Dreaming of A Free Amateur Market

Francisco Lindor wasn’t called up until after the Super Two deadline in 2015. (via Arturo Pardavila III)

In 1966, as Marvin Miller was touring the league making his case to become the Major League Baseball Players Association’s executive director, he faced a lot of pointed questions from the players he was wanting to lead. Among Miller’s suggestions was a modification of the reserve clause, the clause that in those days effectively bound players to one team for life.

One of those questions came from Jim Bouton, then with the New York Yankees. It’s a question that has in many ways defined the way we think about the economics of baseball. “I think there would be a problem if the players could move from one team to the other. Wouldn’t the wealthiest team get all the stars?”

Miller’s response was simple: “What would you say about a system which has produced one team that has won thirty pennants and twenty World Series in the past forty-five years?”

That team was, of course, the Yankees, who were even more dominant in the era before free agency than in the era since, during which money would supposedly rule over all. Despite this fact, common knowledge in baseball suggests free agency supports rich teams at the expense of poor teams.

Similar logic drives support for Major League Baseball’s first-year player draft. In a world in which amateurs could negotiate with every team, the richest squads inevitably would end up signing all the most talented players, resulting in a significant imbalance in talent and a baseball world ruled by dynastic squads like those early Yankees.

But as Miller pointed out, that logic was flawed in the first place, and since the institution of free agency, it has been exposed as entirely wrong. That leads me to ask: What if we abolished the draft and instituted true amateur free agency for all prospects? What would the baseball world look like then?

Parity concerns would be at the forefront, but that was never why the draft was created. The draft exists because, as Branch Rickey put it in his 1965 autobiography, “Ownership must eliminate the bonus.” Over the course of the late 1950s and early ’60s, the free-for-all nature of amateur signings–combined with the way the reserve clause put a hard ceiling on major league salaries–resulted in major league teams throwing the kitchen sink at top amateur talent, with top amateur signing bonuses rising over $100,000 by the 1960s.

This was particularly ludicrous when compared to the top major league salaries of the time. Even star players were rarely making over $50,000 in a season, and the minimum salary was just $6,000. In 1963, Willie Mays became the first player to make over $100,000, 13 years after Paul Pettit received that much as a signing bonus from the Pirates.

The draft fixed this problem by restricting players to only one negotiating partner upon their entry to the league. Without the bidding wars that characterized the early 1960s, bonuses for even the top picks swiftly started to deflate.

This phenomenon is readily apparent when you just compare 1964, the last days of the free-for-all competition among scouts for top prospects, to 1965, the first year of the amateur draft. Rick Reichardt, the top prospect of the 1964 class, earned a $205,000 signing bonus from the California Angels. The next year, the Kansas City Athletics had the number one pick and selected outfielder Rick Monday. His signing bonus was just $100,000, a mark reached by multiple amateur players in the 1950s, including Pettit, Ted Kazanski (1951), Marty Keough (1952) and John DeMerit (1957).

The raw deal for players is obvious; top player payments shrunk by over half in just one year. But also, by putting a ceiling on what top players could earn, rich teams could throw their muscle around even easier, and smaller-market teams had a tougher time leveraging what little relative cash they had.

For a concrete example of that phenomenon, look at what has happened in the amateur market since Major League Baseball implemented a cap on international spending. The Yankees immediately swooped in and signed top prospects by the boatload, blowing past the spending cap because the penalties weren’t enough to influence their bottom line. Given a $2.2 million spending limit, the Yankees instead spent nearly seven times that amount, an astounding $14.51 million. With penalties, the final tab came out to $26.82 million, far more than any other team (except maybe the Dodgers) could afford in this market.

It does seem likely that the Yankees, Dodgers, and other similarly rich teams would wind up signing much of the top-of-the-top tier talent in a free amateur market. But because of the competition among those rich squads, these signings would require a significant amount of resources. Every dollar spent locking up a top prospect is one that won’t be spent in the major league free agent market, a much more reliable producer of wins than the draft.

As risky as free agent deals can be, in most cases, top-tier free agents return solid value at the beginning of their contracts, with the risk coming as they age towards the end of their contracts. Meanwhile, the first overall pick is the only pick in the MLB draft to produce more than 15.0 WAR on average for their careers. Once you get to pick number seven, the average is already below 10.0 WAR, per Baseball-Reference.

