Would a Salary Cap Improve Baseball?

Earlier this week, Dubner wondered what kinds of changes might make Major League Baseball more interesting to the modern T.V. viewer.

A number of you suggested instituting salary caps. This chart comparing team performance with total player salaries over the 2008 season, by data visualization guru Ben Fry, does seem to suggest a link between higher pay and sluggish performance.

But does it?

Check out Fry’s charts for the 2005, 2006, and 2007 seasons as well.


The way free agency works in baseball means that having a large payroll is not necessarily required to succeed. For example, this year the Diamondbacks are one of, if not the, best team in MLB, with a payroll less than one third that of the Yankees ($66 million vs. $208 million).

Of last years 4 AL/NL CS teams, 3 are in the bottom half of payroll (Rockies, Diamondbacks, Indians). Only the Red Sox were in the top half.


The answer is simple math. The only way to improve baseball (improve its entertainment value, that is) is to shorten the season. A regular NFL season has 16 games. Compare the NFL intensity level to that of major league baseball. In MLB the season is 162 games long. The incentive for a MLB player to give their best effort in any one game is so much less because the value of a single game is so far removed than an NFL season where each game is potentially pivotal. When I watch a game, half the time it doesn't even look to me like the players are even into it.


Besides being better than average players, what do Carlos Beltran, Jermaine Dye and Johnny Damon have in common? At one time, they all played for the hapless Kansas City Royals. But they all left because bigger market teams could pay them more money. Without a salary cap in baseball, barring the odd exception, teams like the Royals will never be anything more than farm teams for teams like the Red Sox and Yankees.


If they want to cut salaries and improve performance they should decrease the number of teams. Expansion has watered down the talent pool, and made high performing players cost more (due to more teams chasing the same number of high performing talent).


I don't believe expansion has watered down the talent, in fact I think it is a bit of a canard. There are more teams, but the population pool being drawn from is even greater. And with the focus and training, I don't really think this is the answer.

I love the NFL, but the amount of games and the single-elimination format can lend the appearance of "parity," rather than the effect of the cap.


I actually did a study of the correlation between payrolls and wins or playoff appearances for an applied econometrics seminar (more interestingly and significantly, I also looked at the correlation between market size and wealth with those payrolls). I looked at about the last 20 years of payroll and performance data, and the correlations are, quite frankly, weak. The regressions show positive and statistically significant effects of increases in payroll on wins, and likewise positive effect on probability of playoff appearance, but even the slopes of these associations are not terribly high. The evidence is there for some positive returns to higher labor expenditure in baseball, but problems of competitive balance in baseball can't really be attributed entirely or even largely to payroll inequality - so how much excitement would be induced by a salary cap? Probably not so much.

Donald A. Coffin

But essentially all a salary cap does is transfer wealth from one party--the party whose salary gets capped--to another party--the party paying the salary--the owner of the team. Not to fans. Why should teams reduce ticket and concessions prices from levels you're willing to pay? Why should we expect anything except that salary caps will put money in the pockets of the Steinbrenners, serial-franchise-destroyer Jeff Loria, Jerry Reinsdorf, and other multi-millionaires?


A salary cap + revenue sharing only works if there is also a salary floor. As Jason (#8) already pointed out, there are several owners out there who receive revenue-sharing checks but are not using the money to improve their teams.

As to the correlation between payroll size and winning, I think having a large payroll gives you a better shot at doing well in the regular season just because you have a greater margin of error when a high-priced player gets hurt or plays lousy. A team that can afford five $15 million a year players can survive an injury to one of them much easier than a team whose only $15 million a year player gets hurt.

The postseason in baseball is such a crapshoot because of short series length that it would be very difficult to establish any correlation between payroll size and winning the World Series, however.


All sports should be nationalized with a salary cap of 2 times median family income + travel expenses, all other profits are donated to libraries, schools, and other forms of education.

To make millions playing a game when people are starving is sick and disgusting.

Ben D

How do I become a "data visualization guru?"

Seems like a pretty sweet gig. But you probably need a degree in Useless Plots from Superficial Analysis School.


But does it? Yes. If you look at the teams that have the highest pay roll year after year, namely the yankees and the red sox, they always compete. Other teams may get lucky for a few years, but not over the long term. The problem is, that baseball doesn't believe that it can afford to level the playing field. So much of baseball's popularity is in the northeast, that if other teams had a fair shot, baseball risks losing its fan base. True, over time, implementing a salary cap may improve attendance and ratings in other cities over the long term, but it would take a while, and if the red sox or yankees string two bad seasons together, baseball is in trouble.


I'm happy with baseball the way it is. If I had to see one change to the salary structure though, I'd create a salary floor. The Yankees have outspent everyone and it hasn't done much for them lately, but I'd like to see teams like Florida and Pittsburgh do more than just sit around and cash revenue sharing checks.


Maybe we need a salary cap in the biofuels market.

Baseball with no salary cap last year saw a 0.186 difference in winning percentage between the best and worst teams (162 games). Football with a salary cap saw a 0.938 difference (16 games-granted a bit of an aberration with a team going 16-0 but it's usually about 0.600 difference). In the salary capped NBA the difference was 0.549 (82 games).

