November 5, 2013

BP Unfiltered

Rereading Nate Silver: 2. Collusion

by Sam Miller

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In which Nate Silver forages through newspaper archives, and concludes that his first article in BP probably concluded with a mistake.

The 1987 Free Agent Market
Jan. 14, 2003

Abstract: At readers’ request, Nate fact-checks his previous claim that an efficient market—where salaries are strongly correlated to performance—is evidence against collusion. The statistical evidence is mixed, inconclusive, but Nate reverses course and realizes that statistical evidence wasn’t required. Looking at the individual cases at the time, he shows that collusion was remarkably obvious at the time; compared to 2003, when there were whispers from players about collusion, 1987 saw owners broadcasting collusion at 180 decibels. “Far from being a well-kept secret to be revealed only years later, collusion was pervasive, profound, and explicit.”

Key quote: “Indeed, after further consideration, I'm not so certain that my proposition (competitive labor market = efficient labor market) is correct, even in theory. Teams differ in the way that they assess a player's value. For that reason, it is certainly true that a market with a greater number of bidders does a better job, on the average, of performing that assessment accurately. The problem is that a player's salary is not determined in accordance with the average assessment of his talent. It is determined, rather, in accordance with the most favorable assessment of his talent. (This phenomenon has a name, the winner's curse, that is apropos to baseball). A player need only accept one free agent bid, and more often than not, he's going to accept the one that pays him the most. The really absurd contracts in recent memory - Darren Dreifort, Mike Hampton, Jay Bell - all came in highly competitive markets in which a single owner had an unreasonably favorable view of the player in question.”

Spent The Next Hour Curiously Googling: “Bob Horner” + Japan; “Player Relations Committee” + “Long Term Contracts” + 1985; “Jay Bell” + Years + Millions.

Tables: 3
Graphs: 1
Equations: none, besides allusions to previously used equations

On The Nate Silver Must-Read Scale: 2

Sam Miller is an author of Baseball Prospectus. Follow @SamMillerBB
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