Payroll and Playoffs

Rob Neyer discusses the implications of the fact that six of the nine top teams in payroll are making the playoffs this year:

Well, you can't really compete with the Red Sox. Not unless you're the Yankees, anyway. But there are still plenty of teams wasting plenty of money. The Twins probably aren't going to the playoffs, but they certainly could have. The Rays are stuck in the wrong division. And more to the point, we just can't read too much into one possibly anomalous season.

The Forbes article to which he links also notes: "In 2006, three postseason clubs (Tigers, Twins and Padres) ranked 14th or lower."

Here's the thing. The Tigers are now one of those top payroll clubs making the clubs. Payroll is not static. Should we hold it against the Tigers that they've turned themselves into a top spending club in just a few years? That's a good thing. We want teams that spend to have greater success. It encourages owners to keep investing in their product on the field. The Tigers are a great example of what we should be encouraging in baseball.

Looking at payroll is misleading because teams let their payroll rise and fall over time depending on how they perceive their chances of success. Teams correctly recognize that they should spend more money when the marginal value of a win is the highest. Generally this occurs when a team is the 88-92 win range and additional wins will drastically increase the likelihood of making the postseason. Teams can and do let their payroll spike when a playoff berth is in range.

Thus, focusing on payroll is missing the point. No, the focus should be on whether or not all teams have roughly equal opportunity to support a large payroll. What Major League Baseball needs is a revenue sharing system based on teams' revenue potential, not their actual revenue. This correctly lines up the incentives in the system and ensures that all teams have an opportunity to let their payrolls rise when they get the chance to make the playoffs.

Higher paid teams are always going to be (and should be) more represented in the postseason. Instead of trying to fight that trend, MLB should be trying to find better ways to balance access to revenue.