The Economics of Baseball’s War on Drugs

People sometimes ask what initially got me interested in economics. The truth is that one of the first things that caught my attention was an application of supply-and-demand graphs that explained the war on drugs. What seemed like a set of policies with unpredictable effects actually had some very predictable — and undesired — consequences. Applying these concepts to Major League Baseball’s war on performance-enhancing drugs is naturally an article I was destined to write. I’ll start off by running through the basics of supply and demand for illegal drugs, show the concepts I found so fascinating years ago, and then show you how well they apply to what MLB is trying to do with PEDs and with Biogenesis in particular. I understand that drugs are a somewhat sensitive topic, and I have no interest in preaching any normative points of view. I will instead trust that readers can think of my commentary as descriptive, and not assume any agenda. I’ll also be peppering in references to The Wire throughout, because I’m definitely never going to get to do it again.

The Economics of Drugs

Let’s begin with a very basic description of supply and demand for drugs. The demand for drugs is characterized by a demand curve, the “D1” line shown below in Diagram 1. A demand curve represents the amount that buyers collectively want to buy at a given price level. The vertical axis is “P” for Price and the horizontal axis is “Q” for Quantity of drugs. The higher the price, the lower the quantity demanded—so demand curves are downward sloping; in other words, when P is larger, Q is smaller, and vice versa. I have drawn the demand curve to be very steep, and that is not only intentional, it is the key to understanding the problem with the War on Drugs, as well as the issues surrounding MLB’s decision to go after Biogenesis. The reason that the demand curve is steep is that drug users are insensitive to price (or in econ lingo, demand is inelastic). Empirical studies have shown, and logic dictates, that an addicted user is going to spend what it costs to get what they crave. They want their fix, and they will do what is needed to get it. Other demand curves are not as steep—when the price of Pepsi changes, people switch to Coke, so Q shrinks pretty quickly as P increases. But cocaine is not going to solve your heroin craving if that’s not what you’re addicted to.

On the other hand, the supply curve represents the amount that sellers want to sell at each given price. As the price goes up, sellers are willing to sell higher quantities of drugs. The more money they can make from selling drugs, the more they will devote to growing them (coffee, for instance, often can be grown on similar soil as cocaine), the more kingpins will pay drug mules to transport them across borders, and the more money Avon Barksdale can use to entice his well-meaning but all too eager-to-please nephew to move product for him. The supply curve for drugs is not very steep, because suppliers have more flexibility. If the price decreases, farmers will switch back to growing coffee, drug mules are less inclined to smuggle drugs across borders, and dealers will expose themselves to less risk. Stringer Bell may venture into real estate too.

The “equilibrium,” or the outcome of the market, is characterized by the quantity and price (the horizontal and vertical points on the graph) where the two curves intersect. This is the price where no seller is willing to drop their price, because the risks and costs are no longer worth it, and no buyer is willing to increase their price, because they have acquired all the drugs they want at that price.

Diagram 1

demand and supply2

The amount of money spent on drugs is equal to the price of the drugs times the quantity of the drugs. This is shown graphically by the shaded rectangle on the graph.

The War on Drugs

Obviously a world without addiction and the suffering that goes along with it is desirable, but one of the primary policy justifications for combating drug use is decreasing the amount of crime and violence that goes along with its existence. Some of the crime and violence comes from users’ attempts to steal the money necessary to feed their addictions, while much of the rest comes from sellers’ attempts to increase market share to get a piece of the revenue.  This means that the policy goals are not just decreasing the quantity sold (shown by the horizontal axis intercept “q1” above), but very importantly, decreasing the money spent on drugs—price (p1) times quantity (q1), shown in that gray rectangle above.

Now let’s think about what happens when the War on Drugs is introduced. The key feature of the War on Drugs is severe penalties for suppliers and increased chances of getting caught, which increases the risk of each unit sold—and therefore the average cost of each unit sold. In terms of the supply curve, this basically shifts the curve upward—for each unit sold, the price now needs to be higher to get suppliers to sell the same quantity. The result is that supply shifts in the northwest direction—from the line “S1” to the line “S2” on Diagram 2 below. The new intersection is now the new equilibrium, represented by the price “p2” and the quantity “q2.” Quantity decreases, as is expected, from “q1” to “q2,” but the new price “p2” is higher than the old price “p1.”

