An Economic Evaluation of the Moneyball Hypothesis

20 Pages Posted: 13 Nov 2004  

Jahn Karl Hakes

Albion College - Department of Economics and Management

Raymond D. Sauer

Clemson University - John E. Walker Department of Economics; National Bureau of Economic Research (NBER)

Date Written: October 20, 2005

Abstract

Michael Lewis's book, Moneyball, is the story of an innovative manager who exploits an inefficiency in baseball's labor market over a prolonged period of time. We evaluate this claim by applying standard econometric procedures to data on player productivity and compensation from 1999 to 2004. These methods support Lewis's argument that the valuation of different skills was inefficient in the early part of this period, and that this was profitably exploited by managers with the ability to generate and interpret statistical knowledge. This knowledge became increasingly dispersed across baseball teams during this period. Consistent with Lewis's story and economic reasoning, the spread of this knowledge is associated with the market correcting the original mis-pricing.

Keywords: Innovation, market correction, salaries and compensation, baseball

JEL Classification: J31, O33, L83

Suggested Citation

Hakes, Jahn Karl and Sauer, Raymond D., An Economic Evaluation of the Moneyball Hypothesis (October 20, 2005). Available at SSRN: https://ssrn.com/abstract=618401 or http://dx.doi.org/10.2139/ssrn.618401

Jahn Karl Hakes (Contact Author)

Albion College - Department of Economics and Management ( email )

Albion, MI 49224
United States
517-629-0650 (Phone)
517-629-0428 (Fax)

HOME PAGE: http://people.albion.edu/jhakes

Raymond D. OSkipo Sauer

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Clemson University - John E. Walker Department of Economics ( email )

Clemson, SC 29634
United States
864-656-3939 (Phone)
864-656-4192 (Fax)

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