If you put all the economists in the world end to end, you still couldn’t reach a conclusion. This joke (old yet still good) highlights a basic characteristic of economics. Economists tend not to agree. So when we see two economists independently telling the same story, well, that’s news. On Saturday I noted a column by JC Bradbury – appearing in the New York Times – which advocated a novel solution to the supposed steroid problem in baseball. Soon after – and I am assured independently – Steve Walters (a frequent guest blogger at the WoW Journal) submitted the following column to be posted in this forum. Yes, as you will see, Bradbury and Walters reach similar conclusions. So I guess these two economists must be on to something.
For those who forget, apart from his day job as a professor of economics at Loyola College in Maryland, Steve has served as a consultant to two MLB teams and writes occasional statistical analysis features for The Sporting News. He grew up in Salem, Massachusetts, remains a citizen of Red Sox Nation, and counts as his most cherished piece of sports memorabilia an autographed copy of MBA: Management by Auerbach. And here are his thoughts on steroids in baseball:
Fixing Baseball’s Steroid Problem
Economists like to solve problems by harnessing incentives. Our recipe is usually very simple: Figure out who has the strongest incentive to make the world a better place, and then try to arrange things so they can do so.
If the Mitchell Report on steroids in baseball is any guide, lawyers like to address problems by:
–Billing lots of hours spent talking to people, some of whom (with luck) will be stool pigeons;
–Billing lots of hours spent writing up a long report that fuels gossip and generates publicity for the firm;
–Making sober-sounding recommendations that, if adopted, will cause enough squabbling to enable future generations of lawyers to bill lots of hours.
And if judged by its potential to make the world a better place, the 409-page Mitchell Report may be the worst piece of work by a lawyer since Congress handed Kenneth Starr an unlimited budget and subpoena power. All for a reported $20 million ($50,000 a page-almost as much as The Wage of Wins authors got!).
How has the Distinguished Gentleman from Maine managed to do so little good with so much time and money? By ignoring incentives-both as a source of the problem, and as a possible solution.
Let’s start by understanding the nature of a player’s incentive to stick a needle into his butt (or navel-who knew?) and inject chemicals of questionable quality and unknown long-term effect. In econ-speak, what we have here is a “positional externality” problem: every player wants to improve his position, relative to all other players, in order to capture the huge rewards that go to big-leaguers. But when a player resorts to illegal, chemical means to do so, it puts pressure on everyone else (those “external” to the initial decision to cheat) to do similarly unwise and destructive things.
At any point in time, there are 750 ballplayers in the big leagues. They stay in 4-star hotels, bask in the adulation of millions of fans, and earn salaries ranging from fabulous (the current minimum is $390,000) to incomprehensible (A-Rod, we’re looking at you). This means that the 751st best player in the world, who rides buses between Super 8 motels in places like Syracuse and Scranton, will be tempted to “do whatever it takes” to become 750th best. Which puts pressure on that guy, and so on up the chain. To preserve his relative position and the rewards that go with it, every player will be tempted to cheat.
This is easy to see. The next point, however, seems to have eluded the Lords of Baseball: This positional externality is mainly a problem for the players themselves.
Sure, baseball owners and their Commissioner must “protect the integrity of the National Pastime.” At the least, cheating might pose marketing problems. More importantly, it’s a moral issue.
But as economist J.C. Bradbury pointed out at his splendid Sabernomics blog, it does not appear that fans are much repulsed or attracted by players bulked-up on ‘roids or HGH.
We grumble, but we watch. We want to see the best 750 players; not many of us turn away because some might have gotten into that group (or improved their standing in it) via chemistry.
In other words, the “external costs” here seem to fall not on owners but mainly on players. They’re the ones at risk for shrinking testicles, organ damage, and maybe an early exit, Lyle Alzado-style. And for every dishonest player, an honest one loses his job or considerable money.
So should the owners ignore the problem? Not at all. But they should recognize that their moral obligation to do right by fans and players does not require them to be the head honchos in this effort.