But here’s the real question—what happens to the amount of money spent on drugs? It you look at the graph, you can see that the new revenue formed by multiplying p2 and q2 is actually larger (look at the new gray rectangle in Diagram 2 compared to the smaller rectangle in Diagram 1). That happened because the demand curve was so steep. The result is that drug users resort to more crime than before to feed their addictions, and drug kingpins have that much more incentive to kill off rivals and potential informants. (Wallace was doomed from the start.) In essence, the drug war actually exacerbates one of the two problems it is trying to solve. Not only that, it barely changes the quantity of drugs sold at all, so it does not really accomplish much of its other goal either.

Diagram 2
demand and supply3

The War on PEDs

Let’s switch gears now and talk about Biogenesis. One of the most interesting twists of the latest episode in the years-long PED saga was the decision by Major League Baseball to threaten to sue Biogenesis. The legal case was never a slam dunk, but the risk of an unfavorable and costly decision by the courts was enough to compel Biogenesis to comply. This breaks from the previous policy of increasing testing and increasing penalties for PED usage, which in essence reduces the demand for PEDs by increasing the odds of getting caught, and increases the costs because players lose salary and harm their reputations. That is shown in Diagram 3 below. Instead, going after Biogenesis is effectively a supply-side attack that increases the cost of supply. This would make it look like Diagram 2 above.

Diagram 3

demand and supply4

Unlike the government in its war on drugs, Major League Baseball probably does not care about the amount of money spent on banned substances. All it wants to do is reduce the quantity used. It is not clear whether threatening to go after Biogenesis legally accomplishes this task. This is determined by whether Major League Baseball can shift the demand curve downward more, or whether it can increase the supply curve upward more. Which curve can it shift more? The amount that the demand curve will shift downward is equal to the probability a person gets caught multiplied by the effective cost of being caught (both financially and psychologically). The amount that the supply curve will shift upward is equal to the probability that the supplier is successfully sued times the cost of the awarded damages. Given how uncertain it is that a court would actually side with MLB over Biogenesis, and given the fact that Major League Baseball has the ability to impose long unpaid suspensions on players and expose them to psychologically costly media exposure, it seems almost impossible that a policy of pursuing damages against suppliers could ever be more successful than testing and suspending players.

That is why I was so surprised when MLB announced it was going after Biogenesis—but now it makes sense. The goal was never to actually pursue the damages against Biogenesis, but to compel Biogenesis to cooperate with evidence. As shown with Ryan Braun last year, it can be extremely challenging to impose the demand-side costs by testing alone. As shown with Ryan Braun this year, it can be much easier to threaten the supply-side into turning in the demand-side with clearer evidence, and then punishing the player. This is the reverse policy of the drug war. Law enforcement in the War on Drugs threatens small punishments against users, but offers plea bargains to turn in dealers as an alternative. Major League Baseball has opted to threaten the supplies to turn in the users. As long as the probability of catching players this way is high enough, this becomes an effective strategy. Value judgments aside, that is how you wage a war on drugs if you’re going to do it.

Policy Prescriptions

This framework actually provides some alternative demand-side policy implications as well. What we have boiled this down to is that you want to have the maximum effect on the expected cost of using, which is the probability of being caught times the cost of what happens if you get caught. The MLB has two levers that it can pull. One of these is maximizing the probability of getting caught—and that is what the Biogenesis fight is all about. The other is maximizing the cost of getting caught. Presumably suspension periods are as long as they are going to be allowed to get, based on the agreement with the MLBPA, but another way that MLB could think about this is to consider which players have the most to gain by enhancing their performance. I would propose working out an agreement for increased testing of three groups:

Players recovering from injuries: One of the most common stories told about PED use is that players try it when trying to rehabilitate quickly from an injury, since this is when PEDs are most useful. Since the benefit is so large from using while rehabilitating an injury, MLB should try to make the cost high by testing more during this period too.

Players who are free agents after the season: These are the guys who have the most to gain from using PEDs. Baseball players wait years for the opportunity to be paid the full value of their services. Anything that gets teams to overestimate your talent level at this time is extremely valuable. I would bet that if we had testing data over a long enough period of time, these would be the players who cheat the most.

