Wednesday, November 28, 2007

Bleacher Bums + Economics = Fail

David Zingler grumbles about the Twins moves from the State sponsored MPR blog The Bleacher Bums' post Pohlad has Played Us:
"First, they dealt Luis Castillo to the Mets for some low-level minor leaguers. Next, they gave free-agent-to-be Torii Hunter a low-ball offer that no player in his situation would even consider taking. Hunter, of course, bolted to LA last week. Now they are shopping Johan Santana to the highest bidding, big market team."
If Zingler is going to make agruements against public financing of sports stadiums, he could at least pick intelligent ones (try Andrew Zimbalist's critique that entertainment dollars are a fixed part of people's budgets, so new stadiums do not increase business in their metropolitan areas, they just move spending around from other entertainment venues like restaurants, movie theathers, concert halls, ect).

Castillo was a free agent come season's end and not one that would have gotten the Twins first or sandwich round compensation. He has a history of leg problems and the Twins will be playing on turf until their new stadium opens. No team was going to give the Twins a huge package of prospects for a short rental of Luis Castillo, the Twins were out of contention, and the team felt good about Alexi Casilla moving forward. The Castillo trade was a good thing, regardless of the Twins' finances.

The Twins were again wise to let Hunter go. The Twins and Hunter weren't that far off on his yearly salary, but yearly salary is never the problem with MLB contracts. As all MLB contracts are guaranteed, it is never the yearly amount and it is always the length of contracts that kills teams. It doesn't matter how much money a team has, Hunter is going to be a waste of resources during the last two years of his contract. He'll be 36 and 37 and with both his offense and defense in decline with age, will probably need to move to a corner outfield spot where offensive expectations are higher. The Angels, whatever their payroll, will being paying Hunter more than he's worth and squandering resources (including roster space) that could be used elsewhere to improve their onfield product in 2011 and 2012. I'm glad it is the Angels and not the Twins doing so.

The Twins botched the Hunter situation last July, when they either failed to confirm they couldn't sign Hunter to a three year deal, or knew as much and still didn't move him for prospects greater than the late first round pick they were lucky to receive (if Hunter had chosen to sign with other suitors like the Rangers or White Sox the Twins would have only gotten a sandwich pick).

Zingler goes on to critcize the Twins for shopping Santana to the highest bidder. What's the proper socalist route here, David, shop Santana to the bidder with the greatest need? The Twins should take whatever the Royals or Pirates say they can afford to pay? While Santana is a class above the likes of Carlos Zambrano and Barry Zito, with the uniquely high injury risk that comes along with all pitchers (the human arm isn't constructed to throw overhand) and again taking note that all contracts in baseball are guaranteed for their entire length, locking up Santana to a similar long term deal carries a lot of risk.

Picking up prospects that the Twins can pay league minimum for three years (or possibly two years if said prospects become Super-Two eligible) and then less than market value for the three years of arbitration that follow is a much safer route. The Twins don't invest as large a portion of their resources while the prospects are making league minimum, and as arbitration is a series of one-year contracts, the team can cuit bait on any injured or underperforming players they'd aquire in a deal, and still invest the money they would have spent on Santana's extension elsewhere.

But that's not the worst part--we don't even know who the Twins could get for Santana yet. Zingler is ripping the Twins for exploring their options? Some of the trade rumors have been laughably one-sided. If the Twins could get Kershaw, Kemp and LaRoche from the Dodgers the front office would have to be completely incompetent to turn the deal down (although the Dodgers front office would have to be equally as incompetent to make such an offer for a one-year rental of Santana).

Zingler continues:

"And, the one bargain-basement player the Twins have acquired this off-season – Craig Monroe – will likely be released if he doesn’t take a pay cut."
Craig Monroe needs to take a pay cut. He isn't worth $4 million coming off a season in which he hit .219/.264/.373. As my editor the Twins Geek pointed out, it was actually a creative deal by new GM Bill Smith as the team avoided committing any resources to Monroe in the trade prior to Monroe accepting a reasonable salary. If Monroe doesn't sign something close to a $2 million contract, the Twins don't lose much of anything. How is this a problem, David?

