How to Fix the Declining Competitive Balance in Baseball

No, I don't have an answer for it, and neither does Paul (from the excellent Indians/Baseball blog The Diatribe), but he does have some excellent ideas in a very long post that's worth every second it takes to read it. He first breaks down how payroll has changed over the last 17 years in baseball, and what is the cause of that change (hint: generally speaking, big-market teams spend more because, well, they have a bigger market of income). He then compares MLB to the other two major sports and they're structure of development:

In the NFL, teams are rewarded for intelligent drafting and development and have the tools in place to keep their home-grown players to allow continuity to reveal the wisdom of their best-laid plans. If a team succeeds, it is because the Front Office made prudent decisions and because the players performed at a level that resulted in consistent winning. On the flip side, if a team fails year in and year out, it is largely because of shortcomings within their organization and not reliant on factors outside of football decisions.

In the NBA, the system is also in place to reward wisdom in player acquisition and development and the procedures are in place to foster that continuity that puts the onus of winning on the Front Office, the coaching staff, and the players as the league makes it easier for teams to retain their stars. The NBA features winning teams that build through smart drafting and player development (witness what the Hawks and Trail Blazers are currently doing) and watches teams intent on finding a way to “beat the system” by buying players on the open market (see Knicks, New York) flounder in the mess that they’ve created, unable to simply buy their way out of the mud. [...] Compared to the system in place in MLB, how alien is that concept?

This is a really good point, and Paul's not an idiot who thinks that player freedom must go away. Rather, the luxury tax as it works now simply doesn't work; there's no dis-incentive for the rich teams to still outbuy everybody else in free agency, and no incentive for owners like the late Carl Pohlad or Robert Nutting in Pittsburgh. One of Paul's more interesting proposals:

A possible solution could go something like this – once a player hits Free Agency, allow said player to go out on the open market to see what deals exist for him out there. When the bidding has concluded and an offer sheet is signed by the player and his agent, his current team has 10 days to match the offer, much like Restricted Free Agency in the NBA. Now here’s where that pool of money created by the “Competitive Balanced Payroll Tax” come in – the player’s current team can decide to match the offer sheet while only footing the bill for half of the contract with the other half of the money coming from the pool of money created by the Competitive Tax Pool [original bold] that [Red Sox owner] John Henry argues for. To put that in tangible terms, if the Brewers wanted to match the Yankees’ 7-year, $161M contract offer from the Yankees last off-season, they would be responsible for $80.5M of the deal with the other $80.5M coming from the Tax Pool.

Thus, the large market teams can still bid for the services of the players they desire and, if their offers are matched, they have effectively ensured that the money that they pay into the “Competitive Balanced Payroll Tax” is going strictly for MLB players (not for other small market “expenses”) and the smaller market teams don’t have to assume as much risk in signing their own players to their contracts to keep them. The large market teams may not like the idea of bidding against their own money or subsidizing the contracts of players not playing for them, but their concerns about throwing money into other owners’ pockets would be allayed and they would be left to strive for the same excellence in player development that every other team would be chasing.

If teams don’t elect to utilize this Tax Pool to keep their own players, the onus is strictly on them for either not developing players internally compelling enough that they want to keep them or they are exposed for being more concerned with the bottom line than they are the product on the field. If a team develops players prudently, the machinations would be in place to keep those players as long as they wish to, with the players being compensated dollars equivalent to “what the market will bear”.

This seems like a really good idea. As Paul points out, it isn't meant to have every team finish 81-81; it's meant to give smaller-market teams a broader window to have their players develop and make a championship run. For example (and I use the following example not out of partisanship or complaining, but familiarity): such a system may have allowed Cleveland to keep either Sabathia and/or Lee and/or Martinez beyond 2009, so that all the players had more time to gel. As it was, with Sabathia, Cleveland basically had a two-year window where he and all the other players had to gel; when that fell apart in 2008, Cleveland's entire window for a championship run had opened and closed in just 2 years, and they had to completely dismantle the team in hopes that the next batch of young guys all develop at exactly the same time (2011-2013) if they're going to make another run. Meanwhile, the Yankees or Mets can currently continue to out-bid everybody else (and many times themselves) when their drafts don't work out or their players don't develop the way they planned (though that doesn't mean the Mets are always making good choices in those bids). Under the new system that Paul proposes, players can still leave for NYC or Boston or Chicago, but the smaller market teams that choose to spend their money have a shot, too; the players aren't losing any money in terms of possible contracts; and teams that choose to not spend will earn the record their ownership deserves.

It seems like an amazingly good idea, which is why I'm sure MLB will never adopt it during Selig's ever-shortening tenure, and maybe not under the next commissioner. And maybe this isn't the solution for the long-term; something better may come along. Still, as Paul points out, MLB can point to incredible income growth over the last 17 years, but to say that that proves the system is working could really hurt MLB down the road, as two of three sports in America remain competitive while baseball continues its decline in popularity, in no small part because one of the most appealing components of sports, the underdog, just doesn't stand as much of a chance.