Rookies: The difference between the potential earnings of a major leaguer and a minor leaguer are extremely large, and like the rising free agent class, rookies stand to gain considerably by keeping a foot in the door of a major league clubhouse. Making their costs of cheating higher is important too.

Thank you to Wendy Thurm for her illumination of the Biogenesis story by writing helpful articles and conversation. (Honorable mention to David Simon for The Wire, too.)




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Matt writes for FanGraphs and The Hardball Times, and models arbitration salaries for MLB Trade Rumors. Follow him on Twitter @Matt_Swa.


62 Responses to “The Economics of Baseball’s War on Drugs”

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  1. Senator Clay Davis says:

    “No honorable mention for me? Sheeeeeiiiiiitttt”.

    +28 Vote -1 Vote +1

    • Hillbillburton says:

      The actor who played Clay Davis (Isiah Whitlock, Jr.) clarified officially on Twitter that “Sheeeeeeeeeit” is spelled with 9 e’s, 1, and 1 t (faithfully rendered above). He called it “The Nine E’s Rule.”

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  2. jerusalem_artichoke says:

    super interesting article. I would add that voiding or penalizing contracts signed by players who later test positive could also be an effective way to increase the risk associated with using PEDs and therefore lower demand.

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    • bubbles says:

      That would have to be a negotiated policy with the MLBPA though, right?

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    • Bob M says:

      If you like a good conspiracy theory, it could also invite teams to… create… situations that could lead to voidable contracts. Not that the millions of dollars involved would be any type of incentive.

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      • cs3 says:

        Thats why you still make the teams pay the money.
        Not sure if it should go to the league (since the owners *are* the league), or some place else, but the team should definitely still be on the hook for any money owed to one of its cheating players.

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    • grant says:

      Too many dreadful unintended consequences here. The contracts can’t be void, because the violations occur part way through – you can’t undo the games already played by the player. Also, that can unintentionally be a boon to some players. Let’s say Evan Longoria has a super team friendly contract and wants out – he could hypothetically cheat to have his contract voided so he can become a free agent and get a better contract. So do we let it be voidable at the option of the team? That can lead to all kinds of mischief, where teams have incentives to turn in players on bad contracts but not on good ones. If you think about Ryan Braun, I’m not sure the Brewers would void his contract even if they could – he’s still a superstar. The Yankees would love to void A-Rod, but that’s because he’s at the back end of a bad contract. If this stuff came up immediately after the 2009 WS I’m sure they’d still have wanted him.

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      • Stuck in a slump says:

        To provide incentive for teams to turn in players, teams should be forced to pay a fine, have revenue sharing decreased or luxury tax increased if they have a player who gets caught. If the team turns in a player they should be on the hook for 75% of the player’s salary if they opt to release them (which would go towards programs like RBI or local charities) but they wont suffer repercussions from the player getting caught from testing or scandal.

        This would mean that the teams who have players that get caught would have to face very stiff penalties so that it would be more favorable for the Yankees to just flat out eat 75% of A-Rod’s contract than to suffer from additional luxury taxes or a fine. In this case, perhaps the fine should be something that automatically scales, like 250% of the player’s potential salary, not just base, but all incentives too.

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    • Chris says:

      The team needs to pay a price as well otherwise there could be a huge conflict of interest.

      For example, the Royals signed Xavier Nady* to a minor league contract. The odds are that he is stuck in the minors until his contract expires and he never actually helps the major league team. So he starts using PEDs and begins crushing the ball. Royals buy his contract and pay him a million dollars for the year.

      (*I have no reason to think Nady is dirty — just first name I could think of that fits this storyline)

      He hits a couple dozen homers for KC, helps them win some games, but in July he fails a test. Royals void his contract and reclaim the second half of their investment…

      Who loses?
      The player made much more money than he would have otherwise and with some better luck might not have been caught.

      The team got a half-season of production out of nothing and then had the contract torn up as soon as it turned sour for them.

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  3. hamsterdam says:

    great article!

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  4. Hejuk says:

    Isn’t the demand for PEDs much more elastic than the demand for heroin, too? And doesn’t that help explain, both in terms of economics and simple humaneness, why baseball might target the demand side more than the US war on drugs?

