What everyone’s missing about baseball’s new CBA

[Slate]

In Slate today, I’ve got a story about Major League Baseball’s new CBA — and about its changes in how teams can acquire (and compensate) amateur talent. Among baseball pundits, a sturdy consensus has formed: these changes will make it even harder for small-market teams to compete. I try to show how this analysis overlooks a few key ideas, including the lessons of Michael Lewis’s Moneyball.

The gist of my argument is that spending tons of money on amateur players does give small-market teams an advantage — but that it’s such a big advantage everyone else will catch on and catch up, leaving the draft as stratified as every other element in baseball’s economy. It’s the classic Moneyball narrative: team exploits undervalued asset until it becomes properly (even overly) valued. One of the funny things here  is that Billy Beane and the A’s themselves undervalued draft picks. After all, a big part of Moneyball centers on the 2002 draft in which the A’s had a whopping seven first-round picks (and 35 picks overall). Instead of loading up on high-ceiling, high-cost amateurs — the kind of players you have to pay “over slot” — the A’s looked for players who would sign under slot. Now, as Lewis tells it, the A’s didn’t have much choice since their owner had allocated only $9.4 million for draft bonuses. But that was a terrible move. Bargain-hunting makes sense with big-league players, not with amateurs.

In the last few years, other teams — and, crucially, other owners — have wised up. The Royals provide the best example. But even now you’re starting to see big-market teams invest more and more money in amateur players, players they can keep or trade. The Tigers used two “over slot” prospects to trade for Miguel Cabrera; the Red Sox used two more to get Adrian Gonzalez. And if baseball’s new CBA hadn’t better regulated the draft, this trend would have only increased.

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N.B. If you’re a baseball-slash-economics fan, you might enjoy a long feature I wrote this summer on the Cincinnati Reds and their fans. In it, I erroneously predicted that baseball “has too many people making too much money for anything major to change [in the new CBA].” But there’s lots more I did get right about small-market teams and how they can (and can’t) compete. A .pdf of the story is here.