One of the stories we tell in The Wages of Wins is – contrary to conventional wisdom – teams cannot simply buy a championship in Major League Baseball (or any other North American sport, either). Although there is a statistically significant relationship between pay and wins, the economic significance – or as Deirdre McCloskey puts it, the “oomph” of the relationship — doesn’t seem to be there.
Bill Freehling of the Southern Ledger has taken this argument and applied it to the Florida Marlins and Major League Baseball in the current season. His column – which concurs with our basic findings – is an interesting read. And not just because he mentions the three authors of The Wages of Wins, although it is great to see someone apply our analysis.
I thought I would also look at the wins and payroll relationship in baseball thus far in 2006. When people see the Yankees and Mets – the payroll leaders in the American and National League – lead their respective divisions, it is easy to conclude that teams can buy a title. A different story is told when you look at all teams in baseball.
Yes, the Yankees and Mets are towards the top in both winning percentage and payroll. Three of the top six winners, though, are the Tigers, Twins, and A’s. And these teams rank 14th, 18th, and 21st in league payroll.
Looking past the top teams we see the Marlins winning half their games with a payroll of $15 million. Meanwhile the Cubs have spent $94 million and only won 40% of their contests.
Overall, payroll explains about 24% of winning percentage in baseball this year, a result similar to what we found when we examined this relationship over the past several years.
Despite all this, it is possible that we will once again see a subway World Series in 2006. And if we do, people will argue that the New York teams simply bought their pennants. As I noted in May, if the Yankees and Mets could simply buy a championship team, this would be our fourth consecutive Yankee-Met World Series. And the Yankees would be making their eighth consecutive trip to the Fall Classic.
Given the repeated failures of the New York teams, maybe it is time for everyone to conclude that there is more to building a winner than just spending some cash.
– DJ
Wages of Wins Journal 
Jason
September 7, 2006
I suspect that the popular perception that championships can be bought stems from a few things.
Success in professional sports requires many things. While it appears that raw spending is a minority factor, explaining roughly a quarter of team success by a single factor is rather remarkable. It’s also a factor that everyone can understand. The fan looking for explanation can easily point to spending as something the owner could do to improve his team’s lot. Arguing that the team needs to improve scouting, minor league development and coaching, player personnel decisions, managing the on-field and locker-room issues and keeping a team healthy (and needs to get lucky as well) is tougher to quantify and, due to some subjective nature in it, easier to argue away as the *real* cause of success/failure. A dollar is a dollar. Better eyes for young arms who can hold up for 200 innings a year may be what a team really needs, but it’s tougher to point to this as something that can be more easily (and immediately) leveled.
Travis
September 7, 2006
I bet Bob Costas would love to read that his premise behind his book, “Fair Ball” is almost 100 per cent false…
Mike L
September 8, 2006
So if 24% of winning is explained by payroll, what percentage is based on luck?
Certainly in the playoffs, you can calculate how often a team “should” win a best of seven series, assuming their chance of winning an individual game.
I’m betting if you can come up with a number related to luck, it will be the biggest factor in determining winning percentage, and payroll will look like a much larger chunk of the remainder. Just food for thought.
Jason
September 8, 2006
“Luck” is intangible and thus cannot be measured as anything other than a diagnosis by elimination. After the other things that are difficult if not impossible to quantify (quality of scouting, drafting, minor league development, coaching, etc.) luck remains as an explanation *UNTIL* someone can quantify and remove another component quantified as luck. Is it “luck” if a team with an inferior record wins a short series, or is perhaps that team better put together for a short series?
I do not mean to denegrate luck as being important. The chance outcome in sports is both important and substantial. However, quantifying luck seems problematic.
John
October 1, 2006
You can use statistics to explain or explain away anything. But let’s not over-think this. If all the teams had identical payrolls every year, would the Yankees have 26 championships?
Obviously a huge payroll doesn’t guarantee anything, but it sure does help.