Competitive Balance Review

February 07, 2006

A quick look at Dan Fox’s article

Dan Fox recently wrote a great article at the Hardball Times called Competitive Balance and the CBA.  Dan looked at the typical variance in salaries between 1990 and 2005 to try to ascertain if the latest Collective Bargaining Agreement has restored any competitive balance in the majors.

Dan’s conclusion is that major league competitive balance has gotten worse instead of better during the time in question.  I like his methodology a lot, but I took a slightly different approach to the data and came to a different conclusion.

Specifically, I left the New York Yankees and the four expansion teams of the 1990’s out of the sample.  My reasoning was pretty simple; the Yankees don’t really count because they’ve made it clear (up to this past offseason) that they don’t care about any friggin’ payroll tax.  And the expansion teams might have skewed the data because their payrolls almost certainly followed a different path during the time in question.

I replicated Dan’s graph and applied to my outcomes.  Here ya go:

image

You can refer to Dan’s for an explanation of the graph, but the key line is the red one, which represents the coefficient of variation (refers to the axis on the right).  Suffice to say that the CV has generally risen, but it reached its peak in the late 1990’s and has actually decreased since then.  Maybe, just maybe, the latest version of the CBA has helped after all.



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