From 1996 to 2000 the New York Yankees won the World Series four times. “Baseball has a competitive balance problem” was the cry heard throughout the land. The only solution was some mechanism to control the growth of salaries and re-distribute baseball’s wealth from the rich – i.e. the Yankees – to the poor.
The 2002 labor agreement – which was just extended to 2011 – was designed to resolve these problems. A luxury tax on high payrolls was enacted. This tax – primarily paid by the Yankees – was designed to restrict spending by large market teams on players. The agreement also focused on revenue sharing, which gave small market teams more money.
Payrolls in the American League have not quite responded to this agreement. From 1999 to 2002 the coefficient of variation for league payroll – standard deviation divided by the mean – was 0.44 in the American League. From 2003 to 2006 the coefficient of variation rose to 0.54. In other words, after the 2002 agreement payrolls became less equal.
What has happened to competitive balance? The standard deviation of winning percentage in the American League was on average 0.083 from 1999 to 2002. From 2003 to 2006 it averaged 0.084. In other words, increases in pay disparity did not dramatically change competitive balance. . . .
So is this a “golden age” of baseball? If by “golden age” we mean the Yankees are not winning the World Series every year, then I guess that is true. But one should not be confused about how that trick was pulled off. The true trick happened when baseball expanded participation in the playoffs. Since 1995 the team with the best record in baseball has only won the World Series once. And that is because the best team now has to navigate three playoff rounds to win the title.
So, in other words, penalizing good teams and rewarding bad teams has done nothing to increase parity, or equality, in the league. Yet more competition among the teams has increased equality and parity.
Amazing how that works, isn’t it?
Liberals must not watch baseball.