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Earning $30 million in 2012, Yankee Alex Rodriguez was the highest paid player in baseball last season, followed by the Angels' Vernon Wells and the Mets' Johan Santana.
Paradoxically—yet by a similar token, completely logically—the Los Angeles Dodgers did not field a single player whose annual salary cracked the top 25 MLB salaries.
Using Rodriguez as our starting point, Baseball Player Salaries—a website which judges a player's performance merit relative to his salary and percent of team payroll–and going through Wells, Santana, Prince Fielder and CC Sabathia—all players in the top 5, the website's algorithm has computed that not one of those players performed to financial expectation in 2012.
As Jonah Hill's Peter Brand character noted in the 2011 film Moneyball, many players who receive high-profile contracts are being overpaid.
Given this following quote—taken from my last slide—this conundrum is absolutely logical.
Under the present MLB model, a lessening of competitive inequality between teams has resulted in greater aggregate talent, which itself has contributed to increased player salaries and higher aggregate payrolls.
In other words, players who are paid higher salaries effectively retain their talent level when moving to a team with an already-high level of talent, accordingly encouraging other teams throughout baseball to improve their aggregate talent. Not only, however, does this make the entire league more talented, it sets a salary precedent for talented veteran players.
When a non-elite (to be read: non-Yankees and non-Red Sox) team, such as the Dodgers, therefore executes an incredible payroll push or spending spree, this has the effect not only of increasing this third-party team's (e.g., Dodgers') aggregate talent and payroll, it inspires the remainder of the league to increase their talent by either paying the piper or by developing a quality farm system.*
*The MLB league minimum increases from year-to-year—when compared to salaries in the tens of millions of dollars—are negligible.