A Market Correction for Arbitration-Eligible Sluggers

In Major League Baseball, the market tends to correct itself as clubs gain greater knowledge of players and their value. If aging players are less successful, the market for that group might slow a bit. Bullpen arms become more or less desirable depending on their scarcity. Increased revenues tend to move everyone up the pay scale. It is important to understand how and when to make adjustments in value as run-scoring environments, finances, and aging patterns change.

That is all well and good for those who run organizations and those who follow the game closely, but the arbitration process is much less nuanced. The non-tendering of contracts to Pedro Alvarez and Chris Carter, along with the trade of Mark Trumbo, are all the result of a failure to adjust — within the arbitration process, specifically — as the market slowly corrects for the overpayment of defensively- (and sometimes offensively-) limited home run hitters whose overall effectiveness has dimmed.

The arbitration process tends to favor the traditional stats that place like FanGraphs have tried to de-emphasize. Closers get big paydays in arbitratio, regardless of overall performance. As a result, the St. Louis Cardinals opted to let Steve Cishek go instead of moving to arbitration where he would receive a salary of around $7 million. Home runs and RBI tend to get paid as well, causing an overpayment for those players who rack up those numbers, but have big deficiencies in other areas.

Consider the following players who MLB Trade Rumors predicted would get salaries in excess of $5 million in arbitration. The second column represents their predicted salary, the third column represents their predicted WAR by Steamer, and the third column represents the cost per WAR in millions of dollars.

The average at the bottom showing cost per WAR is the average of the totals. Chris Carter’s monster number does not have an undue influence. The chart above has a lot of good players. Manny Machado and Nolan Arenado are two of the best young players in the game. It is possible you have heard the $8 million per win as the going rate to buy wins in free agency. Here the number is less than half that, around $3 million, as arbitration salaries are purposefully suppressed by the system to which the players and owners have agreed in the collective bargaining process.

Let’s isolate those players above who are defensively limited by the position they play. I included first basemen and designated hitters, although Brandon Belt could arguably be left out as he can play some outfield.

Pedro Alvarez once played a poor third base, but was moved to first base last season, and could not do well enough there that he might only be a fit in the American League as a designated hitter. Chris Carter has limited time in the outfield, but played just six games there in 2014 and none in this past season. Lucas Duda was dreadful in the outfield, but has become a more valuable player since moving to first base. Mark Trumbo still played some outfield last season with the Mariners on a team with Nelson Cruz and Logan Morrison, but those experiments are likely (hopefully) over as Trumbo heads to Baltimore. Moss can play some outfield as well, but is generally defensively limited.

When you take away the seven players in this second table from the first table above, you are left with 14 position players. Every single one of them was tendered a contract for next season, while two players were non-tendered (Alvarez, Carter) and one was given away in trade (Trumbo). Brandon Belt was a no-brainer to keep and Lucas Duda was likely an easy decision as well, but for five of the seven players above, the team would have to pay, or is paying, essentially free agent prices for these sluggers, some of whom have not slugged as well lately.

Here is what the stat lines looked like in 2013:

Here is what they looked like in 2014:

And finally, their stats this past season:

It might be a bit unfair to include Moreland in the non-tender category as he is more in the “think about it for a bit, but then tender him” camp. The home runs were there for all the players at some point, which also means their salaries in arbitration continued to rise even as the overall production has not. Eno Sarris wrote recently about the possibility that we are undervaluing slugging first basemen and designated hitters as maybe they take too much of a hit for positional difference. Looking at the stats in the chart above, as well as the projections for these players, even adding a bit extra for the big positional loss is not going to do a whole lot to help these players overall. This is not just a WAR-related issue, either.

Organizations have decided these types of players are receiving too much money and backing that up with their actions. Alvarez and Carter were non-tendered; Mark Trumbo was essentially given away; the Rangers might be trying to trade Moreland; and the Cardinals have possibly kept Moss as insurance for if they fail to bring in anyone via free agency (making him potentially expendable, as well). The arbitration process is designed to suppress salaries ahead of free agency, and for the most part it does a very good job at accomplishing that task. For defensively limited home run hitters, the scales tip the other way, and at least this season, the market has made a correction.