Can’t Buy Much Love: Why Money is Not Baseball’s Most Valuable Currency

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Does money buy wins in baseball? Conventional wisdom says yes, but the conclusions from this paper make us question that ironclad assumption.

A cross-sports comparison finds that MLB, along with the NBA and NFL, has a very weak relationship between payroll and wins. In one striking example, baseball’s model was not able to predict with statistical certainty that the 2013 Yankees (payroll: $229 million) would win more games than the 2013 Astros (payroll: $22 million). By contrast, studies of the English Premier League have found a nearly perfect payroll-wins relationship.

Switching to a longitudinal lens, the paper examines baseball’s historical relationship between payroll and winning. Contrary to popular belief, payroll’s explanatory value on wins is currently at a near-all-time low, in spite of rising payroll inequality. How is this possible? In a word: youth. Pre free-agency-eligible players continue to outperform their elder, more expensive peers at a staggering rate. With an increasingly large percentage of the best players not eligible for purchase on the open market, the payroll-wins relationship continues to erode.

It’s impossible to know for certain whether this trend of weakening “win-buying” ability will continue, but increasingly stringent penalties for performance-enhancing drugs—widely assumed to offer greater benefits to older players—could help maintain the youth dominance effect for the foreseeable future. While today’s headlines may speak of baseball’s “haves” and “have nots” in terms of financial clout, they may need some revision for a future in which the reigning currency is not money but youth.

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