My point is that for any individual game the underdog is much more likely to win in baseball. It doesn't seem a salary cap would reduce that margin. Perhaps it would make different teams year to year being at the top and bottom but as pointed out in yesterday's thread, a lot of different MLB teams have made the playoffs or World Series in very recent memory.


Also, a lot of people have been saying that reducing the season will increase ratings based on the opinion that the season is too long and games in April don't matter. Last year the best team only won 59.3% of their games. The worst team still won 40%. This 20% gap is typical of baseball, but separates it from other sports. This year in the NBA it was 80.5% to 10.3%. In the NFL it was 100% to 6.3%. Reducing the amount of games would not only increase ratings because people felt that the game they were watching had higher stakes, but also because it would increase parity. Of course this will never happen because if you cut the amount of games in half you would have to double the revenues per game to make the owners consider it.


Considering the very large sample size in baseball games and how easy it is to overpay for pitching it isn't surprising that many teams perform poorly with relatively high payrolls. However the payroll alone doesn't show true costs because it doesn't include bonuses to amateur players or the scouting and player development staff. Arizona for instance consistently pays over slot bonuses to draftees, as do an assortment of large and small payroll teams.

Fundamentally though baseball's revenues aren't dependent on TV revenue, unlike the NFL, and this difference explains why there isn't a salary cap, and a salary cap wouldn't improve the game. The NFL needs a salary cap because they need teams to have a very large variability in wins for teams over the course of a few years to ensure a national audience where fans across the country feel like they have a chance in no more than a couple years. Baseball on the other hand finds it's revenues overwhelmingly from the ballparks in the form of ticket sales, in park sponsorships, corporate boxes, and concessions. Because of this combined with the fact that there is a pretty long turn around time for bad teams to become good mean that ownerships need payroll rises in order to signal to fans a commitment to improving the team in order to get fans to return to the ballpark. If they were already at the limit, the Giants or White Sox for instance very well might be, and bad, ownership would not be able to signal to fans that the team was improving. Further a salary cap would result in cost shifting for large market teams to find other places to put money, something that happened in the NFL with paying for coaches.



What do you mean by "improve"? Are we trying to improve the fan experience, increase the fan base, or the amount of cash owners take in. From my point of view improving baseball would be improving the fan experience and by fan I mean people who actually enjoy the entire game. If you can't sit through a game please don't. There are plenty of us that love to and you're filling our seats and driving up prices. If we want to see ticket prices and salaries fall we can start by letting everyone who doesn't truly enjoy the game that that doesn't make them a bad person to not want to go to the game. Obviously this won't increase the overall love of baseball in the country and it certainly won't increase the owner's profits.


I dunno. Business decisions aside it just seems silly to me that one guy on Yankees makes more than a whole organization.
But I'm not a baseball fan either.

I'd like see similar comparisons for other sports.


Interesting chart. I'd like to see it again in October when it matters. Ask any Red Sox fan what a good record in April does for you.

Winning percentage's biggest factor team talent. Highly skilled players demand higher pay so winning percentage can be seen as a function of player salary. The exception to this is young talent which is has high risk on return. Teams Like Oakland, Tampa bay and Florida have found success in employing young talent.

Since the salary cap would likely be above the level many small market teams are willing to pay it would allow big market teams to pay less while the small market teams to pay the same, the most talented players would loose and the big market owners would win.

My solution to the problem is for MLB to make take over the television contracts and make it more like the NFL. Teams like the The Yankees, The Red Sox and the Braves have had a huge advantage with revenue generated by also owning YES NESN and TBS.


the TV with hockey highlights on

Salary, shmalery...the games (and season) still take too long.

The problem for the majority of the bottom half of the salary divide teams is that after a month or two of the season their fans know they have no chance to make the playoffs and even a victory over a rival or contender is usually meaningless.

In the NFL, NCAA hoops and football, late season games can be meaningful even for non-contending teams.


I don't like the idea of salary caps. The business of baseball is taking in the money regardless - capping it for players just means the businessmen get more. I think the bigger issue is that most tickets are now prohibitively expensive. Most of the season ticket holders with the best seats wind up being corporations, not fans. I don't believe for an instant that if they lowered the salaries of the best players that the business would charge less money for tickets.

Also, have you been to a ballgame? BORING. Unless it's a big rivalry or playoff. I love listening to baseball on radio though - they use the downtimes to give out stats, talk up the players and in general say what is going on with interesting stuff to fill up the dead air. On TV there's some of this, but not enough running patter. In the actual stadium, it's just dead air. It's hard sometimes to tell what's going on. And this from someone who can keep book on the plays.

My solution? Fewer games during the year by about 20%, Announcers at the games who provide infotainment during dead air time or broadcast wireless radio simulcast to people who bring headphones. Would make it a lot more interesting. And before discussing salary caps for players, find out how much the stadium and team owners are raking in and how much they actually pay to support the local infrastructure that funnels the fans to their venue.