Baseball and capitalism are America’s pastimes. If there is one activity to exemplify America’s free-market capitalist system, it would be the sport that coalesces athleticism, thinking, innovation, and overpriced hot dogs and beer at the ballpark. Everything about the game puts economic principles in action: the division of labor, subjective value, human capital, and market regulations. Unfortunately, like capitalism in America, baseball’s popularity is diminishing despite being the greatest sport in the world. Until its destruction, players and owners are making dollars and cents of every component of the game. Just ask Scott Boras.
Scott Boras – Fair or Foul?
Even if you do not follow the game, you may have heard the name: Scott Boras. He is probably the most well-known sports agent on the planet, notorious for typically getting his clients the biggest contracts possible. Tim Donner, Liberty Nation’s Washington political columnist and resident New York Mets superfan, perfectly described the negotiator by saying:
“Boras is willing to wait out the market and see possibilities where other agents and purveyors of conventional wisdom do not. He can read desperation in owners, their willingness to ultimately cry Uncle and say ‘what the hell’ in the face of fan pressure. His ability to wear them down and squeeze every last dollar out of them is unparalleled in the history of the game.”
You could say that Boras read The Art of the Deal and has played 4D chess with owners for years.
Don’t believe it? He negotiated more than $450 million in contracts for former MVP Alex Rodriguez and recently sealed the deal on a $330 million gamble by the Philadelphia Phillies for Bryce Harper. Let’s also ask the $800 million question: What have you done for me lately? Recently, Boras was a part of the three biggest contracts ever signed: a nine-year, $324 million deal for pitcher Gerrit Cole (New York Yankees); a seven-year, $245 million contract for pitcher Stephen Strasburg (Washington Nationals), and a seven-year, $245 million agreement for third-baseman Anthony Rendon (Los Angeles Angels).
It is unknown how much he makes from each negotiation, but baseball agents earn an estimated 5% commission. Since he represents roughly 50 MLB players, Boras will earn about $27 million in the 2020 season alone – this is a conservative figure because free-agent signings are still being worked out.
So, for fans and non-fans alike, why does this matter? Baseball showcases how labor relations in a capitalist system work.
Make a Good Pitch
Every offseason, a free agent will test the market and attempt to attain a contract that best represents his value. Multiple factors come inside the baseline: average annual value (AAV), Moneyball theory, length of the deal, and the list goes on. Although the way owners hand out contracts has changed from just a decade ago, outfielders, relievers, and back catchers are generally still paid what they are worth. In fact, thanks to advanced analytics, you could make the case that athletes are valued better than ever before.
There has been some consternation among management about shelling out $19 million a year to players who are past their prime or doling out seven-year, $250 million contracts to someone who will be 38 in the final year of his deal. For the most part, however, if you can produce in any capacity, then expect to play come Opening Day.
The way a starting left-handed pitcher or a utility infielder gets hired works the same as any other job. You showcase your skills, highlight your achievements, and discuss what you can bring to The Show. If a franchise has a need or a demand for your talents, you will sit at the table and iron out the details. Should a team refuse to pay what you think you are worth, then you can engage with a rival team that is willing to meet your terms and conditions. However, if nobody is interested in signing you, then perhaps there is not much of a need for a 33-year-old right-handed reliever with a lifetime ERA of 4.21 and a declining fastball, which might mean that you need to improve your human capital and add to your résumé.
This is the same way you apply for any job in the economy, minus the seven-figure annual remuneration. If you possess in-demand skills and education, you will gain employment. However, if you do not have too many skills that employers want, you will sit home and, in theory, think about what you can do to be more appealing to companies.
Instead of turning to the state to determine wage rates, the employee directly negotiates with the employer regarding compensation. Both need to consider whether a voluntary partnership will benefit each party: The player gets paid his market value, and the team sees a return on its investment (production meets or exceeds the salary).
J.D. Martinez of the Boston Red Sox and Max Scherzer of the Washington Nationals are examples of players who were absolute steals for ownership. They have produced beyond the value of their contracts. On the other hand, Chris Davis of the Baltimore Orioles and Miguel Cabrera of the Detroit Tigers are players who failed to match output expectations comparable to salary.
Conservative circles might make the case that unions are the antithesis to free-market capitalism. However, labor unions are perfectly acceptable in the marketplace since they involve the freedom of association. Of course, like most unions, the MLB Players Association (MLBPA) is a paragon of incompetence that was designed to help veterans, not rookies. Hence the barrage of complaints regarding player service time for those who get promoted from the minor leagues to primetime.
A Diamond in the Rough
We were told that baseball owners were colluding. We were told that billionaires were not spending money on pitchers, hitters, or anyone in between. We were told there would be a labor disruption because ballplayers were not getting paid enough. During this year’s MLB offseason, we learned that these narratives struck out when some of the biggest contracts in the sport’s history were hit out of the ballpark at the winter meetings in San Diego, CA. Ballclubs are willing to spend the cash when it seems necessary to do so, not just toss money at players who might not fit the franchise. This year’s scorching hot stove proved that last year’s edition was a fluke, an anomaly. And we still have two months until pitchers and catchers report for spring training.
Read more from Andrew Moran.