Does revenue-sharing 'work'?

August, 30, 2010
8/30/10
4:41
PM ET
It's hardly shocking that the Commissioner's not concerned about the Pirates' financials (though I suspect he's not thrilled with the leaking of the Pirates' financials. And despite Jeff Passan's best efforts, I don't suppose the Commissioner is real worried about the Marlins' financials, either. Especially with Miami's publicly financed ballpark well under construction.

And this is probably where I should mention that the Major League Baseball Players Association isn't worried, either. Oh, the union's not thrilled with the Pirates and the Marlins. We knew that already, though. Last week's leaks shouldn't have changed the equation at all, because -- and I'm surprised by how many writers don't know this -- the union already had the financials. All of them. It's in the Collective Bargaining Agreement. Essentially the MLBPA has unfettered access to the books of all 30 franchises.

But while MLB and the MLBPA (and Forbes magazine) already knew that some of baseball's "poor" teams have been making tidy profits, most of the rest of us didn't. And this new knowledge does allow for appraisal. Unfortunately, it's too late for the citizens and their elected officials to ask for larger contributions to ballpark costs. But it's not too late to wonder about the efficacy of revenue sharing. According a study cited by J.C. Bradbury in the Times, the Commissioner's beloved "competitive balance" -- even as more and more revenue has been redistributed from rich teams to poor -- hasn't budged since the early 1990s.

Bradbury's big finish:
    It does not appear payrolls are the best policy instrument for improving competitive balance. Though payroll and winning are correlated, several teams have found success on small budgets in recent history, including the revenue-sharing scofflaws Rays and Marlins. It is also not clear that baseball’s competitive balance needs further improvement. Since 2000, 23 of M.L.B.’s 30 clubs have made the playoffs, and two of the seven that have not reached the playoffs (the Cincinnati Reds and the Texas Rangers) are on track to participate in the postseason this year.Growing attendance and revenue over the past decade do not indicate that fans are turned off by any perceived imbalance, and revenue sharing does not appear to help poor teams compete. Rather than tweaking the current revenue-sharing system, I think it would be best if M.L.B. abandoned it.

I can't say that I'm convinced, but then again I can't say I'm objective, either. Because it makes me happy to see the rich giving to the poor. It makes me happy to see the Yankees and the Red Sox writing checks to the Rays and the Royals.

Also, Bradbury's argument isn't terribly convincing. Maybe competitive balance hasn't improved with more revenue-sharing ... but that doesn't mean it wouldn't be worse without revenue sharing. Bradbury points out that the balance has hovered around 1.8 -- as measured by the Noll-Scully ratio -- since the early '90s ... but can anyone prove that it wouldn't be lower than 1.8 without revenue sharing?

Maybe someone can. Economists love to play around with models. But I haven't yet seen a model that gets the Rays into the playoffs twice in three years without a little help. And I suspect they're happy, this year at least, with Commissioner Robin Hood and his Merry Men.

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