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    • Matt Swartz says:

      I don’t think that the price of PEDs is much on an MLB salary, so I don’t think the demand curve is necessarily very elastic. I am sympathetic to your point on humaneness but I’m trying to separate value judgments here. Keep in mind that incentives for treatment can shift in the demand curve too, so it doesn’t need to be penalties.

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      • Hejuk says:

        But there’s also price to, e.g., one’s reputation, both for PEDs and heroin — and heroin users are much more likely to disregard that than PED users. I just can’t see the demand curves having the same slopes.

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      • The Boomer says:

        Is your elasticity argument at the beginning of the article related to your screens at the end? All of those situations (injured, approaching FA, rookie) are relatively short-termed and if you mean to say that demand in aggregate is more inelastic at those points, that makes sense to me.

        I am not yet convinced that demand is generally of heroin (or tobacco)-like elasticity. Because it is cheap relative to salaries doesn’t necessarily mean demand is less sloping. I think you should not discount the obvious effectiveness of heroin in getting people high and the non-obvious effectiveness of PEDs in making you a better ballplayer. I am not saying PEDs don’t work or have an effect, but it’s definitely not the same kind of causation as with heroin. It’s not possible to get a heroin high without heroin (at least so they tell me), but it is possible to be a superstar baseball player without PEDs (at least so they tell me).

        “What you’re thinking is that we have an inelastic product here.” – Stringer Bell

        Since we’re in Econ Wire world:
        http://www.postbourgie.com/2008/01/16/the-wire-and-economic-theory/

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      • The Boomer says:

        Let me try and simplify my point:

        Take drugs = 100% get high
        Take PEDs + workout like crazy = x% (< 100) MLB player/big payoff
        Workout like crazy = y% (< x) MLB player/big payoff
        Take PEDs and don't workout = z% (~0) MLB player/big payoff (note: unlike drugs)

        If y-x is close to zero, demand will be much less than the case if y-x is very large. Cases where y-x is larger include your screens plus fringe minor leaguers, although after going through this I'm not convinced that injured players have PED incentives with respect to their current contracts, which are valid if unable to perform due to injury. Maybe their next contract though.

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      • The Boomer says:

        Great article Mike; my comments are not intended to be snark. Is there any information on how much PEDs cost? I assume that they are more expensive for MLB players vs. my getting a prescription, but I have no better idea than that.

        If I were Tony Bosch, I sure would have charged as much as I possibly could.

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  5. olethros says:

    So who’s the Greek in this scenario?

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  6. Ian says:

    Omar comin’ !!!!!

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  7. Professor says:

    I appreciate the attempt at economics anywhere, but I think there are a few mistakes here.

    1. It’s easy to say drug users will ‘get their fix’, but price elasticity estimates in the literature for various types of drugs are not actually that high, and in many cases they are less than one – in which case the following claims about revenue as related to price are not true.

    2. You justify a steep demand curve through addiction, but surely we don’t think of baseball players as addicted to PEDs, do we? A better argument would be that they’re price-insensitive because the price of PEDs is very low relative to their salaries. Similiarly, the logic of an elastic supply curve as per the street drugs example does not necessarily to extend to the MLB case. I can believe the supply of doctors willing to supply PEDs may or may not be elastic.

    3. When you claim “The amount that the demand curve will shift downward is equal to the probability a person gets caught multiplied by the effective cost of being caught”, this is not true at all! You’re assuming risk neutrality, and nobody is risk neutral! You need to have a discussion of how risk-averse ballplayers might be here, and that’s where you can incorporate discussion on changing penalties on the demand side.

    4. Given the analysis is fraught with errors, I can raise objections to all your ‘policy’ points.

    Fangraphs: Good try, but I expect better, C-.

    -5 Vote -1 Vote +1

    • Bob M says:

      It wouldn’t be fangraphs if no one missed the forest for the trees.

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    • Those who can't do teach says:

      Ok hotshot, you write an article

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    • Cidron says:

      Sure they are addicted.. Not in the classic sense of the word as it applies, but follow me.
      1. They want to be at the top of their game, all year, all years. Then along comes some hotshot (trout, or whomever, for example), and they see a challenge to their seat at the top. A few more PED’s wont hurt, but will get me to the top again.
      2. As they age, the natural process diminishes their skills. PED’s can reverse, or slow that down. Prolonging the career effectiveness.