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And with the freedom to compete for every amateur player, and not just those who happen to fall to them due to draft orders and arcane free agent compensation rules, competitive advantages in scouting and development can be leveraged even harder. If a team’s scouts believe enough in a player, that team can get him.

Compare that to the current draft system, in which the institution of slot values and a capped bonus pool make it harder for teams to put extra investment into amateur talent. Teams like the early-2010s Rays that were built up by getting as many early draft picks as possible and maximizing their ability to invest in amateur talent have seen that strategy cut down by new draft and free agent compensation rules. These rules were touted as helping small-market teams, but in reality they have cut off alternative means of acquiring talent and ensured their competitive disadvantage in the major league free agent market will matter even more than before.

It’s also important to remember that the draft was as much about control as it was about bonus reduction. The elimination of the need for the “bonus baby” through the draft allowed the owners to more strictly enforce the minor league pipeline, making it easier to assign prospects to lower levels of the minors and keep them there throughout their early 20s. Thus, by removing the ability to negotiate for (among other things) a quicker promotion to the major leagues, the draft allowed major league teams to maximize their surplus value by hoarding prospects in the minors until they hit their prime age.

Every season, rules like the 172-day minimum for accruing a year of service time and the Super Two arbitration cutoff lead to teams keeping their best prospects in the minor leagues in order to maximize surplus value. The Super Two rule in particular serves to keep incredibly talented young players out of the major leagues until late May or early June most seasons.

Over the past five years, players who have been held back from promotion to eliminate a fourth year of arbitration include Dallas Keuchel, Chris Archer, Derek Norris, and Trevor Bauer (2012); Michael Wacha, Gerrit Cole, Zack Wheeler, and Wil Myers (2013); Oscar Taveras, Gregory Polanco, Aaron Altherr, and Joe Panik (2014); Carlos Correa, Vince Velasquez, Jarrett Parker, and Francisco Lindor (2015); and last season, Julio Urias, Albert Almora, Willson Contreras, Jameson Taillon and Tim Anderson.

A good example of this strategy this season can be seen in my Milwaukee Brewers, which earlier in June called up top prospects Lewis Brinson, Josh Hader and Brett Phillips in the course of just one week. Even though the Brewers shockingly are in first place this season, the necessity of playing for the future and maximizing surplus value in a small market take supremacy, and as a result, some of their most talented players have been playing in meaningless games even as the team has been one of the league’s biggest surprises thus far.

But we see these kinds of moves happen no matter what stage of contention a team is in, or is supposed to be in. Many of the Super Two-delayed players listed above were playing on contending squads, including Archer, Cole, Taveras, Polanco, Urias, Almora and Contreras. The larger point is that these kinds of rules are designed to keep young talent in the minors for as long as possible.

While you can debate how much these rules help small-market or large-market teams, I don’t think there can be any debate that they are bad for fans, who crave to see the best players possible in every game. This year’s Brewers, though, trotted out such has beens as Kirk Nieuwenhuis and Jhan Marinez for a month plus while much more talented players were stuck at Triple-A Colorado Springs.

There’s no guarantee there wouldn’t be similar rules teams could game in a post-draft world. But I believe the sums of money top prospects could earn in unrestricted negotiations with all 30 clubs would create a significant incentive to get players to the majors quickly, especially since it wouldn’t be out of the question for many top players to negotiate for a major league contract right out of the gates.

In fact, a select few players have gotten major league contracts through the draft, including Milwaukee’s Rickie Weeks in 2002. The increased ability to negotiate such contracts would guarantee these players get placed on the 40-man roster right away, which would force teams to get them to the majors quickly or risk losing them through the Rule 5 draft (or some other such mechanism).

So let me summarize what I see in my hypothetical world, where baseball’s talent market is truly free. I believe, much like in the days of the bonus babies, we would see rabid competition for baseball’s top talent, with fierce negotiations for top prospects.