Zingler never mentions how the Twins derive their payroll, either. The team claims they spend a fixed portion of their projected budget for the coming season (if memory serves 51%). Zingler could have explicitly argued that (a) this percentage isn't high enough, or (b) that taking the Twins at their word that their projected $75 million budget is actually 51% of their projected revenues is foolish, but instead all Zingler offers is tired class warrior griping.

Zingler continues:

"The way things are going; the Twins will be less competitive when they enter Pohlad Park in 2010 than they have been the last 7 years in the Metrodome. Let’s also remember that Twins tickets will be scarcer and more expensive and out-state fans will be turned away by the dozens every April because of rainouts. But, I bet those luxury suites will be nice – Cambria countertops and all."
That the Twins will be less competitive in 2010 is pure speculation, and a bit of an underhanded move by Zingler in cherry-picking their recent run of success to hold up against the shorter term 2010 season, as the Twins' claim is that the new park will improve competitiveness in the longterm. The new ballpark will increase the Twins revenues and increased revenues baseball-wide are trickling down to the players and increasing the size of contracts the league over (Carlos Silva is going to make $44 million over four years at a minimum this offseason).

The real question is whether the Twins' competitiveness in relation to other franchises with voters dumb enough to finance stadiums is really a problem that the taxpayers need to solve. Or if Minnesotans have an unalienable right to competitive professional baseball (or one to theatre, emphasis on the "re") when it requires a multi-million dollar public expenditure from their fellow taxpayers. Not if it is alright that the Twins put expensive luxury boxes in their stadium.

Zingler is again wrong when he complains about Twins tickets being significantly more scare come 2010 (with the exception of playoff games when the Twins remove their outfield curtain in the Metrodome, but the curtain was only up during the regular season because no one wanted the seats they covered). The supply of tickets will be about the same, which means the Twins aren't imposing the scarcity. The public demand is going to go up. The tickets are going to be more expensive because of increased demand. The increased price will ration the tickets.

Joe Thingvall of Curlz and Curveballs weighs in on the post's comments with the same sort of nonsense:

"The seats will sell to brokers who will double the price the first couple of
years, so who cares that real fans will be kept away.
Brokers can't double the price of tickets. Increased demand from baseball fans can. And the idea that "real fans" will be kept away by increased prices is flawed for two reasons:

1. It assumes wealthy fans aren't real fans, or that the clients and employees of corporate season ticket holders aren't real fans (not that the latter are the types of tickets likely to be bought up by brokers in large numbers and scalped).

2. Real fans and fans of all kinds are going to be kept away by increased demand regardless of the price anyway. Even if the Twins gave tickets away for free in 2010 in equal numbers to every fan that wanted to attend games, the more fans that want to attend, the fewer number of games each fan will see. With an improved facility, everyone will see fewer games at the ballpark, especially during the first three-to-five years of the new Twins park when new stadiums have their honeymoon period.

Rationing tickets by price will most likely allow "real fans" to see more Twins games, as only those people that place a very high value on live, outdoor Major League baseball will shell out for the increased expense of attending a Twins game, leaving the casual fans to head back to the movie theaters, restaurants and bowling allies that Zimbalist writes about.

What Thingvall is really complaining about is either (a) that he shouldn't be subject to economic law just like everybody else and doesn't want to place a premium on attending Twins games at an improved stadium even when other people will or (b) that because public money is involved, the price mechanism shouldn't be used to ration tickets. I'll leave it to Lew Rockwell to dispell the latter myth (Joe, the solution here is to remove public money from the equation, not get rid of the price mechanism).

There is no valid economic defense of publically financed sports stadiums (you'd have to be dumb enough to take MLB's economists at their word). All we're left with is the claim that having a Major League team in town with a modern outdoor park is a Public Good. The fact that there will be a huge spike in demand for Twins tickets seems to confirm this if you're willing to ignore any kind of cost/benefit comparison, which is still difficult to do even if you want to with fuzzy things like happiness and quality of life replacing any concrete metrics. And at the end of the day, if you work for MPR, do you really want to bring up cost/benefit comparisons for Public Goods?