If players bear most of the costs of the steroid problem, they have the greatest incentive to get a handle on it. The best players in a steroid-free world would be the same ones in a world where everyone juices-but all would be healthier and could stop writing checks to shady characters peddling vials of… who knows. And the best players have a strong incentive to prevent lesser talents from using illegal means to leap-frog them into The Show or get a bigger contract.
Luckily, the players already have an organization that could and should want to minimize this risky and wasteful conduct-their union, the MLBPA.
Unfortunately, the Lords of Baseball have maneuvered the players’ union into a position where it has not just dragged its feet, but actively resisted attempts to mitigate the problem. The owners did so by defining the integrity of the game as exclusively their property and assuming they alone could police players’ conduct; their ham-handed initiatives have bred mistrust by players and delayed progress for years. Indeed, the Mitchell Report itself-with its casual use of hearsay and its promotion of a sinister-sounding bureaucracy (a new “Department of Investigations”) and snooping (e.g., intercepting packages shipped to players)-promises to further set back labor relations, as my friend Ken Rosenthal has eloquently stated.
But the union is the entity best situated to do the policing here. The owners should not see the MLBPA as their adversary in this case. Indeed, they should toss the hot potato that is performance-enhancing drugs to the union and say “this belongs to you. You speak for the 750 best players in the world. Figure out how to keep ‘em healthy. Keep cheaters from stealing your members’ jobs or costing them money. We’re out-except to pay the bills for any testing or bureaucracy you decide to use (since, after all, we want you to have an incentive to do this right and not skimp).”
If the MLBPA owned this issue, I’m pretty sure that use of PEDs would go down farther and faster than it will with Mr. Mitchell’s Inquisition Squad. Labor economists have identified a host of salutary effects of unions in giving workers a collective voice that solves trust issues and enhances job performance. I’d bet that once players knew that membership in their fraternity was contingent on honest conduct and once they trusted the policing mechanism, it would be significantly harder to cheat.
But I’ve prattled on long enough. Time to total up my hours and send a bill to the Commish.
– Steve Walters
Wages of Wins Journal 
Sam Cohen
December 16, 2007
So if you were a player (or MLBPA), what system would you recommend?
I would imagine that different players have different incentives (particularly if your hypothesis that “all-steroids” and “no-steroids” ranking of players is equal does not hold true), so simply saying that players have the greatest incentive to solve the problem doesn’t really get us that far.
And players could have turned in other players at any point over the last couple years, but clearly they didn’t (except when being investigated).
Steve Walters
December 17, 2007
Well, Sam, since you’re a Sixers fan I’m not sure I should be talking to you, much less agreeing with you, but… you raise good points.
Since I’d rambled on for over 1,000 words, I didn’t think adding details about how the union might run things was a good idea. But one virtue of a blog is it can go on for a while, so:
What I think the MLBPA would do if they owned the PED issue is something like other skilled trades unions do in limiting entry into their ranks, and making sure members adhere to certain standards once in. E.g., some unions operate training schools and have rigorous testing before one can get a “card” entitling him or her to the jobs/wages members enjoy. The MLBPA could make completing an educational program on PEDs (and how to achieve improvements in performance through legal training means) a condition of entry into the union, without which a player couldn’t be on a big-league roster.
Unions also frequently test members to assure that their skills are still up to par, and some even operate drug testing programs (or closely monitor programs run by management) where being clean is related to safety or job performance. Flunking can mean you’re out of the union and out of a job.
Generally, when compliance with any program is related to trust in the entity running it, I’d argue you’ve got a better chance of success if you let the workers take the lead. This is why, as you say, players haven’t “finked each other out” under the present approach: the drug program is management’s baby, and management is your adversary. That needs to change if players are to commit to policing themselves.
dragonsi55
December 17, 2007
“In a 1995 poll (conducted by the IAAF) of 198 sprinters, swimmers, power-lifters and other assorted athletes, most of them U.S., were asked if they would take steroids with two guarantees: 1) You will not be caught. 2) You will win. One hundred and ninety-five athletes said yes; three-said no. They were also asked if they would take steroids with two guarantees: 1) You would not get caught. 2) You will win every competition you enter for the next five years, and then you will die from the side affects of the substance. More than half of the athletes said yes.”
