Lately it seems like wherever you look, either on and off the field, the New York Mets are in trouble. (Okay, maybe not at third base, but that’s about it). Even though the Yankees’ offseason has fallen short of expectations, the Mets are the ones who need dramatic improvements in order to contend, but they clearly did not attempt to make those improvements all at once this offseason. General manager Sandy Alderson told Adam Rubin of ESPN New York that the quiet offseason has more to do with the Mets’ already sizeable payroll than anything else (like, say, Ponzi schemes). Most notably, he described the $140-million range as a payroll that is “significantly higher than where we’d like to be on an annual basis.” Whether or not Alderson will actually accomplish his goal of maintaining a lower payroll—unlike his crosstown counterpart—remains to be seen, but setting that goal is an important step in restoring the short-term and long-term health of the Mets organization.
First of all, Alderson seems to have realized that throwing more money at free agents this offseason was not the answer to either the standings problem or the balance sheet problem. The entire basis of labor economics is that a firm will hire an employee as long as the employee’s marginal revenue product, the value he produces, is at least as great as his marginal factor cost, or his wage/salary. This concept translates seamlessly into baseball; players get paid millions of dollars because they contribute wins, which generate millions of dollars in revenue for the owner. The tricky part is to determine how much revenue a player’s performance is worth, which rests on two primary factors: the quality of the player and the team’s place on the marginal win curve before his addition. Intuitively, it makes sense that an upgrade for a bad team (e.g., from 65 wins to 70) will boost revenue far less than that same upgrade for a marginal playoff team (e.g., from 90 wins to 95) or an elite team (e.g., from 100 wins to 105). Economist J.C. Bradbury used multiple regression analysis to produce an equation relating a team’s run differential and its revenue (as well as other variables, like population, that are irrelevant for this analysis). For a team like the Mets, who finished 2010 with 79 wins and a +6 run differential, it takes an unrealistic amount of value to justify adding, say, $15 million to the payroll. See below:
This means that if the Mets were to pay $15 million in order to upgrade from an average player on their roster to a free agent, that free agent would have to produce 83 runs above average in order to justify the contract. Scanning the marginal revenue product charts in the back of Bradbury’s Hot Stove Economics, one can see that the list of players who have accomplished this type of season in 2008 or 2009 is as follows: Albert Pujols and Albert Pujols. And no one else is particularly close. This is not meant to suggest that the Mets could sign Pujols for $15 million or that they should necessarily pursue him if he becomes a free agent. The point is simply that the Mets and other average teams generally should not shell out major dollars until they are legitimately close to playoff contention unless they have a lot of money left to spend.
As it turns out, “unless” is the operative word in that last sentence. An average team that has a huge amount of money coming off the books, as the Mets will after 2011, has a much better chance to do some damage after a strong winter. Per Cot’s Baseball Contracts, the Mets’ strict payroll commitments for 2012 only amount to $65.8 million—less than half of their current payroll. Accounting for arbitration raises to Mike Pelfrey, Angel Pagan, Ronny Paulino, Taylor Buchholz, Dan Murphy, and Manny Acosta, maybe that number will be more like $75 million. Even if the Mets want to restrict their payroll to a maximum of $130 million, they would still have a significant opportunity to improve immediately without trading off the long-term health of the franchise. The players whose contracts expire after 2011—Carlos Beltran, Francisco Rodriguez (club option), Oliver Perez, Jose Reyes, and Luis Castillo—provided the Mets with a grand total of 4.6 WAR at a cost of $57 million, and that number does not figure to improve significantly in 2011. Reyes seems to be the only one who has a chance of coming back in 2012, so let’s assume that he does return at a generous salary of $15 million, just for the sake of argument. This would put the Mets at roughly $90 million with their most obvious needs at second base, right (or center) field, and on the mound, an incomplete but flexible situation from which the Mets could launch themselves into contention much more easily than they could have this offseason.
With that kind of financial flexibility, the Mets could take any number of strategies next winter, so detailed speculation would be somewhat premature, as it is necessary to see how the Mets’ young players as well as potential free agent targets fare in 2011. Some notables that should seemingly be on their radar are Rickie Weeks, Jose Bautista, Heath Bell, Jonathan Broxton, and some of the injury-plagued starters trying to bounce back this year, like Brandon Webb and Jeff Francis. One could make the case, too, that Albert Pujols could be exactly what the Mets need, but that’s a topic for another time. This year, the health of Jose Reyes and the development of Ike Davis will be much bigger storylines for the Mets than a Wild Card chase or a battle to be the best team in New York. Still, Mets fans will see the benefit of having a GM who knows winning takes more than just money and, at the same time, will be able to use it well. We’ll know much more a year from now, but so far, Alderson is one for one.
Lance Gurewitz is currently a freshman at the Wharton School of Business at the University of Pennsylvania. He also serves as the MLB Trade Rumors Florida Marlins Team Coordinator. You can read and discuss his baseball analysis and other sports musings in 140 characters or less by following @LanceWG42 on Twitter
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