Scott Boras infamously opened negotiations for Stephen Strasburg’s first deal by asking for a $50 million contract. Strasburg would wind up settling for $15.1 million, still a record amount. But in a world in which other teams could have negotiated with Strasburg besides the Nationals, $50 million would have been a real possibility. The market likely would have operated in similar fashion to the international free agent market, where a select few prospects earn a majority of the bonus money, and rates swiftly fall off after the elite group is snapped up.

But still, even if only a couple dozen prospects break the bank on a yearly basis, the abolition of the draft very well could threaten the entire structure of the minor leagues. I see this as nothing but a point in favor of amateur free agency. The minor leagues are an exploitative labor system that not only fails to pay many of its workers the minimum wage, it also creates a scenario in which the majority of professional baseball players are stuck playing games in which the outcomes don’t matter.

The minors as they currently exist are closer to glorified instructional leagues than anything competitive, and that’s unfortunate for fans who live in areas without major league squads. Sure, they can go watch a minor league contest, but the energy at those games pales in comparison without the kind of stakes you see even in independent leagues, where a championship is as important (or more so) than player development. The documentary Battered Bastards of Baseball illustrates this well, as it shows how the energy surrounding the Portland Mavericks independent squad was far more intense than that of the major league affiliates it played with in the Northwest League.

So I think the result would be that major league teams would have much, much smaller farm systems—perhaps just one or two teams rather than the five to seven we see now—if they would have farm systems at all. We would see more young, raw talent in the major leagues, and the fact that these young players would take roster spots would mean veterans would have a tougher time hanging on past their primes.

This isn’t to say the minor leagues would die. I think the success of the various minor leagues and independent leagues over the years has proven there is a viable market for baseball even in areas that aren’t populous enough to support a major league team. And because there is a massive pool of professional-level (if not MLB-level) players, these teams shouldn’t have a problem filling their ranks. Perhaps a loan system would develop such that major league franchises could send their prospects to smaller leagues to get playing time at younger ages, much like in professional World Football.

As for the parity issue, I don’t think a free amateur market would be a magic salve by any means. I still think teams like the Dodgers and the Yankees would have the best access to talent. But if they want to rule the amateur market like they rule the free agent market, they will have to take significant risks. They will have to deal with investments worth tens of millions of dollars failing to make the major leagues.

Small-market teams still would have a mountain to climb, of course. But they would be free to take more creative approaches to amateur talent acquisition and development. And many of those parity problems could be solved by a more robust revenue sharing program, something studies have shown are better at improving parity than any other sort of anti-competitive device like a salary cap.

Most importantly, though, I think it would create a more interesting baseball world, a world in which the levels below the major leagues still have something to play for, a world in which players have freedom of choice in where they ply their trades from the beginning of their careers, and a world in which teams would be free to pursue whomever they have their hearts set upon signing.

Free agency scared so many in the baseball world, but it has improved the game for everybody—players have more freedom, owners have been making money hand over fist, and fans have more access to the game than ever before. Maybe I’m just optimistic, but I see no reason why expanding the same rights to the amateur class won’t have a similar effect.


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35 Comments on "Dreaming of A Free Amateur Market"

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crew87
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crew87

I think I agree with this- I’ve gone back and forth on it several times over the years. I’m left wondering before the draft, was parity in baseball any better? My feeling is probably not, with New York teams dominating pretty much every era of baseball.

There are good reasons to abolish the draft and it probably wouldn’t *hurt* parity (as Jack explains well), but I don’t think necessarily it helps, either.

Will H.
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Will H.
I disagree pretty heavily with the premise of this article. Even with the explanations, I don’t see how much of this could possibly be beneficial for all parties. You reference the current international system as something to look to, but even with the penalties in place the bigger market teams are still the ones who exploit the system and end up with premium talent. The Dodgers have spent boatloads of money on top talents like Yasiel Sierra, Yordan Alvarez, and Yadier Alvarez, while the Cubs and Yankees have also spent heavily and Yoan Moncada and Luis Robert ended up in… Read more »
Jimbo
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Jimbo
I read your first point and the assumption is wrong – that the most sought after amateurs would not end up on small market teams. MLB had close to free markets in Latin America international signings prior to 2011 and small market OAK held the record for largest bonus. Small market MIN and PIT were next. I believe 2010 was the last year for a true free market in international signings and the highest bonuses were paid by PIT, STL, TB, TEX and TOR, SEA, and OAK with two each. A free market similar to what the author proposes existed… Read more »
Jimbo
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Jimbo

You point out the LAD and other big market teams have signed much of the premium Cuban talent in recent years. It is *because* the rules created a distortion in the market that LAD in particular seemingly cornered the market on Cuban talent. LAD directed all their resources to the Cuban player market *because* all the other markets were closed off by rule which left one market for their resources. It is not correct to assume that LAD could have exploited all the markets they way they exploited one single market.