      Both of these, combined with the ‘star’ quality we give most of the games best (likelier to use peds as well, to maintain it), form what amounts to an addiction. Not to the drug, but to the game, and their rank in it. PED’s are merely a means to that end. So, by if A=B, and B=C, therefore A=C, we get this as an addiction.

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    • Matt Swartz says:

      1) What literature are you talking about? Hasn’t revenue increased for street drugs (suggesting pre-drug war elasticity<1)?
      2) I never said players were addicted to PEDs. They still have inelastic demand in all likelihood, given income effects. Supply curve elasiticity wasn't central to the PED analysis, either.
      3) Risk neutrality was excluded for simplicity and would not change the conclusions.
      4) Shame about the C-. I hope that doesn't retroactively affect my GPA. -Dr. Swartz

      +33 Vote -1 Vote +1

    • The whole of the population of planet Earth says:

      You are a haughty ass who got a few too many wedgies in high school. If you think you can do it better, do it better.

      I give your criticism an F–.

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    • Lex Logan says:

      I think you meant elasticity > 1 (absolute value), i.e., relatively price-sensitive. The counter-argument is that the monetary rewards of PED use may dwarf the cost, so athletes are not very price sensitive.

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  8. mike wants wins says:

    Frankly, once HGH is used by people like me to make my recovery from a broken leg or whatever, I’d hope sports would allow athletes to use these helpful drugs to speed their recovery. I think this whole thing is kind of silly, really. Players buy special equipment, they pay trainers lots of money, all sorts of things are used to improve themselves. Why should we not allow drugs, especially once they become more commonplace in general healthcare.

    +5 Vote -1 Vote +1

    • mike wants wins says:

      Sigh, sorry for the missing word(s) and whatnot above…..actually was paying attn at work when I typed that.

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    • Cidron says:

      I agree. PED’s have their uses, HGH does too. But, their image (ped’s that is) has been so tarnished that even if a good framework of use could get in place, the public wont stand for it. And, you would get inequality of usage that may allow slugger (recovering) on team A to get alot, and slugger on team B not to get any, just due to the training staff. Slugger A, the training staff may be administering the ped during post recovery for a bit to do some ‘final healing’ while he is playing. Did it help him hit that 480ft homer ?? maybe…

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      • mike wants wins says:

        I know it is heretical to type this, but I just don’t care about PEDs. I find it bizarre that cheating in a game (spitball, or whatever) is tolerated, but “cheating” to get in better shape (supposedly) is not.

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        • Jason B says:

          To be fair, with a non-stop 24/7 sports news cycle to fill, where every last story and non-story is picked over in ridiculous detail, I think Gaylord Perry-style unabashed spitballing would get the same hand-wringing hysterics nowadays.

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        • Lex Logan says:

          “Getting in better shape?” From all I’ve heard, PED’s trade short-term benefits for long-term damage; young players should not feel pressured to sacrificing their bodies in order to compete. This isn’t football, after all.

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        • Richie says:

          Are you new here?!? Not caring about PEDs is the ‘edgy’ Fangraphs position, shows that you’re brighter and cooler than the hicks. Lex Logan and I are more the heretics on this site.

          Vote -1 Vote +1

        • siggian says:

          The difference is that the spitball etc can be detected and punished within the game (whether the rules against it are enforced is another matter). For PEDs, it’s not possible to have a player pee into a cup while the game is ongoing and get a result.

          And it’s not just baseball that is against PEDs. It’s pretty much all of sport is against it. Different organization have varying rules and levels of enforcement though.

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      • Anon says:

        But, their image (ped’s that is) has been so tarnished that even if a good framework of use could get in place, the public wont stand for it.

        So use a slightly different substance and call it a supplement.

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      • cs3 says:

        If “the public wouldnt stand for it” then how do you explain the fact that MLB is making more money than ever before?
        Where is this money coming from , if not from the public?

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  9. tylersnotes says:

    Season 6– The Commissioner, attempting to rewrite his tarnished legacy, imposes a strict zero tolerance drug policy. Meanwhile, the Union is experiencing conflict between members who want to protect their own self-interest and others who understand a need to police themselves to keep from falling victim to drug abuse. Caught up in the drama are seasoned veterans who tried to escape but got caught up back in the game, a supplier hiding in luxury behind the front of an “anti-aging clinic,” the rookies and kids who just want a shot even though the Commissioner’s office AND the union have left them to fend for themselves, the press who will follow any lead no matter how far it takes them from the real story, and the celebrity who the Commissioner will stop at nothing to destroy– even if the commissioner has to destroy the whole sport in the process.

