Ryan Howard’s new 5-year/$125mn megadeal has rung the bell for the latest round in the debate over how to value major league baseball players. On one side, more traditional baseball writers have argued that Howard’s MVPs and prolific HR/RBI production, along with his status as a key component of a championship core, justify the deal. On the other side, however, sabremetricians have argued that Howard’s WAR and advancing age make the deal a major risk. Of course, absent from both sides of the debate are some basic economic concepts like transparency, intangible value and marginal utility. So, what is the truth? It’s probably somewhere in the middle.
As the baseball world digests the Howard contract, a more interesting question has emerged: “What must Albert Pujols be worth”? Bobby Cox has done some back of the envelope math and come up with $50mn, and according to at least one estimate by J.C. Bradbury, he isn’t that far off base. I am sure the Cardinals aren’t exactly thrilled with Cox’ estimation, but Pujols’ agent may consider taking him on as a consultant once his tenure as Braves managers ends after this season.
Amid all the wrangling about what Howard and Pujols are worth, I got to thinking about Alex Rodriguez. When Tom Hicks signed Arod to the then seemingly outlandish 10-year/$252mn deal in 2000, many in the baseball community scoffed at the inflated price. Of course, we now know the deal wasn’t so absurd. In fact, when Arod was able to opt out, he actually signed a larger deal at 10 years/$275mn.
With seven more years left on his current deal, Arod’s long-term value definitely carries significant risk, especially considering his recent hip surgery. Looking back, however, we can see that Arod has actually been a bargain. Using Fangraphs’ WAR-based valuation (which obviously ignores all of the economic concepts mentioned above), Arod has been worth $204.7mn since 2002. Over that same time span, he has earned $196.4mn. Even assuming that the value deflation resulting from WAR’s UZR component is accurate (Arod has had a negative fielding component since 2005), Arod has provided about $1mn per year in excess value before taking into account any attendance, ratings or playoff contribution. Not bad for someone who has so frequently been vilified because of his salary.
What Value Arod?
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