The Baseball Economist: The Real Game Exposed (7 page)

Even if we grant that there is an advantage in keeping opposing runners off third base for right-handed catchers, the advantage is very small. It’s small enough that a left-hander with an excellent arm could overcome it. But herein lies a second issue, which adds one more reason why lefties don’t catch. In Bill James’s opinion,

The biggest reason there are no left-handed catchers is natural selection. Catchers need good throwing arms. If you have a kid on your baseball team who is left-handed and has a strong arm, what are you going to do with him?
²⁰

The opportunity cost of using a lefty who’s good enough to catch behind the plate is using him as a pitcher. If you have a left-hander with an excellent arm in a world where left-handed pitching is in short supply, you’re probably going to want him to throw to a catcher rather than become one.

4

Lobbying for Balls and Strikes

—TONY LA RUSSA
²¹

I WAS STANDING in the first base coach’s box on the local Little League field, when the ball zoomed down the line. I turned to watch the ball as it passed me, and I saw it land on the chalk and roll into foul territory. Without looking back, I waved my arm and hollered to my player, “It’s fair, go for more!” As the runner coasted into third, I saw the home plate umpire waving his arms and yelling in my direction with anger, “That was a FOUL ball!” Without even thinking I responded, “What are you talking about? It hit the line!” The crowd snickered, because they knew I was right. I’d had the best view of the play in the whole park. The umpire covered his icy glare with his mask, while still staring in my direction. “FOUL BALL!” I was punching myself on the insides, thinking, “Why did I do that?” My team didn’t get a close call for a week.

It’s quite common to hear people rant against the evils of profits. When a business sells a product that generates more revenue than it cost to produce, this seems unfair. But economists are normally quick to defend profits. Profits are something that entrepreneurs chase, and in doing so they yield new products and ideas that benefit society. However, one form of profit seeking that economists will not defend is
rent seeking
.

Rent seeking is one of those economics terms that can be misleading. It’s not about landlords searching for tenants. Rent seeking occurs when parties try to capture profits by transferring wealth from one party to another. It is most often studied in the field of public economics, a field where economists analyze government decision making. Governments of all types—although some are more susceptible than others—possess the power to grant special privileges to . . . well, whomever they can get away with granting these privileges to. Dictators may grant privileges to almost anyone, but in representative democracies politicians tend to give special favors to those who support their re-election campaigns. And what type of favors do politicians grant? Some privileges help promote the interests of the lobbying company, such as subsidies for a product, favoritism in winning government contracts, or loopholes in regulations. Some favors indirectly help lobbying interests by harming competitors by taxing competing products, adopting strict regulatory standards, or outright banning of substitute products.

A common example of rent seeking is protectionist trade barriers. American car manufacturers really wish Japanese car companies didn’t sell their wares in the United States. In the late 1970s, several Japanese automakers began to offer cars to American consumers at prices lower than what was available from U.S. dealers. One way to prevent this competition from “destroying” profits was to keep Japanese imports out of U.S. markets by lobbying the U.S. government to place quotas and taxes on foreign automobile imports. With less foreign competition, American consumers would have to pay higher prices for U.S. automobiles, leading to greater profits for U.S. companies. Of course, an alternate path would be to reform U.S. car production to become more competitive with Japanese imports. It turns out that a little of both happened.

On its face, rent seeking seems like pretty nasty business, and something that almost no one likes. Self-consumed politicians responding to the whims of greedy businessmen in search of easy profits? It is not the way we like to see decisions made in government. However, the search for profits through lobbying as opposed to generating superior products through innovation is not always undesirable to economists. What’s wrong with rent seeking is not the transfer of wealth from one party to another. Transferring wealth from American drivers to American car sellers doesn’t make American society any poorer. Drivers may be a little poorer, but this is offset by the extra wealth of stockholders in U.S. automobile firms. I think this kind of transfer is morally repugnant; however, it’s not because society was made poorer. Dollars were just shuffled around.

Rent seeking
is
very bad for society; it just turns out that the transfer of wealth isn’t the problem. The problem is that the effort that went into transferring the wealth is effort that could have been devoted to something productive. Think of what it takes to get majorities in two houses of Congress and the President to agree to a law that grants favors to a particular group. The President seems easy; one person is all you have to convince, right? Moving to the Senate, you’d have to get 51 senators on your side. And the House has 435 members, so you’d need 218 representatives. How are you going to convince 270 people to support legislation that benefits a group of already rich people who just want some help earning more money? It’s going to take more than a few postcards expressing support for the law.

Politicians are well aware that helping one group necessarily hurts another group. Potential losers from favors given to one group may be pushing just as hard to prevent the legislation from being put into place. In addition, elected representatives must serve the needs of their constituents or fail to be reelected to office, and some political favors may require a politician to vote against constituent interests. Thus, convincing politicians to dole out favors is not a simple task. Interest groups spend large amounts of money hiring lobbyists, lawyers, and experts to make their case. Rent seeking requires putting on a happy face for the public. Companies advertise on television to sway politicians’ constituents that these special programs are a good idea.

All of these expenses are the costs of rent seeking. The expenditures on lobbyists and advertising could have gone into R&D to develop new and superior products that could be sold at lower prices, which is the goal of profit seeking. The difference between rent seeking and profit seeking is easiest explained through the metaphor of a pie. Rent seeking is the attempt to get more pie by taking pieces from others. With profit seeking, individuals seek to generate profits by innovating to create new low-cost production techniques. These individuals get more pie by making more pie. The effort that goes into arguing over who gets the slices could be spent on enlarging the pie for everyone, which is why economists consider rent seeking to be social waste.

