Earlier this week we looked at whether the Nationals overspent for their free agents and concluded that they probably didn't, all things considered. Now we look at whether they overspent relative to other top spenders.
As we wrote earlier, so far the top spenders have been the Red Sox ($172 MM), Nationals ($128.5 MM), Phillies ($125.5 MM), and the White Sox ($120.25 MM). To compare the effectiveness of each team's spending, I did some WAR analysis similar to that in my last article.
WAR stands for Wins Above Replacement. It is a relatively new statistic which incorporates nearly everything we know about a player—his wOBA, his UZR, his baserunning abilities—into one “total” counting statistic. The contributions of the player being evaluated using WAR are transformed into a number which represents the approximate number of wins the player is worth versus a theoretical “replacement” player. The comparison with a replacement player is necessary because we are interested in how good a player is a relative sense since there is not really an absolute manner in which to evaluate players—if everyone were at least as good as Albert Pujols, would Albert Pujols be a Hall of Famer?
To conduct my analysis, I tried to predict how much WAR each relevant player would produce while under contract. I then priced 1 WAR to be worth $5 MM—the going rate during the winter according to FanGraphs writer Dave Cameron—and predicted how much each player will actually be worth. I then compared this to how much they were promised in 2010 dollars and calculated the difference. (My data is available here)
According to my analysis, the Nationals ended up spending about $10.75 MM more than they should have, but this was actually second best out of the four top spenders. The Phillies did the best, underpaying by $19 MM (Yes, I think Cliff Lee is that good), the White Sox overspent the second most, and the Red Sox easily overspent the most, dropping $39.71 MM over value, including a contract for Carl Crawford nearly 25% more expensive than his “actual” value. Naturally, the spending per WAR follows the same order.
As mentioned before, I think there is a possibility that the Nationals had to pay the “Nationals Tax” for getting good players, aka Jayson Werth, helping to explain their fairly significant overpayment for Werth (15% above value). The Red Sox, in case you haven't heard, are loaded and the vast majority of their overpayment came from signing Carl Crawford, suggesting either they wanted to keep Crawford out of someone else's hands or that they were very optimistic about his future prospects, or some combination of the two (or maybe they just don't care how much money they spend). By my estimation, the Phillies seem to have gotten a very good deal on Cliff Lee, explaining their surplus, while the White Sox seemed to have overspent (considerably) on Adam Dunn and Paul Konerko.
The long story short is, though, that almost everyone signing high profile free agents seems apt to overpayment. Because the bidding for these players is much more intense than for lower profile free agents, the winners seem to be those willing to overpay the most for a player's services after they do their projections for the player's future performance. Perhaps part of that overpayment comes from a “Nationals Tax,” a desire to not let the player fall into the hands of another team, recklessness with funds, or simply a very optimistic projection of his performance. At any rate, bidding in baseball seems to be a very confusing process and far from worked out. But at least the Nationals seem to have been one of the better bidders this offseason, though let's hope they aren't finished.