The Two Markets
At any given time during a baseball off-season, there are essentially two different ways to acquire talent – sign players via free agency or trade for another’s team’s player who is already under contract. We often refer to the combination of both as the market of total available players, but given the pricing differences we’ve seen in each, perhaps we should reexamine whether these are really just two very different markets altogether.
There’s no question there’s been significant inflation in the free-agent market this year. Teams have already guaranteed $1.08 billion in future contracts to free agents, up from $846 million a year ago. Players like Adrian Beltre and Carl Pavano remain unsigned as of yet, so the gap will only grow as the winter progresses. Nearly every contract signed to date has been for more years and often more dollars per season than was expected heading into the winter, and has impacted free agents at every level of play – inflation has been pervasive across the board, not just limited to a certain sector of player types.
The trade market, however, has not seen the same kind of corresponding rise in prices. Here are the significant trades that have occurred so far this winter:
Dan Uggla for Omar Infante and Michael Dunn
Adrian Gonzalez for Casey Kelly, Anthony Rizzo, Reymond Fuentes, and Eric Patterson
Mark Reynolds for David Hernandez and Kam Mickolio
J.J. Hardy and Brendan Harris for Jim Hoey and Brett Jacobson
Josh Willingham for Henry Rodriguez and Corey Brown.
Zack Greinke and Yuniesky Betancourt for Alcides Escobar, Lorenzo Cain, Jake Odorizzi and Jeremy Jeffress
Of those moves, I’d estimate that the only one where the general reaction is that the seller made out better than the buyer was the Marcum trade, and even that was certainly not clear cut, as there is a lot of question about where Lawrie will end up on the field. The Greinke trade is also somewhat mixed, depending on how different people feel about Escobar’s future. It was almost universally agreed that the buyers did better on the rest of the deals, as established major league players have simply not been generating the types of returns in trade that we’ve seen in prior years.
In one market for players, we’re seeing runaway inflation. In the other, we’re either seeing stagnation or deflation. If the two markets were really treated by major league teams as one larger market, we’d expect them to move somewhat in tandem, as buyers would price shop between free agents and trades and then acquire players in the market that cost less. That’s just not really what’s happening, though – teams have mostly jumped head first into the free-agent market, paying the going rate for players as if that’s the only opportunity they have to improve their rosters.
There are several possible explanations for why these markets have gone different ways this winter; the one that holds the most water in my mind is that teams are reacting to the rise in prices in free agency by increasing their valuations of cost-controlled players. Teams are essentially seeing that the free-agent market has mostly recovered after a downturn in spending last year, and with prices for players with 6+ years of service time going up, the perceived value of players who are not yet subject to market pricing also has gone up. These are the players who are most often traded in these rent-a-player and old-for-young moves, and if teams are less willing to give them up, then the teams looking to deal players headed for free agency in a year or two will find themselves with a softened demand.
Whether this is a correct price adjustment or simply an overreaction to valuing young talent, I’m not sure. However, if I were a GM trying to improve my team right now, I’d probably be doing the exact same thing Doug Melvin has done this winter – abandon the free-agent market, keep my potential free agents, and trade prospects for guys headed towards free agency. Given how the two markets have acted this winter, it is certainly been the more cost effective way to build a team right now.
Dave is the Managing Editor of FanGraphs.
I don’t think it’s a new phenomenon that teams are trading for the marginal value of players and not ignoring contracts to come up with a talent-for-talent swap. Run an analysis taking into accounted projected WAR vs. projected salaries for the cost-controlled seasons being traded, and I think you’ll see a handful of stupid trades by bad GMs and an otherwise rational marketplace stretching back at least five seasons.