The social loss of rent seeking was the discovery of Professor Gordon Tullock, whose lectures I was privileged to attend as a student. In his seminal article on the subject, Professor Tullock made the case that not only is rent seeking social loss, but that the amount of resources individuals will devote toward rent seeking will be equal to the amount of the profits to be gained from “winning” the special interest legislation. If I were to offer an auction on a $100 bill on eBay, how much do you think it would sell for? $100. We expect rational human beings to exploit profit opportunities until they are gone. A bid of $75 would most certainly be matched by other bidders. The ability of governments to grant special privileges creates the incentive for rent seeking, which is why public economists spend large amounts of time trying to design and advocate for political rules and institutions to discourage rent seeking.

The end game of a rent-seeking contest is a sad outcome. Because, in the end, winning the contest puts you right back where you started. If you pay $100 to get $100, you’re not gaining anything. So this begs the question: why does anyone participate in a rent-seeking contest to begin with? Well, the problem is that if there are profits to be gained, someone is going to go after them. Not going after them can be deadly to your livelihood. If you make a product, and your competitors see your inaction, they will lobby to put you out of commission. You can’t just not play the game. If you are in business, the game is being played. And as long as the rules allow it, rent-seeking players will engage in this behavior. Again, the ending is not a happy one.

But what does this have to do with baseball? Certainly, we see owners, players, and agents in front of Congress on a frequent basis on issues ranging from steroids, to labor disputes, to franchise relocation. This is certainly posturing that may affect some rent seeking for privileges by the many parties with a stake in the business of baseball. But that’s all just politics. I want to look at a particular brand of rent seeking that is quite unique to the game of baseball and is so much a part of the game that it’s hard to imagine the game without it.

Baseball managers have many jobs: keeping players happy, setting the batting order, picking the right players, etc. We generally think of managers handling the strategic choices of the team that lead it to win or lose the game. However, one very important aspect that a manager rarely gets any credit or blame for is lobbying umpires to ensure that his team is getting calls to go his way. Old men kicking dirt, spitting, and base-throwing tantrums all seem like a sideshow. But this is much more. It’s all done in an attempt to influence how umpires enforce the rules of the game in a way that benefits the manager’s team. This is rent seeking, plain and simple.

While certainly any manager will tell you that the goal is make sure the umpire “gets the call right,” not to seek special treatment, the game of baseball requires umpires to pick winners and losers on many close plays. Anyone who watches a lot of baseball will admit that though umpires make incorrect calls from time to time, the vast majority are correct. Obvious mistakes are rare, and normally understandable given the speed of the game. It is during the moment just before the umpire makes his public judgment—safe or out, ball or strike— that the manager wants him to think, “I don’t want to hear an earful from that guy.” And if a manager can make an umpire feel insecure enough, maybe he’ll be more deferential to that team on future close calls. Tony La Russa, who has managed the White Sox, A’s, and Cardinals, sums it up nicely:

When you go against somebody who is complaining all the time, you worry about how it affects the umpires. . . . When I was a young manager, Earl Weaver at Baltimore played it that way. They challenged every strike. If your wife is getting on you every minute, you get fed up. Pretty soon, you may tune her out and do whatever it takes to get through it.
²²

Every call an umpire makes has a zero-sum outcome. That is, one team’s gain equals the other team’s loss. A called strike helps the pitching team at the expense of the batting team. A manager understands that gaining an advantage on close calls is not just something he wants, but also that any advantage the opposing manager gains is something he wants to prevent. This sets up a rent-seeking contest within the game. Every manager tries to make his influence felt just to keep the other manager from gaining the upper hand. One manager yells, “Hey, Ump, that ball was high!” The other manager, if he thinks the comment has been influential, responds a few pitches later, “The strike zone goes all the way to the letters. A high strike is still a strike!” Most of this banter stays on this level, to where it’s not always obvious that this game is being played from the shadows of the dugouts and behind the mask of the umpire.

Sometimes the lobbying spills out onto the field, where the exchanges become heated and the antics begin. If the manager goes “too far,” he’ll get tossed, and return to the clubhouse and run his team just as effectively through a relay to the dugout. Why does a manager allow himself to be tossed? There’s no bigger insult than to say to the umpire, “You blew it,” in front of the thousands in the stands and the millions watching highlights. The manager may be wrong in a particular instance, and he may even know it, but he’s sent a message to the umpire: “If you cross me, I’ll make life difficult for you.” There are superiors to answer to, umpire review hearings, maybe even questions from the media. It’s all a pain that the umpire would prefer to avoid if possible. And to make matters worse, the umpire has to keep both sides happy.

Let’s think about the end result of this little game by comparing two worlds: one where managers can argue and one where they cannot. For both worlds we’ll assume that we have a home plate umpire who is an impartial judge of balls and strikes. He’s going to call it the way he sees it. He may make mistakes, but they will be random and will even out over time. In the world without manager arguing, there will be mistakes but no bias in the calls of the umpire.

In the world with arguing, we’ll assume that each comment by a manager makes the umpire slightly more inclined to choose in favor of the complaining manager. “The squeaky wheel gets the grease,” as they say. Managers know that complaining about anything but borderline calls will only make the umpire mad and hurt his case. Therefore, each manager has the incentive to complain whenever the call is close but goes against him. And once the first complaint starts, the other manager knows he must respond or risk losing future calls. Each counter-complaint reverses any developed bias back toward unbiased calls. So what happens at the end of the day? There is no bias in the calls of the umpire, just as in the first world, but there is also a lot of complaining. This effort that goes into complaining is rent-seeking loss.