Will H
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Will H

It is true that the players I mentioned were Cuban signings, however, these guys were signed under the same regulations as players from any other Latin American country. The Dodgers have cornered to market on Cuban talent of late, but I intentionally didn’t mention Guerrero, Arruebarena, or Olivera because they were signed under a different set of circumstances. However, by dominating the market for Cubans, LAD has also dominated the international market as a whole in recent years.

Will H
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Will H

Maybe my statement was a little extreme, but in general it has been true that larger market teams have brought in the majority of top dollar international signings. Heading into last year’s signing period, 24 of the largest 35 or so international signing bonuses in MLB history have been doled out by teams with large markets and high revenues, per Baseball America. Not all elite players end up with richer teams, but the ratio is significantly tilted towards large markets when compared to the draft.

evo34
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evo34

“Premium talent?” There is a reason the rich teams passed on these players…

http://www.mlbprospectguide.com/2010/09/2010-international-signings.html

evo34
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evo34

Do they have an award for worst baseball article of the year?

Evo35
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Evo35

No but they might for needless comments.

Scott
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Scott
A major benefit of eliminating the draft is that teams with losing records would no longer pick at the top and have access to the talent and bonus pool. Large market teams like the Cubs and the Astros would no longer be rewarded for throwing games. The draft exists for one major reason – suppressing player salaries. It is a legally accepted form of collusion between the owners not to compete for the best players. Smart, small-revenue teams found ways to improve their performance on the ball field and off. The Cardinals lacked the money to purchase top-tier talent from… Read more »
Will H
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Will H
The draft doesn’t exist only to suppress player salaries. Regardless of whether or not that was the original intent, it plays an important role in maintaining a more balanced, competitive league by ensuring that top talent is spread around more evenly to the 30 teams as opposed to the richest teams snapping up all elite talent. Without the draft, there is no balance of talent. Additionally, eliminating the draft would also eliminate the competitive balance picks distributed to smaller market teams to allow more access to talent through the draft since they are disadvantaged in international and free agent signings.… Read more »
Scott
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Scott
Almost all articles examining the history of the draft state that it was created to reduce amateur signing bonuses. The competitive balance aspect is merely cover concocted to gain support from fans and writers. Many of those restrictions are either because of agreements between the owners insulate themselves from competition (market monopoly) or because of bad management (stadium leases). The A’s should be allowed to move to San Jose and the Rays to San Antonio, Charlotte or even New York. Secondly, the competitive balance picks do not go to small market teams – they go to small revenue teams. The… Read more »
Mark L
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Mark L

As the article said, only the no.1 pick has been “guaranteed” to be good – lifetime WAR for other picks is around 10. Well, it’s up there anyway. What you posit just isn’t true, and the big teams dominate this system the way they did the pre-free agency one.

Will H
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Will H

I’m curious what I said that you feel “just isn’t true” and I’d love to see some kind of evidence for your claim that “big teams dominate this system the way they did the pre-free agency one”. No pick is guaranteed to be good, but the draft ensures a more fair opportunity to get good talent for smaller market teams.

evo34
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evo34

@MarkL Try using Google if you looking for facts…

http://www.hardballtimes.com/the-net-value-of-draft-picks/

evo34
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evo34

Scott,

You have it all wrong. The *CBA* exists to protect veteran player salaries. E.g., Guys like Miguel Montero can get cut and still collect $10M. It protects veterans by screwing over amateurs and minor leaguers — the same way most unions work.

The owners are still paying more money than in any other sport. It’s just the way that money gets distributed that supresses salaries for young players. The only way that changes is if the veterans demand it in the next CBA. Spoiler: they won’t.

