Dollars Per Win
Today at FanGraphs, Dave Cameron wrote up a good explanation of the dollars per win system that MLB teams choose to operate under. Part of the analysis in effect shows why young players are so cost-effective, and in turn shows why teams like the Rays can compete with such a low payroll. Something that is often missed when looking at big free agent contracts is that just because a player is paid a billion dollars doesn’t mean that he’s overpaid, relative to the rest of baseball of course.
Now, I know there’s some sentiment that teams don’t pay for wins linearly, because a six win player is worth more than three two win players. While I agree with this in theory, major league teams just don’t operate this way. If you just look at the dollar per win costs for the multi-year contracts handed out to hitters last year, the cost per win was $4.3 million for guys with an average win value of 4.4 wins per player. Alex Rodriguez signed for about $3.8 million per win last year. Teams just don’t pay exponentially more for higher win value players than they do for average and below players. You could argue that they should (and I would probably agree), but they don’t. The dollar per win scale is linear.
So just because Sabathia and Santana are being paid boat loads of money doesn’t mean that they’re being paid more than their expected production because of their “marquee status.” In some cases, that may happen (Derek Jeter would be an example, maybe), but that’s more the exception than the rule.