But it’s certainly bad for the Major League replacement-level players in the minors.

It's bad for something like 5-10 guys in the minors per year, if that.

Further, the fact that there are ANY Rule 5 draftees even with these barriers suggests that there is a significant, under-exploited talent pool out there tied up in the minors.

I see the exact opposite phenomenon. The number of failed Rule 5 picks tells me that teams are fewer deserving Rule 5 picks than there are players picked in the Rule 5 draft. So some of them have to toil in the minors for another year or two, and if they still can't make the roster, that's what minor league free agency is all about.

Also, why would you do away with the requirement that the player spends time on the active roster? The whole point is to get players who aren't being promoted quickly enough to have a chance to be promoted. If they're just getting plucked from one franchise's AAA team to go play on another franchise's AAA team, I don't see much, if any, benefit to the player.

Also, the fee is a total non-issue. In a league where some players make $30K per plate appearance (while racking up 500-600+ PA), a $50K fee is nothing if you think you might fill an entire roster spot with that player.

Further, the fact that there are ANY Rule 5 draftees even with these barriers suggests that there is a significant, under-exploited talent pool out there tied up in the minors.

I see the exact opposite phenomenon. The number of failed Rule 5 picks tells me that teams are fewer deserving Rule 5 picks than there are players picked in the Rule 5 draft. So some of them have to toil in the minors for another year or two, and if they still can’t make the roster, that’s what minor league free agency is all about.

Well, no. The club owns these guys' major-league rights for an extensive period of time (4 or 5 years, depending on age of first signing, or 3 years on a 40-man roster). The Rule 5 draft then imposes a substantial (relative to the expected benefit) transaction cost on any club that wants to draft an under-utilized player from another club's system. That transaction cost deters drafting; hence, it deters player movement from low-valued (within-system) positions to higher-valued positions (within some other system). That (deterred) higher-valued position need not be an immediate spot on a major league roster.

Likewise, there is a minor league phase to the Rule 5 draft (AAA teams drafting AA or A players; AA teams drafting A players), but these guys presumably are very unlikely to make it to the big leagues.

so who gets free agency at the minor league level? you have to have spent 3 years on a 40-man roster. If a player has spent 3 years on the 40-man, he's probably already spent 5+ years in the minors and, therefore, been passed over for the Rule 5 draft at least once. Odds are high that a minor leaguer granted free agency will be in his mid- to late-20s and very unlikely ever to make it to the majors.

as for the fee being a non-issue, I disagree. Just because the fee is small compared to the total budget of the organization doesn't make it irrelevant. The economic question is about expected marginal value. $50k plus a season's worth of major-league minimum salary for a player who provides no margin above what you expect from players already in your own system (and the further loss of roster flexibility of being able to move such players up and down) has to deter some transactions.

Why not just grant free-agent status to any Rule 5 draftee that a drafting club decides not to retain?

Why not just grant free-agent status to any Rule 5 draftee that a drafting club decides not to retain?

Because the initial club has already invested a lot in that player's development and they deserve some sort of return on that investment as an incentive to develop players over the long-term. The size of that return is a matter up to debate, but I don't think that willy-nilly redistributing minor league talent is a good idea for baseball.

As to the larger point, I still disagree with you. If there were that many players who were ready to be promoted to the major leagues, teams would find them and draft them in the Rule 5 draft. The lack of successful Rule 5 draft picks (you don't have to go back far to find an unsuccessful Twins' pick) means to me that there just aren't that many players out there who deserve to be promoted but aren't being promoted. Find me the list of players who got passed by in the Rule 5 draft and then turned out to be successful major league role players. It's just not a long list. We're talking about maybe a handful of players per year, if that.

The economic question is about expected marginal value. $50k plus a season’s worth of major-league minimum salary for a player who provides no margin above what you expect from players already in your own system (and the further loss of roster flexibility of being able to move such players up and down) has to deter some transactions.

If the player isn't any better than what is already in a team's farm system, why would he want to move to that team's farm system? I guess I don't see why teams should be able to freely swipe talent from teams who have done a good job of developing talent, so that they can acquire redundant pieces. From the player's perspective, he's blocked or redundant whether he gets drafted in the Rule 5 draft or not. The fee helps ensure that the player is actually moving to a better situation.

And just on a human level, you're talking about making guys pack up and move their family so that they can be a redundant piece in someone else's system instead of a redundant piece in the system that they know already. I fail to see how that would be of great service to the player.

If a player has spent 3 years on the 40-man, he’s probably already spent 5+ years in the minors and, therefore, been passed over for the Rule 5 draft at least once. Odds are high that a minor leaguer granted free agency will be in his mid- to late-20s and very unlikely ever to make it to the majors.

That may be true for college players, but if you're drafted out of high school (which many, many players are), you've been in the minors for 5+ years by the time you are 23, well before your prime years as a player.

Well, I agree that the set of directly affected players appears to be rather small. A few dozen per year, probably.

I suppose the way to think about this is to draw analogies to the way that publishers produce books. A single hit produces huge profits -- more than enough to pay for numerous duds. The publishers don't have a very good idea about which new authors will be successful (beyond the ghost-written, celebrity books, where the nominal authors typically get huge advances). So they publish a lot of titles, hoping that magic happens.

The development costs are, in fact, pretty low. Send a bunch of free copies to reviewers and send the author on a book tour with a lightning rod strapped to his/her head.

In the baseball case, the clubs spend some money on development. But, given that the minor league clubs are in fact owned by independent proprietors, who bear much of the financial risk associated with the minor league teams, the costs to the major league clubs are pretty small. This means the Rule 5 transaction fees relatively large, I claim.

it's also pretty hard to argue that the kids involved suffer much loss from being relocated. (1) they move almost every season anyway, climbing the ladder up the organization; (2) these are early-20s kids. A majority are single; their peers in the "real world" are changing jobs and locations at high rates as well; (3) for the typical minor leaguer, baseball is seasonal employment -- they relocate for the off-season.

Anyway. Interesting topic. I'd be interested to see some numbers on the time-in-minors distribution for major league players and on the counts of franchises that major leaguers played with during their minor-league careers.