Deacon Drake
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The biggest barrier influencing this is that their is no incentive to field a competitive team in MLB. There have been times when the best AAA teams were better than the 08-09 Nationals, 03 Tigers, early 00s Rays, etc. The Marlins spend the bare minimum year after year because they can always be cheaper next year. Spending money guarantees nothing (ask the Angels), and many teams have succeeded without opening the wallet. But because MLB does not punish bad teams (as with club sports in Europe, Americas) by booting them from the top league, why would you risk large financial… Read more »
Mike
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Mike
I’m not super close to the situations surrounding all the guys you mentioned held back because of super two but I follow the NL West pretty closely. I can say without a doubt Uriah was not held in the minors because of Super Two status. He was held back in order to limit his workload so he would be available for the playoffs. The Dodgers don’t play those games. If a guy can help the big league club he will be up. Joe Panik and Jarret Parker also weren’t held back because of Super Two. Especially Parker. Not even close.… Read more »
JimmieFoXX
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JimmieFoXX

“Free agency scared so many in the baseball world”

It sure did and they got busy shutting it down. In 2000 Free Agency hit it’s peak that winter with Alex Rodriguez and Manny Ramirez. MLB reporters were busy at the Winter meetings hotel as Scott Boras and Jeff Moorad were the stars generating new rumors by walking through the hotel lobby.

Eighteen years later we may see two such players again as free agents the same winter with Bryce Harper and Manny Machado. Will it happen?

Beef Jelly
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Beef Jelly
You say that the richest teams would not get all the best players but in a free market (IE: Free Agency) that is almost exactly what happens. When big time free agents come up there is only 4 or 5 teams in the league that can actually afford to pay them. I have to think something similar would happen without an amateur draft. The smaller market teams would have almsot zero chance at the top prospects. The Bryce Harper’s, Stephen Strasburgs and Griffey Jrs of the world would all likely end up on the same 4 or 5 tesms just… Read more »
Joe D
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I disagree with this article. If the draft were eliminated, the Yankees, Dodgers, Cubs, and Red Sox would sign the vast majority of Top 100 amateurs each year. That is how the Yankees were able to dominate the game for so long. There is always going to be a revenue disparity between the large and small market teams and there really isn’t anything that the small market teams can do to close the gap as everything just costs more in large cities. The Yankees can sell tickets, TV packages, and sponsorships for more than the Pirates simply because they are… Read more »
Bucs22
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Bucs22
Very well put Joe D. I like that you bring up the fact that the Yankees dominated baseball in the pre-draft era by snapping up top amateurs, because this is 100% true. Oddly enough, the author seems to believe that the advent of free agency is what has caused more parity and slowed Yankee dominance. The Miller-Bouton anecdote noted occurred in 1966 and free agency soon after, but I think the author misses a key point here. The draft began in 1965, meaning the Yankees could no longer simply sign all the top amateurs. I’m not seeing how free agency… Read more »
Andrew F
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Andrew F
“The minors as they currently exist are closer to glorified instructional leagues than anything competitive, and that’s unfortunate for fans who live in areas without major league squads. Sure, they can go watch a minor league contest, but the energy at those games pales in comparison without the kind of stakes you see even in independent leagues, where a championship is as important (or more so) than player development. The documentary Battered Bastards of Baseball illustrates this well, as it shows how the energy surrounding the Portland Mavericks independent squad was far more intense than that of the major league… Read more »
BaseballGuy
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BaseballGuy

Not sure how this would benefit anybody except players and big market teams. Players would get way more money (you suggest Strasburg could get $50M) and big market teams would get the best talent. Small market teams would have a harder time competing for amateurs and the higher amateur expenditures would jack up ticket prices for fans even more. This reads like a Scott Boras think piece, not a well reasoned argument for why a free amateur market would be beneficial.

