Baseball's Moral Hazard: Law, Economics and the Designated Hitter Rule

Abstract:     
No subject prompts greater disagreement among baseball fans than the designated hitter rule, which allows teams to designate a player to hit for the pitcher. The rule increases the number of hit batsmen, and some have suggested this effect is a result of “moral hazard,” which recognizes that persons insured against risk are more likely to engage in dangerous behavior. Because American League pitchers do not bat, they allegedly are not deterred by the full cost of making risky, inside pitches - namely, retribution during their next at bat. Using a law-and-economics approach, this Article concludes that the designated hitter rule creates some moral hazard, but finds that recent structural changes to the game have largely overshadowed this effect. Moreover, the benefits of the rule - including increased offense and attendance - likely outweigh its costs in the American League. This is not necessarily true in the National League, however, due to differences in fan preferences. Thus, the current hybrid system (in which the American League allows designated hitters while the National League does not) best effectuates these fan preferences, maximizing social welfare.

Number of Pages in PDF File: 37

Keywords: designated hitter, moral hazard, torts, law and economics, baseball

JEL Classification: K00, K10, K13

Accepted Paper Series