The A-Rod Suspension and the New Moral Hazard
Alex Rodriguez has been suspended for the entirety of the 2014 season. You already know this, and if you haven’t yet, go read Wendy Thurm’s breakdown of the arbiter’s ruling for more information on the judgment itself. I’m not all that interested in talking about Rodriguez that much more, personally, as this is a story that has been so thoroughly covered that there just isn’t that much more to say.
However, I think that the precedent of the season long suspension, and the near unanimous agreement that we’re going to see significantly increased suspension lengths for failed PED tests in the next CBA, creates an issue that Major League Baseball is going to have to contend with eventually. As we’ve seen in the A-Rod case, the relationship between the team and the player has essentially disintegrated, as the interests of the Yankees were clearly aligned with the interests of Major League Baseball; both wanted Rodriguez suspended for as long as possible.
By virtue of the suspension, the Yankees have just received a $25 million rebate, which could allow them to get under the $189 million luxury tax threshold and lead to significant long term savings from the resetting of the tax brackets. After years of benefiting from Rodriguez’s on-field performance while he was presumably using PEDs, the Yankees are now benefiting from the fact that Rodriguez is being punished for using PEDs. And that is essentially the definition of a moral hazard.

