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Spending in the MLB to Measure Efficiency

Spending in MLB to Measure Efficiency

Arjun Srinivasan β—† March 3, 2017

As Major League Baseball is the only major American professional sports league without a salary cap, money can play a larger factor in the success, or failure, of a given baseball team. This has allowed monetary value to have more influence in the sport, when compared to other American leagues, as it merely taxes its highest spending teams, rather than capping their salaries. Consequently, certain teams are able to spend much more on their players’ salaries than others.
Due to these large differences in the amount of money spent by each team, it is critical that each team spends its money efficiently, more so than in a league with a hard salary cap. I thought that it would be interesting to look at how much each team spent in 2015, to win a single game. The results are displayed in the table to the left.1 The teams highlighted in yellow made the 2015 MLB playoffs.

Calculating how much was spent to win a single game did not yield any significant conclusions about which teams spent most efficiently. For example, the Houston Astros spent less money to win each game than the Pittsburgh Pirates, but the Pirates won eight more games than the Astros. About 65% of the teams spent less, in 2015, than the average of 1,546,594.09 π‘‘π‘œπ‘™π‘™π‘Žπ‘Ÿπ‘  to 𝑀𝑖𝑛 win a single game, and 70% of teams that made the 2015 playoffs spent less than this average value. 61% of teams that did not make the playoffs spent less than the average value to win a single game. Upon deeper examination of these metrics, we can consider another interesting metric. If, on average, it costs $1,546,594.09 for a single MLB win, then each dollar spent in the MLB generates an average of 6.47 Γ— 10βˆ’7𝑀𝑖𝑛𝑠. Mathematically, ($1,546,594.09)βˆ’1 = 6.47 Γ— 10βˆ’7𝑀𝑖𝑛𝑠. This number is critical, as it allows us 𝑀𝑖𝑛 $ to calculate the expected number of wins for each team. By multiplying the average wins per dollar by the payroll of each team, we can see how closely each team matched its expectation of wins, based on the amount of the money they spent. The results are shown in the table below.

This table reveals some interesting results about the 2015 season. For instance, even though the Dodgers and Yankees made the playoffs, they were the two teams with the largest difference of wins when compared to their expected win totals. This is likely correlated with the fact that these are the highest spending teams in the league. Additionally, although the Rays, Marlins and Indians, won less than half of their games, they were all in the top 5 of the difference between their wins and expected wins. Furthermore, 7 of the 10 playoff teams had positive differences between their wins and expected wins, indicating that teams that spend money in a wise manner are usually the ones that end up in the playoffs. Finally, this table can help answer the question of which of the Pirates or the Astros, both teams that spent less than 100 million dollars and made the playoffs, were more efficient in spending their money. Based on our table, the Pirates finished with a 1-win advantage over the Astros, indicating that they were more efficient with their spending.

Edited by Derek Topper, Sports Analytics Group at Berkeley