Major League Baseball: Finding a Market Inefficiency

GregCorrespondent IMarch 10, 2010

NEW YORK - OCTOBER 28:  Manager Joe Girardi (L) and General Manager Brian Cashman of the New York Yankees look on during batting practice against the Philadelphia Phillies in Game One of the 2009 MLB World Series at Yankee Stadium on October 28, 2009 in the Bronx borough of New York City.  (Photo by Al Bello/Getty Images)
Al Bello/Getty Images

While running a major league team, there are only so many ways you can gain a real advantage. Having more capital then your opponent is the easiest way, but teams continually look for other ways to better themselves at an inexpensive price.

This is termed a market inefficiency. Basically, the best thing a team can do is find something of value that isn't being valued properly on the open market.

While many people ignorantly think Michael Lewis's Moneyball is about sabermetrics, this is what it was really about: finding market inefficiencies and using them to your advantage. The biggest example that was used in this case was on-base percentage, which was significantly undervalued at the time.

At this point, something as simple as OBP is valued correctly. In recent years we've seen teams like the Mariners shift to optimizing defense at a well below-market rate.

It seemed that this was the new market inefficiency, but this seemed to right itself quickly. This offseason, we saw Boston look to improve their defense through free agency by acquiring defensive specialists Adrian Beltre and Mike Cameron while moving Jacoby Ellsbury to left field.

While Boston may seem to be a continuation of getting defense on the cheap, they actually didn't pay too much below market value with these two signings. This suggests that teams are much more aware of the impact defense can have and it can no longer be seen as a market inefficiency.

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These things work in cycles. It's very hard to find a way to game the market consistently without other teams catching up to you. In a recent post on FanGraphs, Dave Cameron talked about efficiency wages . In his piece, he briefly mentions nutrition without getting into it too much.

See, MLB just raised the minor league per diem five dollars all the way to $25 per day. Now, if you're eating for one and cooking your own meals, that's fine. I cook many of my own meals and spend less than $25 a day.

The issue here is that these are not people who live on a regular schedule. They're not working nine to five jobs; they're traveling all around whatever region they're in and end up eating out for many of their meals. Now you can see why that's a struggle. If you want three meals on $25...you're going to be getting food that is neither nutritious nor particularly good.

Dave suggests a widespread increase of quality of life for minor leaguers. He proposes that you not only raise the per diem, but you get better buses as well. For the Yankees, these two things should be a no-brainer. Having updated, comfortable buses for each minor league affiliate would cost relative pennies for the Yankees. We can't be sure how much this would benefit the team in the long run but improving the day-to-day life of the team's prospects can't hurt.

This also got me to thinking about the recent film Sugar, which follows a young pitching prospect out of the Dominican Republic. Now, I don't want to spoil the film for you if you haven't seen it yet (and I recommend you do ), but the character Sugar could have benefited from these things and many more.

My Recommendation for the Yanks

With the Yankees' financial advantage, they should take this whole idea a step further. Considering that they are so active in the international free agent market, they'd benefit the most from it anyway. Instead of just increasing the per diem, encourage players to eat healthy. Maybe if there is a restaurant in an area a team is visiting that specializes in healthy food, offer incentives to eat there.

When the team is home, serve healthy foods. Substitute regular pasta, white rice, and white bread out; replace them with whole wheat pasta, brown rice, and whole grain bread. Obviously, I'd take it a bit further, but you get the point. Simple changes like that would not even cost very much, but would increase the health of the players.

I haven't spent enough time around the low minor leagues to know what goes on in Low-A ball, but teams should go out of their way to make sure that the prospects are comfortable and happy. In Sugar, we saw that might not always be the case.

This would not only benefit the players currently in the system. It's possible that young ballplayers would be even more attracted to signing with the Yankees because they offer a better quality of life.

As the first commenter on Dave's post points out, this would probably end up causing other teams to follow suit, which would just raise prices all around. If that happens, then so be it.

This would just mean that corporate suits end up with a little less money while these 18-year-old kids in A-ball get an increase in their quality of life. I know I don't have a problem with that.

If other teams didn't follow, then the Yankees could have found themselves another efficient way to spend their money as they streamline talent to the major league team.

Find more great content at Pending Pinstripes .

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