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Keith Law is Wrong About the MLB Draft, But His Critique Teaches Us a Lesson About Public Policy

2012 July 14
by Eric Horowitz

This year Major League Baseball instituted new rules that were designed to stunt the growth of signing bonuses by allotting teams a certain amount of money for each draft pick. Teams could move the money around between picks, but they couldn’t exceed their total bonus pool. In the end, only one first-round pick failed to sign, Stanford pitcher Mark Appel. Appel reportedly turned down $6 million from the Astros to be the first pick, hoping to get closer to the $7.2 million bonus MLB allotted for the pick. Instead the Astros passed on Appel to draft Carlos Correa, who agreed to sign for the $6 million. Appel slid all the way down the Pirates, who had the 8th pick, and could only offer $3.8 million without incurring major penalties. Yesterday Appel turned down their final offer.

Keith Law believes the Pirates’ inability to raise their offer in order to sign Appel shows the flaws in the new system. I think he’s wrong, and that in reality the system is working perfectly. Why do I say that? Because there is almost no way Appel will ever see another offer approaching what either the Astors or the Pirates offered him. Seven teams already decided to pass on Appel this year. Even if he manages to avoid injury and have another excellent season at Stanford, Appel will re-enter the draft next year with even less leverage and a reputation for seeking an unreasonable bonus. Under the old system, the Yankees could take Appel 30th next year and give him $7 million. But under the new system there is nothing that points a way forward for Appel to receive the high seven figure bonus he seeks. Once it becomes clear that Appel made a terrible decision, I think it will be extremely rare to see players turning down slot money, and that was the goal of the new system. The mistakes made in the initial feeling-out process were always going to hurt somebody. The fact that it ended up being a small market team like the Pirates rather than the Cubs or the Red Sox doesn’t mean much. The poor decision making of Appel and his agent Scott Boras shouldn’t be mistaken for a flaw in the system.

There is one potential flaw in the system that nobody is talking about. What happens when a player suggests he’ll sign for below slot money, gets drafted, and then holds out for more money? Suddenly, the player has leverage again. I don’t know if this is what happened with 4th overall pick Kevin Gausman, but it seems like it. The Orioles were linked to him weeks before the draft and there was never any hint he wouldn’t sign. Then a few days before the signing deadline it was reported he might not sign because he had turned down the Orioles latest offer — an offer that was still under slot value. Gausman eventually ended up signing for $4.32 million, a sum slightly over-slot.

Under the new system the goal for players is to get drafted as high as possible. Better to get less-than-slot money as the 4th pick than slot money as the 7th pick. By giving false information about what they’re willing to sign for, a player can move up in the draft. That gives the player access to a larger bonus pool, and the plater can then increase their demands. As long as the player isn’t demanding a huge over-slot bonus, it’s probably worth it for the team to give in.

Getting back to Law’s criticism of the new system, I think it’s emblematic of our general impatience when it comes to evaluating new policies. Most major policy changes require diverse groups of people to alter their behavior, and this takes time. As a result it often takes a few years to truly evaluate whether or not a policy is successful. But our culture is incapable of waiting, and that’s why you see people claiming that the new healthcare bill has failed two years before it’s really been implemented.

2 Responses leave one →
  1. October 30, 2012

    I blame also the poor education Appel is getting at Stanford.

    Signed, A Cal grad

  2. October 30, 2012

    Seriously though, nice article, what you say makes a lot of sense. I think Boras just did his usual tricks and that backfired in the new system for him and, unfortunately, Appel. If he don’t get in 2013 at least the slot money he would have gotten had he signed in 2012, he should seek legal advice about suing Boras for failing Appel on his fiduciary responsibilities in advising Appel on what to do.

    Good point about the other loophole about reneging on promises. I think over time, prospects will learn to do that, because not all players are solid citizens who do what they promised to do, but rather do what their agents tell them that they can legally do, and teams will learn not to bother doing that.

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