U.S.S. Mariner's David Cameron comes up with a list of three free agent landmines. You might be familiar with them: Torii Hunter, Carlos Silva, and Kyle Lohse. I don't really disagree with their inclusion on such a list--for instance, I'm certainly not suggesting that the Twins try to sign them for the money they are going to get--but Dave Cameron has a weird bias against pitchers who are mediocre at many things but not particularly good at any one thing, which I think clouds his judgment when he's comparing Lohse and Silva.
Either way, it's an interesting read, though I wouldn't blame you for skipping the section on Torii Hunter simply because this offseason has seemingly been a neverending stream of Torii this and Torii that (including stuff I've been saying.)
I always find myself torn by these kinds of arguments.
Torii Hunter just had a terrific year at the right time, and he’s going to be paid for what he was in 2007, not for what he’s likely to be in 2008 and beyond.
Why? Why should we believe that the baseball free agent market is not "efficient"? I'm not saying it is, just asking the question.
basically, the argument here is that baseball GMs fail systematically to incorporate all reasonable forecasting information when bargaining for talent, or that they are "too" shortsighted, or both.
Suppose it is the latter. Against what standard? Against how an equally well-informed owner would behave? that seems reasonable (implying that this is an agency problem in the argot of delegation theory -- how does the owner get the GM to do what he wants done, given that the owner lacks full information?)
So, do we really believe that GMs have an inappropriately large discount rate, so that future contractual dollars committed are undervalued compared to what the owner would really like done? How the heck could this state of affairs be an equilibrium? That is, why wouldn't impatient GMs tend to be found out by owners over time and removed, thus leading to the industry being dominated by owner-GM pairings with concordant attitudes toward the longer run?
I guess where I'm headed is in challenging Cameron's conclusion that Torii should be regarded as a "landmine" (even though I agree with SBG's and others' arguments against signing Torii to a fat, multi-year contract). That assessment is conditional on one's time horizon. People differ on that.
Or they are willing to gamble by overpaying in the hopes that the targeted player will exceed expectations.
that still doesn't address the agency problem, I think. Why would owners, in equilibrium, let GMs pursue high-risk strategies if the owners are not also risk acceptant?
What makes you think that this system ever reaches equilibrium?
Why should we believe that the baseball free agent market is not "efficient"?
It's been a while now since I've taken intro econ, but is there any reason to expect such a market with so few buyers and so few sellers to be effecient? It seems like with small closed systems efficiency is hampered because even if a buyer is willing to pay a lot for a certain resource, he might not be able to find it, and vice versa.
basically, the argument here is that baseball GMs fail systematically to incorporate all reasonable forecasting information when bargaining for talent, or that they are "too" shortsighted, or both.
To me, it seems like the auction format for buying up players exaggerates small differences amongst players. Certainly it is to Torii's credit that he had a good year last year--a good year is better than a bad year--but how much does that really matter?
I don't have any evidence to back this up, but it seems like you usually don't see too many similar contracts handed out to similar players in the same offseason. The guy who is considered the best gets a huge deal, the next best guy still gets a lot, but simultaneously a lot less than the top guy, etc. Though I don't necessarily see why this should be the case, it seems that when you eliminate one buyer and one player from the market that this increases the remaining buyers' leverage, and the remaining players sign for what always seems to be a lot less.
Also, would it be especially surprising that at least some baseball GMs don't incorporate all reasonable forecasting information into their decisions when some of them are openly hostile towards certain forms of evaluation? I'm not saying it's everyone, but it only takes one Brian Sabean to give Barry Zito a Mike Hampton contract.