An Economic Evaluation of the Moneyball Hypothesis

Abstract

In his 2003 book Moneyball, financial reporter Michael Lewis made a striking claim: the valuation of skills in the market for baseball players was grossly inefficient. The discrepancy was so large that when the Oakland Athletics hired an unlikely management group consisting of Billy Beane, a former player with mediocre talent, and two quantitative analysts, the team was able to exploit this inefficiency and outproduce most of the competition, while operating on a shoestring budget.The publication of Moneyball triggered a firestorm of criticism from baseball insiders (Lewis, 2004), and it raised the eyebrows of many economists as well. Basic price theory implies a tight correspondence between pay and productivity when markets are competitive and rich in information, as would seem to be the case in baseball. The market for baseball players receives daily attention from the print and broadcast media, along with periodic in-depth analysis from lifelong baseball experts and academic economists. Indeed, a case can be made that more is known about pay and quantified performance in this market than in any other labor market in the American economy.In this paper, we test the central portion of Lewis's (2003) argument with elementary econometric tools and confirm his claims. In particular, we find that hitters' salaries during this period did not accurately reflect the contribution of various batting skills to winning games. This inefficiency was sufficiently large that knowledge of its existence, and the ability to exploit it, enabled the Oakland Athletics to gain a substantial advantage over their competition. Further, we find

Matching and Winning? The Impact of Upper and Middle Managers on Team Performance

“…5 Further support for our manager estimates comes from the fact that the top managers we identify are consistent with other research and popular opinion on baseball manager abilities. For example, in the case of GMs we find support for the notion that the 'moneyball' managers (see Lewis, 2003) have outperformed their peers, as also argued by Hakes and Sauer (2006) and Wolfe et al (2006). Our results in this respect diverge however from Goff (2013), which we suspect is due to large differences both in inputs and methodology.…”

Ch-Ch-Ch-changes: How Action Phase Functional Leadership, Team Human Capital, and Interim vs. Permanent Leader Status Impact Post-transition Team Performance

“…Prior research examining human capital in the context of professional baseball typically used earned run average (for pitchers) and batting average (for batters and fielders) as an index of a player's skills and abilities (e.g., Longley and Wong 2011;Zimbalist 1992). However, these measures do not capture the full range of human capital that a player uses to contribute to a team over the course of a season, nor do they consider differences in context such as variations in ballparks or season-specific situations (Hakes and Sauer 2006;Miceli and Huber 2009). The TPR comes from a class of metrics known as Sabermetrics, which provide a set of comprehensive indicators of player KSAOs (James and Henzler 2002).…”

Selections from ordered sets

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