    It’s– The Waiver Wire.

    +18 Vote -1 Vote +1

    • olethros says:

      Meanwhile, the horrors of his new job as PI investigating the seedy underbelly of high-level pro sports drive McNulty back to the bottom of a bottle of Jameson and into the arms, and beds, of a series of ever more suspect Orioles fans. Finally, convinced of the guilt of all MLB players, he invents an anti-aging clinic, fabricates emails, texts, and documents, and leaks all of these to the Sun, which doesn’t give a shit about the veracity of the claims so long as they can garner attention by publishing the scoop.

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  10. BillyBeaned says:

    Mike – despite your typos, you make some sense. I’d try to make some distinction between helping to heal an injury and performance enhancement. Then again, it’s probably unrealistic to believe one can maintain such a distinction for long.

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  11. CHRIS says:

    THIS IS THE WORST THING I’VE SEEN SINCE DAVE CAMERON LEFT UTELY, LEE AND REVERE OFF HIS TOP 50 PLAYERS IN THE NATIONAL LEAGUE LIST

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    • John says:

      Hahaha, you are so funny. It isn’t at all boring how you constantly troll. Look at how Chris can hijack discussions by posting inflammatory statements. But it is ok because he does it ironically (and because he loves attention).

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  12. Bread n Mustard says:

    When I hurt my arm while playing baseball in high school I didn’t use any PED to help me heal or get better. I had to take a year off to let my arm to heal so that I could play again my senior year.

    So why should professional baseball players be allowed to take PED? Because they are getting paid lots of money and want to make even more? It sounds like greediness to me.

    That is like telling kids that if they are benefiting from something then its okay to do whatever it takes to continue benefiting and maybe benefit even more in the future.

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    • Bread n Mustard says:

      Everyone who lost money because of Madoff considers him the biggest scum of the earth and they are probably right but he was trying to make even more money doing whatever it took, just like many people think its okay to do it, that is the result of greediness.

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    • Richie says:

      Yes, if now-HGH-less Andy is out injured for 6 months rather than 4 months, baseball is not short one worker for those 2 extra months. Just means somebody else is in the majors for those 2 months.

      A greater willingness to shrink your testicles or what-have-you should not be a competitive advantage in coming back from injury any more so than in hitting a ball farther or throwing it harder. And with the substitution effect, it doesn’t benefit the game as a whole at all, either.

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  13. pt says:

    I like this argument, and would add a couple things to the rational:

    While players probably respond little to the actual price of PED’s, they certainly respond a lot to salaries. That means that while there isn’t much potential for moving along the demand curve, but there is room for shifting the demand curve (as Swartz draws them).

    I actually think it would be useful for policy design to think of income-maximing players. Then MLB’s task is to design a drug policy which is designed such that PED use would damage a player’s lifetime salary prospects at any point during his career.

    While players certainly have some risk aversion, it will actually work in MLB’s favor — with very strong penalties in place, using PEDs will certainly be a riskier option than not using PED’s, so if the policy is designed to deter a salary-maximizing player, it would certainly deter a risk averse player.

    Of course, the effects of competitive instincts and hall of fame ambition on PED demand are hard to account for, but I still think this presents a good starting point.

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  14. proposition joe says:

    You make it sound like it’s so easy to catch the supplier, sure they got biogenesis, but now there’s a new young buck named Marlo taking over the corners, and he’s got the muscle to keep the re-ups coming to a-rod without commissioner mcnulty getting a wiff of it.

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  15. Emdee says:

    Your post raises an interesting question: why does baseball suspend the players? Why not tax them? Suspending the players alters the trade market, hurts the city/team, influences the stats of other players — those are negative externalities. If the player takes a dive, at least the team has the option to suspend the player.

    Why not just tax the players 33% of their yearly salary their first offense, 66% the second, and then a lifetime ban after that?

    Obviously there are many non-economic reasons to do steroids (there’s just something about the long ball – but this gets into the risk aversion and preferences) that wouldn’t be addressed by this system (such as, why did ARod continue to do steroids after he admitted he used them in ’03 and had already signed a mega-deal with the Yankees? If its about money, he shoulda quit while he was ahead).

