Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Tuesday, November 09, 2004

Most Valuable Player?

On November 15th and 16th, major league baseball will announce the MVPs in the National and American Leagues, respectively. Because this is an award voted on by sportswriters, not economists, the outcome will likely not include any concept of marginal physical product or marginal revenue product.

It seems to me that MVP ought to answer the question, "Who contributed the most revenue to the team?" This criterion, by itself, is probably controversial, since, on the one hand it seems terribly crass in that it relates value to something measured in dollars; and on the other hand, it ignores cost in its definition of value.

In my mind, there is no doubt that Barry Bonds displayed the most "units of playing ability" of anyone in the majors during 2004. But that doesn't necessarily mean he contributed the most to his team's revenue.

Baseball, more than any other sport probably, comes close to having fixed co-efficients production functions, but there are still likely some complementarities; consequently, it is possible that Bonds contributed less to his team's wins than, say, Adrian Beltre of the Dodgers did for his team. I doubt it, but it is possible. This aspect of the MVP has to do with incremental physical product (akin to marginal physical product) -- the contribution of a player's ability to the number of team wins.

And let's face it - - Bonds was a great draw. When the Giants came to town (well, not my hometown of Clinton, Ontario [pop. 3200]) or were on tv, people wanted to watch. And so he probably contributed a great deal to his and other teams' revenues.

But put him on a slightly better team, and his contributions would have been worth a great deal more to the SF Giants. His team would probably have made the play-offs and would have had a better chance of advancing to the league play-offs or World Series. So maybe someone else (Beltre? Edmonds?), who is not as good a player as Bonds but who had the good fortune to have better teammates, actually had a larger incremental impact on revenues for their teams.

I doubt that most people interpret MVP this way, but it makes sense to me because it is directly analogous to the concept of marginal revenue product.

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