Another look at baseball's 'irrational exuberance'
by Bob Timmermann
Alan Schwarz in the New York Times discussed the phenomenon in baseball of owners and executives complaining about sharply rising salaries (9.3% each year for the past 10 years), while still paying out the high salaries.
Major League Baseball has devoted resources to educating club officials on how to make better decisions on contracts. One step was emphasizing how most players in their early 30s, though known commodities, quickly lose their productivity and value.
More subtle is the message that purchasing extra years to hedge against market inflation particularly with pitchers may be outweighed by added risk. The player can become injured or simply not be as good as expected, leaving the club saddled with a payroll-draining deal or the drag of paying another club millions to take the player off its hands.
That situation happens every season with former free agents whose value was misjudged years before. Still, general managers do not stop trying to see the future before everyone else.