Competitive Imbalance

Last week, Cleveland Frowns wrote in defense of the Tribe's manager and GM based on the extra hurdles small-market teams face in MLB. Both THT's Shysterball and my colleague Coachie Ballgames (I hope they'll both excuse this over-simplification of their arguments) responded with evidence that competitive balance in MLB is comparable to the NBA and the NFL. I think that's a bit beside the point. It may or may not be easier to build a dynasty in other sports, but the issue is whether those dynasties are the result of inherent unfairness resulting from the league's rules (or lack of rules). I think the payroll disparity in MLB speaks for itself - unless we think all these teams are getting no value for their money, it's obvious that certain teams have a large advantage. Shysterball and Coachie both also pointed out the obvious examples of small-market teams who have had recent success, but just because teams like the A's and Rays have had success doesn't mean that we should ignore the disadvantage that they and all the other poor teams are fighting against.

Let's imagine for a second an alternative universe where MLB pools all revenues and has a hard salary cap. Bizarro MLB realizes that they make a lot more money on games played in New York than on games played in Tampa Bay. So, they decide that all the big market teams will play 100 games at home and all the small market teams will play 60 games at home (and let's assume that there'd be some kind of similar breakdown in the playoffs). Obviously, this would give the big market teams an advantage because home teams win about 55% of the time in baseball. But some small market teams would still succeed because the advantage wouldn't be huge - assuming that 55% rate, big market teams would win an average of 83 games and small market teams would win 79 games. Even though the edge would be small, we'd all recognize the basic unfairness.

How does that compare to what currently goes on in MLB? Here's my attempt at figuring out how big an edge the rich teams have had - I collected three pieces of data for each franchise for the last 10 years: payroll, wins, and playoff appearances. The 10 highest payroll teams have averaged 86.6 wins per season and 4.5 playoff appearances over the last 10 seasons. The 10 middle payroll teams have averaged 80.7 wins and 2.1 playoff appearances. The bottom 10 payroll teams (which include the very successful A's and Twins) averaged 75.8 wins and 1.4 playoff appearances. Each of the top 10 teams has at least one playoff appearance (Texas is the only one without two) and 8 of the 10 have winning records (Texas and the Cubs are the exceptions). 4 of the bottom 10 teams have failed to make the playoffs at all, while another 3 have only one appearance each. Three of the teams have averaged less than 70 wins a season; only 3 have more wins than the Rangers, the worst of the rich teams.
I don't think there's any way to look at this data and conclude that payroll doesn't make a significant difference in teams' ability to compete.

{For stats nerds - for this sample, the the coeffiecient of determination (r-squared) for payroll and wins is .47, which means that 47% of winning percentage can be predicted by payroll; for playoff appearances, it's 50%.}
Image above courtesy of Coachie Ballgames.