Believe it or not, at least two reputable economists say that the
astronomical baseball salaries shelled out in this off-season are not
out of line -- and in some cases are probably lower than what they
should have been.
Gerald Scully, a professor of management at the University of
Texas at Dallas, and Robert Baade, an economics professor at Lake
Forest College, have each constructed statistical models for
estimating how much money a player generates for his team. Their
equations take into account the player's statistics and his team's
record and revenue data. Baade contends that his model can explain
83% of a team's attendance. He also maintains that at least 40% of a
team's revenue can be attributed to the quality of its players'
Neither Scully nor Baade has analyzed this year's free agents
because the financial data needed to do so are not yet available,
but in applying their formulas to information from 1986 and '87, both
have found stars to be worth $3 million per year and more. For
example, when Roger Clemens went 24-4 for Boston in '86, he was being
paid $340,000. But Scully found that Clemens's '86 performance was
worth $3.9 million in revenue to the Red Sox -- more than the record
$3.25 million a year Mark Davis got for signing with the Royals in
December. In nearly every case that Scully and Baade looked at, the
player was underpaid.
''It's incorrect to conclude that because you're seeing some $3
million contracts, owners will put themselves in the poorhouse,''
says Scully. ''This is scarce talent in an open market, where you bid
for it.'' In light of baseball's new four-year, $1.06 billion
contract with CBS and its four-year, $400 million deal with ESPN,
says Baade, ''this year's large free-agent contracts were both
inevitable and justifiable.''
This is an article from the Jan. 15, 1989 issue