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    • The Boomer says:

      Who would get the tax money? That’s probably the biggest real-life contention.

      Instead of a tax, why should MLB not get into the PED supply business and make it OK for a player to use MLB-authorized and supplied PEDs?

      MLB can charge the same extortionate rates as the tax to a player who agrees to use PEDs within the MLB-set framework and anyone who goes around the MLB to get PEDs receives a huge penalty, like the current season plus a full season with no pay.

      So you can pay a lot to use PEDs legally, not pay anything and don’t use PEDs, or not pay anything, use PEDs outside the system, and risk blowing up your career.

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  16. Chris sale says:

    FREE BRADLEY MANNING

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  17. pft says:

    Surprised no mention about the economics benefits to MLB and its owners by selectively enforcing the PED rules against players with non-performing contracts to save the owners (Arod), against players right before they enter their free agent year (Cabrera, Cruz), players with large contenders for teams falling out of contention (Braun), completely hopeless teams who would like an extra year of service time for young players (Yasmani Grandal-Padres), and to punish certain players/owners for various reasons (Manny/McCourt-Manny for forcing a trade, McCourt to force him to sell).

    Let me know when a Trout, Chris Davis, David Ortiz, or Miguel Cabrera gets suspended and maybe I will take this phony War on PED’s seriously.

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  18. jcxy says:

    I think there’s a small flaw in the logic leading to the conclusion re: the War on Drugs and would love it if you or someone else could shine light on what I’m missing.

    You wrote how we can incentivize supplier behavior through the idea that outcomes=p(x)*cost. You note how increasing costs might change the approach of many of the leaders of these organizations and make them more willing to provide details of their criminal enterprise and implicate those within it. I’m unconvinced, however, that p(x)–the probability that you can catch those big fish–will ever be sufficiently large that the increased costs, to put it bluntly, matter. As we saw in The Wire, the best leaders of drug enterprises–Stringer, Avon, the real world Little Melvin–are those who recognize if you operate without profile, aren’t physically in contact with drugs, and don’t concern yourself with hands-on operation/violence it’s fairly difficult to 1. get caught and 2. have a case made against you. It’s easy to make a case where you have a room full of individuals cutting heroin at a kitchen table. Conspiracy charges are much, much tougher to prove, no? Which is why mobsters typically go away for lesser crimes and avoid giving up their organization when they do, even when it’s potentially advantageous for them to do so.

    I struggle to see how this top-down approach achieves the goals of the War on Drugs any better than the status quo does. Which is to say, at all.

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  19. Mojotronica says:

    Great article – thanks!

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  20. Armchair Sabermetrician says:

    Personally, I wouldn’t mind if they apply a “one strike, you’re out” (or should I say “you’re nuked”) policy for PEDs:

    1. If you refuse a drug test, you’re treated as if you were guilty of failing one.

    2. A lifetime suspension would be applied for the very first offense. Also, the player would be fined an amount equal to his lifetime earnings in professional baseball, and all of his statistics would be voided.

    3. Any team that knowingly signs a player who’s guilty of using PEDs shall:
    a) Pay the remainder of his salary to the league as fines;
    b) Be prohibited from participating in the amateur draft and signing free agents for one year.

    4. The punishment for #3 is cumulative. For example, if you have two offenders on the team, your team would receive a two-year ban from the draft and free agent signings.

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    • Jason B says:

      I’m glad you aren’t setting the guidelines and doling out the punishments…

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      • Armchair Sabermetrician says:

        Fair enough. The point is simply that a “War on Drugs” approach is unlikely to be effective unless one applies the harshest punishment possible. In essence, I’m advocating for the baseball equivalent of death penalty (which I wouldn’t mind being applied to violent crime for the very first offense either).

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  21. Rob says:

    Thank you very much for this article, it was perfect for me. I’m an economics major who of course loves baseball AND my favorite TV show is even The Wire.

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  22. attgig says:

    totally not about the economics, but I kinda like MLB delaying announcing the suspensions until after the trading deadline. Make the teams think twice about signing someone who has had shady connections in the past.

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  23. dbssaber says:

    I forgot that this was a reason why I disliked economics: Your axes are flipped! Aargh!

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