Eddie
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Eddie
I’m sorry, but some of the logic here is just awful. The objective fact is that, whatever the reasons for its implementation, the draft era has had dramatically more competitive balance than the pre-draft era. There’s just no escaping that. Moreover, I suspect that the other changes (money, information, etc) since 1965 would make the gap between rich and poor teams widen even more than it did in the 1950s. I’m all for returning to a free- or at least mostly-free minors world, but the only way that’s going to happen is the loss of the anti-trust exemption. If that… Read more »
Ryan
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Ryan
I’m missing the point on how eliminating the draft would drastically change the minor leagues. Anyways it would be foolish to think big market teams would not just scoop up all the top amateur talent. The Dodgers were spending millions on any modestly interesting teenager when there was no cap, but a tax, on the spending. Front offices are now too smart to overlook the value of amateur talent. Also if you want an example of a league with no draft, look to the soccer leagues in Europe. Top teams usually end up with the top players and there is… Read more »
evo34
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evo34

The only accurate statement of this entrie piece:

“It does seem likely that the Yankees, Dodgers, and other similarly rich teams would wind up signing much of the top-of-the-top tier talent in a free amateur market. “

Josh
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Josh
The article is kind of a mess for all the reasons listed above, but I’ll pick specifically on conflating the Super 2 deadline with the existence of the draft. The two aren’t really connected – Super 2 is about service time, not player distribution. Arbitration rules in general are obviously slanted toward owners, but could be “fixed” without messing with the draft. Competitive balance issues are always going to exist in a league where teams have massive revenue disparities. The league that by far does the best financially in the world (the NFL) is the most socialistic of all when… Read more »
Mark L
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Mark L
I’m not sure why competitive balance is the ideal that everyone seems desperate to maintain. Soccer, a vastly more popular sport than baseball, has no draft (other than in the US) and little competitive balance, and it’s only really in the USA where drafting is seen as a natural part of sport. The draft is, as the article said, largely a crap shoot, anyway. No.1s are the only picks who can be reliably expected to provide more than 15 WAR over their lifetimes, which seems a poor argument for keeping it. Rule 5 seems designed to stop teams from stowing… Read more »
Mark L
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Mark L

Sorry, that last paragraph was typed badly – “which makes money for the people who run the instructional leagues, the owners, and a handful of top guys, but denies it to almost everyone else”.

Josh
Guest
Josh
Minor league pay is something of a separate issue than the draft. The problem minor leaguers have is that the vast majority of them aren’t vital to the league themselves as individual assets, and are paid as such. I don’t think we’d see minor league salaries change much if the draft was abolished because “real” prospects would still happily accept big bonuses and small salaries, while fringe prospects would take whatever someone offers them just for the chance to play. We might actually even see minor league salaries fall (in real terms, at least), since we’d see runaway bonuses at… Read more »
Bucs22
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Bucs22
Mark L – I don’t understand how the fact that the best players in baseball have come equally from the first round of the draft as from any other amateur talent source shows that the draft isn’t necessary. Yes, not every pick is going to be a success, but obviously the draft is doing something right when considering that a variety of teams have found elite talent through it. The fact that 13 of the top 30 active hitters (per Baseball Reference) and 16 of the top 30 active SP (4 of the top 5) came from one round of… Read more »
Mike
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I feel like using the signing and drafting policies of teams from decades gone by, when most front offices were focused on batting average and wins, doesn’t fully address the modern game, one where every team has access to (and uses) advanced stats like spin rate and exit velocity. Perhaps there are some untapped inefficiencies in the market for the next Billy Beane to exploit, but they’ll be less and less impactful as they were during the last advanced stats revolution because it appears every club is addressing the importance of having smart front offices.

Yehoshua Friedman
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Yehoshua Friedman
There are a few issues here which pull in different directions. One is maintaining competitive balance, which has been addressed pretty well, with MLB being more balanced than other US professional sports of European soccer. OTOH the issue of free market works in the opposite direction, the survival of the fittests, which leads to a less competitive playing field and a lot of unhappy fans. I would ideally like to see more community ownership of teams, which would enable a small market team like the NFL’s Green Bay Packers to stay competitive from year to year. If the farm system… Read more »
Rob H
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Rob H

There is no doubt that there is some competitive balance benefit to the draft, how much I am not sure. There is also no doubt that the draft suppresses salaries for at least the top amateurs. The most probable/logical next step would be to eliminate the slot bonus system which has reduced the growth signing bonuses significantly in recent years.

If amateur’s are going to be forced to negotiate with one team then that negotiating power should not further be limited by a cap on bonus pools.

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