Why Prices for Free Agents Might Not Skyrocket

Heading into the winter, there has been one thing that’s pretty much universally agreed upon; this is a bad free agent class. After chasing Zack Greinke and David Price last winter, the best arms on the market this winter include the likes of Jeremy Hellickson and Ivan Nova. When it comes to just throwing money at veterans in an attempt to upgrade a team’s roster, the pickings are slim this go around.

Naturally, any time there is a diminished supply, thoughts go towards price inflation. And we see this all the time in our daily lives. Gas pipeline bursts? Gas prices go through the roof. Grower strike in Mexico? Avocados now cost like $20 apiece. We need more avocados, people; the lack of guacamole in my life lately has been a real problem.

So, it’s tempting to look at this winter’s sparse free agent crop and think we’re about to see some truly crazy contracts. After all, teams are still making money hand over fist, and there are only so many ways to spend money in baseball, with the path of least resistance being to hand it over the best free agent that will take it. This kind of landscape leads to tweets like this one, from Ken Rosenthal the other day.

Craziest prediction I’ve heard so far from a GM: Ivan Nova, five years, $75M.

— Ken Rosenthal (@Ken_Rosenthal) November 7, 2016

I don’t know, maybe Ivan Nova really will get $75 million. I’d take the under, but Ian Kennedy got $80 million (and an opt-out!) while tied to draft pick compensation, so we can’t really say that anything is completely out of the realm of reason. But, as much as there is a supply shortage of upper-end talent in the free agent market this winter, there is one reason to think that prices might not be as outrageous as some expect. That reason? A reduced supply of free agents also means reduced demand for roster spots to be filled.

When we see price spikes for items in our daily life, like for gas or avocados, it’s because we still want those items just as much as we did before the supply shortage. But in baseball, the supply of free agents is driven by the number of players leaving their former teams, which constrains the amount that supply and demand can diverge. If you don’t have a lot of quality free agents, conversely, you don’t have a lot of teams losing quality players to other teams, and thus, they don’t need to look to fill that hole in free agency.

Let’s look at who drove the pricing for free agent pitching last year, for instance. The Red Sox aggressively pursued David Price in order to add an ace to the front of their rotation. They outbid the Cardinals for his services, who were looking to make a big splash themselves, and liked Price specifically. The Diamondbacks were the high bidders for Zack Greinke, offering more than the Giants put on the table; San Francisco then pivoted to sign Johnny Cueto and Jeff Samardzija. And then there were the Tigers, who spent big on Jordan Zimmermann before they also went and spent big on Justin Upton, trying to solidify their team for another run at the postseason.

Realistically, it’s difficult to see any of these teams being big players for free agent pitching again this year. The Red Sox are looking for a DH to replace David Ortiz, some relievers, and probably some rotation depth, but Dave Dombrowski already said he thinks it’s unlikely that his team would be fishing in the slightly-less-shallow end of the pool this year. The Cardinals have too many starting pitchers now, and might be in the market to trade pitching away; they won’t be bidding on free agent starters. The Diamondbacks are very unlikely to repeat last year’s mistakes, and might even be sellers, depending on how Mike Hazen wants to take the organization. The Giants aren’t going to be spending big on rotation arms after their bullpen meltdown cost them a chance to advance in the postseason. The Tigers aren’t going to be spending big on anything, already announcing that they’re looking to move payroll downwards.

Of course, some teams that weren’t buyers a year ago will move into that role, and we’ll still some teams looking to spend on pitching in free agency. The Yankees, for instance, will likely sign a big league free agent this winter after not doing so last year. The Orioles obviously need to do better than their bargain shopping with Yovanni Gallardo last year. The Rangers need more pitching than they have. There will still be buyers, and those buyers will have to figure out what they want to pay these kinds of lesser arms.

But there will likely be fewer buyers in free agency this year, and that diminished demand should keep prices reasonably in check. Even teams who want to upgrade their rotations can turn to the trade market as an alternative, and especially if the White Sox blow it up, there could be far better players available than just looking at a free agent list would indicate. When supply in one market fails to meet demand, alternatives often emerge, and the lack of quality free agents may very well lure some teams into supplementing the talent market by making players available that weren’t on the table last year.

So, yeah, maybe Ivan Nova gets $75 million this winter; he can make a decent case that he’s Mike Leake without a qualifying offer (or the durability, but shhhhh, let’s not bring that up when making a case for him) and the price for average players has gone up a lot the last few years. But I don’t think we’re in for a winter of wholesale silliness in terms of free agent pricing. Wins are still going to cost around $8 to $9 million apiece, probably, and if teams find agents asking for absurd prices, they’ll either call the GMs with players to trade or they’ll look at the fact that their rotation is mostly in tact and decide to go with what they have internally.

There’s definitely a supply shortage of quality free agents this winter, but I think the weakened demand for starting pitching should let the market continue to be at least in the range of rational. And with most every team in baseball being run by — or heavily advised by — strong analytical groups, we’re moving past the days when organizations just deluded themselves into making obviously crazy decisions. Teams will still make mistakes this winter, but the magnitude of those mistakes will probably be smaller. The desperation just isn’t there, so free agents counting on holding all the leverage over a GM who has nowhere else to turn might find themselves particularly disappointed in the offers they get this winter.