The relationship between money and wins

From SABR member Dave Studeman at The Hardball Times on February 7, 2012:

Okay, we all know that teams with bigger payrolls tend to win more games. We know it so well, in fact, that many people consider it the scourge of baseball, the evil lurking in our fanatical hearts, the dark side of the force out. Call it the Alpha Team theory of major league ball. If you’re a fan of an Alpha Team, life is good. If you’re a Pirates fan, well, you’ll always have Willie Stargell and Rennie Stennett.

I’m not out to debunk the Alpha Team theory; far from it. I would just like to give it some historical perspective. This is possible thanks to some terrific data collection by THT co-founder Matthew Namee. Matthew recently compiled the payrolls of all major league teams from 1976 through 2011, the Free Agent Years. Matthew has been using the data to analyze the effectiveness of general managers, which is a really cool idea. Consider this article a background piece to his more detailed analyses.

Let’s start at the very beginning. In 1976, the average team payroll was $365,000; in 2011, it was $93 million. That’s a 13 percent compound growth rate over 35 years. During the same time period, inflation has grown 4.5 percent a year. The S&P 500 index has grown 7.6 percent a year. If you could have invested in baseball players in 1976, you’d be buying lots of THT Forecast subscriptions right now.

Plus, there were just 24 teams in 1976; now there are 30. More teams. More payroll. A boatload of money is now paid to major league ballplayers. It wasn’t always thus.

Read the full article here:

Originally published: February 7, 2012. Last Updated: February 7, 2012.