(http://www.free-researchpapers.com/dbs/a12/hpw154.shtml)
Assuming the above quote is accurate, I believe this undercuts the argument.
Even setting aside the problem that self-policing can also mean n0-policing, as long as testing trails new drug forms, there is a competitive advantage to be gained, and about half of anyones competition is willing to put their life on the line to win.
Add a couple of corollaries:
1. For all but a few athletes, you won’t win if you compete against users.
2. You’re ‘out of the union’ anyway if you can’t match the competition for the roster spot.
This is just to stay in the game. Furthermore, given performance incentives for winning playoff games, even a clean player would be hard-pressed to rat out a teammate who’s using, if that decreases the team’s liklihood of winning a money game.
The problem seems to me to be less related to other unions, and more to pollution and externalities. If two companites are in competition, and one pays for pollution control while the other dumps, the miscreant can make better profits and drive out their clean competitor with lower prices.
Has that problem been solved by self-regulation?
Steve Walters
December 17, 2007
Cool data and provocative questions, dragon–thanks.
The survey data on the propensity to cheat is itself prima facie evidence of the positional externality problem. I’d just note that the responses are contingent on not getting caught. Ergo, our goal should be a system where that presumption is questionable, no? I’m arguing a union-run system has better odds in that regard.
Here’s another reason for that argument: Many “state-of-the-art” tests are blood tests. But bloodwork might reveal some health issues that clubs might use to decide not to sign a guy, even if clean (PED-wise). So the union would rationally resist allowing such tests–but if they ran the tests and promised to discard all irrelevant info, blood tests might happen.
The point about the possibility that team-related rewards might swamp the individual’s incentive to police cheating is a great one. As it is now, post-season dollar rewards are a small fraction of player income. But rings and prestige are big, so I can’t rule your argument out.
The pollution analogy is, I think, restating the positional externality problem. If enforcement is imperfect, the propensity to cheat rises quickly. Again, the goal is effective policing. But here’s the next question: If the MLBPA really dampened down on PEDs, then the returns to a cheater would rise. Ergo, this drug war is just like the Big Drug War: to some extent, successful enforcement raises the profits of those not apprehended–and compounds enforcement difficulties.
dragonsi55
December 17, 2007
Good point about the unions & bloodwork. That brings to mind that unions in other fields have also fought for their workers health, even when it has squeezed the average worker. It seems like they counter the competitive disadvantage with political leverage like tariffs.
I can’t see the application here. But your mention of the drug war took my mind to vice…
Anyway, it seems like there is a close analogy, of other people who sell the wares of their body, in the sex-trade industry. I think they have achieved (when allowed to operate) significant reductions in std’s, despite situations where body-enhancement and lack of, uh, prophylactic remedies can give advantages to individual workers in selling their wares. Like sports, the workers tend to be younger, with the older-and-wiser better realizing the consequences of youthful indiscretions. Because of gambling, shady characters will always be waiting nearby, and that is something the sex-trade unions also must deal with.
I offer my apology, I’m not trying to scuzz up the page. My own background is in environmental science and the problem of externalities is the 1200-lb gorilla in the room I find myself compelled to wrestle with. So I look for hope where I can find it.
firebird
December 18, 2007
I can’t see the application here. But your mention of the drug war took my mind to vice…
chew2
December 18, 2007
Aren’t there aspects of the prisoners dilemma and the tragedy of the commons with doping as the dominant strategy?
Steve Walters
December 19, 2007
Another point that dragon’s analogy to “sex workers” brought to mind: The baseball industry is similarly afflicted with people whose interests and incentives coincide only loosely with the long-term interests of players in general (i.e., the chemists, but also some less-than-scrupulous agents). Strengthening the union would, I believe, push people like this farther toward the sport’s margins a bit.
Also, I think chew’s right that one could model this as a prisoner’s dilemma-type game. Collusion (call it cooperation if you want) is one way to get to the collective best; collusion is what unions do.
Panda Bear
December 19, 2007
Pete Rose belongs in the hall of Fame.