Why Would Major League Baseball Prohibit the Trading of Draft Picks?

My friend Jimmy Golen, writing for the Associated Press, tackles that puzzling question.

As another friend, the economist Richard Thaler, says in the piece:

I cannot think of any good reason why MLB would have such a rule, unless it is worried that the teams with the highest picks are not capable of making good decisions…it has to help the teams with the top picks to have the option of trading them for additional picks.


Matt

Or they could just dump the whole slotting/signing bonus system and put a hard cap on rookie salaries (like the NHL), so that the team that gets the #1 pick can actually afford to draft the best player.

MRB

It's very simple - because underfunded teams, poor teams, teams in bad markets, and incompetent teams would sell their draft picks by the bucket load.

This would mean that rich teams would not only control the Free Agent market, but also the talented young player market. The extreme amount of competitive imbalance would destroy the league over the course of a generation or two.

Mark Myers

The actual draft order seems much less relevant in baseball than in other sports. In the NBA almost all of the superstars are top draft picks. In MLB most of the household names are drafted in the later rounds.

Carl

If you read Moneyball by the always-entertaining Michael Lewis, it appears that MLB is determined to make it as difficult as possible for small-market -- or, strictly speaking, small-payroll -- teams to compete.

From that perspective, it makes perfect sense. A team like the Oakland A's is extremely good at evaluating draft prospects, so they would happily trade their high-round picks for a clutch of lower-round picks and get players who will perform better for less money compared to teams that do a far worse job of evaluating prospects (e.g. high school is a very poor predictor of future performance).

Another example: it used to be that when a team lost a free-agent -- almost invariably, because a team like the Yankees or the Red Sox outbid a team like Oakland -- after grooming and developing that player, they got a compensatory draft pick. No longer.

I can think of no logical explanation for this behavior on the part of MLB. My best guess is that they can't deal with the reality that, as the stats geeks have demonstrated, the stars of the game are wildly overpaid compared to journeyman players compared to the marginal value they add, and the only way to deal with the cognitive dissonance of low-payroll teams like the A's demonstrating this fact is to make them go away.

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Paul

If the MLB has a rookie pay scale, it could be a way to force lower end teams spend more (think Marlins).

Tucker

I think Carl is pretty far behind the times now. Oakland certainly did a pretty good job of exploiting inefficiencies in the draft system during the CBA era leading up to when the new version took effect in 2003. Since then the Blue Jays took the same Moneyball approach of drafting college players that had worked well in the early part of the decade, and failed miserably with it. I think MRB is basically right, but the result is that poor drafting teams with limited draft budgets- the Astros are the best example now, it used to be the Pirates and Padres- draft players who are worse than players who are still around. The draft process through this CBA period was probably among the most dysfunctional and market distorting, but we'll see how it is revised which I believe will be for the draft in 2012.

Craig in MN

It could be that it isn't allowed because they didn't think of it when they first started the draft. To make a change and allow it now, the players union would have to agree to it, and they'd ask for something in return to allow it. Is it worth giving the players union something in order to allow trading? Not when it isn't obvious what the benefit is to teams.

John T

It's also to hold down salary costs by limiting the draftee's options. Take Stephen Strasburg. He had two choices once drafted - either agree to a deal with Washington, or re-enter the draft the next year, where he would be a year older yet the same distance from true free agency. He didn't have the additional leverage of saying "Trade me to the Yankees" who presumably would be willing to pay him more. In fact, don't be surprised after the next CBA to see baseball continue in that direction with a hard slotting system or draft salary cap in order to keep costs down, and they can easly sell that to the players union by claiming that leaves more to spend on players in the majors who "deserve" it.

Fred Vincy

I'm surprised they didn't mention how much it keeps down the price of players, which is why baseball does a lot of things (luxury tax, revenue sharing, etc.). I'd bet that the Yankees or Red Sox would have paid a lot more for Strasburg than the 15M or so the Nationals did, especially if they'd had to pay out big time to get the pick. (Consider how much the Sox paid for Matsusaka once they'd paid 50M for the right to negotiate with him.)

Andrew

The issue might be that while teams have infinite lives, the general managers don't. So while it might not be in the team's best interest to trade away its picks for the next 10 years, a general manager might try it since if it doesn't work, he'll be fired anyway.

I think the NFL and NBA have similar rules about not trading away 1st round picks in consecutive years.

TBallgame

I think John T and Fred have it right. Look at what Eli Manning did to San Diego, forcing them to trade him to the New Jersey Giants. If you know the teams at the beginning of the draft are all small market teams this year and they likely will be again next year and there is no way of escaping from the draft, you have to submit.

Back in 1996, with the help of Scott Boras, four players found a loop hole to escape the draft. Matt White was one. I don't recall the others. White signed for over $10m, an amount few draft picks have ever received, and never had meaningful MLB playing time. The four signed for a total of $30m. Thirteen years later, the top 4 picks (including once in a generation prospect Strasburg) in 2009 signed for a record $30m ($15m/$7.5m/$6m/$2.5m) with Boras representing the top 3 picks. Constraining mobility lowers labor prices.

Tyler

#8's rationale makes by far the most sense. The league would much rather conspire against rookies than against its own small market teams.

Patrick

The free agent compensation system has changed over the years. At one time, teams actually could get a player back in compensation. Weirdly enough, that player was not necessarily from the team that signed the free agent!

Teams still *do* get compensatory picks, unlike as stated in #4, but only if the original team offered the free agent arbitration.

The slotting system is voluntary. The Commissioner's office recommends the slots, but there is nothing to prevent a team from going over slot, and teams often do.

Any kind of cap on draftee pay would probably have to be negotiated with the MLBPA, and I doubt that the MLBPA will allow it without some pretty tasty concessions.

I staunchly oppose any kind of salary cap, and I would support allowing teams to trade draft picks. If two teams are able to reach a mutually agreeable deal involving draft picks, I see no rational reason for the rule preventing that from happening.

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Bill

It's widely believed right now that a hard-slotting system will be put in place next CBA (2012). This actually favors small-market teams, as no longer can the Yankees and Red Sox pay players over-slot bonuses and have those players scare off teams less likely to do so.

The time Moneyball was written is very different from baseball in 2010, as nearly every front-office values sabermetrics and the draft highly, as well as understands the value of the current free-agency rules and cost-controlled players.

Dan

MLB's thoughts on the issue
http://mlb.mlb.com/news/article.jsp?ymd=20091215&content_id=7811316&vkey=news_mlb&fext=.jsp&c_id=mlb

Voice of Reason

The rich teams basically already use the draft as free agency. They draft high schoolers who are set to go to college in the 15th round, and lure them away with overslotted signing bonuses, poorer teams with high draft choices stay away from top talent due to "signability" issues, and many of the best players are taken from the international market, that requires no draft choices, and heavily favors the rich teams.

Not allowing the trading of draft picks is the one thing that the MLB does to help the worse off teams. Otherwise, the Yankees would essentially just buy the #1 overall pick every year. The league needs a draft slot cap, salary cap, and salary floor.