I've met and know plenty of "I don't care what it costs" Twins fans. It is to be expected that proponents are willing to vote for their pet public expenditures when they know they won't bare a proportional cost. It takes two to tango and a large segment of Twins fans got exactly what they wanted, the rest of us be damned. Pinning this all on Pohlad's greed ignores the greed of a large segment of Minnesotans. And all of this, all of it, ignores the fact that a stadium doesn't change local media revenues, which is a huge part of why teams Zingler points out, like the Yankees, have larger revenues than the Twins do. The Twins will never have local television and radio contracts like the Yankees, Red Sox, Dodgers, etc.

If Pohlad played you, it is because you are a rube.


John said...

Well, I don't know where to begin...

What's the proper socalist route here, David, shop Santana to the bidder with the greatest need?

Great line.

I can get behind the criticism about the trade deadline deals from both you and Zingler. It sabotaged any hope the season had, they were clearly wrong about Casilla, and they didn't go nearly far enough. It was about as bad as they could have played it, and it looks like an awful lot of it was financially motivated.

I can't agree with the Hunter thing. They should have made an effort and I would've supported a competetive five year deal. Maybe that's my heart talking. If so, so be it. It should have it's say, too.

I'll also support Zingler in another area - I can't figure out how the Twins end up with an appropriate payroll level this year. Right now they would need to spend about $22 million to reach a reasonable level, and that's if they don't trade away Santana's $13.5 M deal. How do you spend that money without long-term deals, which they're clearly allergic to? They deserve to be ripped if don't spend it, and they deserve to be ripped if they spend it foolishly.

And finally, I'll disagree on the ballpark thing. I think there is a good valid economic point for it based on property values and the quality of life in a city with major league sports. It's not a terribly popular argument rhetorically, because it also points out that the benefit leads to higher property taxes. You can find it at:

Nick N. said...

Agree with Kyle that the Twins should not have gone any further than three years on a contract offer for Hunter.

The 2008 payroll, as John mentions, is interesting. The Twins have steadfastly claimed that payroll will increase next season, but that would be almost impossible if Santana is traded. They'd have to do something like signing Barry Bonds to a one-year, $30 million deal.

Kyle Eliason said...

You're right that the downside of gentrification in a world with property taxes is that it can be very hard on people with fixed incomes who may be driven off their land/out of their homes.

I'd argue that raising taxes in and of itself isn't automatically a good thing and cite Hazlitt's One Lesson of economics--you also need to weigh the new taxes against what that same capital would have done, the business, investment and savings that would have happened.

Not to mention, with increased property taxes (that result from increased property value) and the increased sales tax, Minneapolis becomes a less attractive place to work and do business.

If you want a 36 and 37 year old Hunter posting a .770 OPS in left or right field come 2011 and 2012 for $18 million per... I guess there's no accounting for taste.

If the Twins are being honest about using 51% of their revenues for player payroll, they'd be ahead of the league average which I've heard is in the upper 40s and is lower than most businesses on the whole.

Zingler's one good point in my eyes is that the Twins should probably take the increased value of their franchise that results from the new stadium into account when increasing payroll.

Certainly, the Twins need to spend an appropriate amount of money on payroll, but spend it wisely. Hunter is going to be an albatross on Los Calafornaheim's neck at the end of his deal.

ronpaul2008 said...

Twins and Lew Rockwell. In the same post.

Life is good.

BD said...

The Castillo trade made "baseball" sense economically. The problem at the time wasn't the trade per se, it was trying to sell it as a "not giving up" deal - for that to be true, we'd have to believe Casilla was ready. IMO, Terry Ryan knows too much baseball to engage in that kind of wishful thinking.

With that said, Ryan would've been well justified in "giving up" - that the 2007 Twins were a deeply flawed team was pretty obvious; that simply wasn't a team that was going to get everything together and win the Division. In which case, moving free agents-to-be that you're not going to bring back to get SOMETHING makes sense.

As for Hunter .... not only isn't he worth the money, I'm becoming more & more inclined to believe he wasn't exactly a great "presence" in the clubhouse either. I doubt Justin Morneau appreciated whatever led to the fight; I doubt Joe Mauer appreciated Hunter calling him "soft"; and I suspect his yapping about his contract status, etc. was an annoyance.

Torii the player would be worth more if he kept his big mouth shut.