Trends in Major League Baseball

Concentrating on the relationships between the payroll of MLB teams, win-loss records, and team homerun production. February 10, 2013 By Chris Krier

Pre-Study Statements
The reality of Major League Baseball is that the most affluent franchises such as the New York Yankees and the Los Angeles Dodgers have the advantage when it comes to buying players in free agency by offering larger salaries that are not capable of being matched by those offered by smaller franchises. However, recent World Series matchups have not been exclusively comprised of the richest baseball clubs. Teams with lower salaries have found success through farm system development and small ball baseball. The purpose of this study is to determine if there is a strong positive correlation between the total payroll of MLB teams and the success of teams. Additionally, this study also attempts to ascertain as to whether teams with the highest salaries possess the most productive homerun hitters. Based on previous observations of Major League Baseball, I hypothesize that there is not a high positive correlation between the total salary of clubs and their win-loss records. Teams with smaller payrolls may find success through young talent rather than with established stars who carry burdensome contracts. As for the relationship between team salaries and home run production, I hypothesize that teams with higher salaries have higher homerun production as well. A possible reason for this phenomenon could be that players with higher homerun production attract greater home game attendance and television coverage thus demanding higher salaries. Data from the 2012 season of every MLB teams payroll, win total, and number of homerun will be utilized to test these hypotheses.

Data
MLB Franchise Arizona Diamondbacks Atlanta Braves Baltimore Orioles Boston Red Sox Chicago Cubs Chicago White Sox Cincinnati Reds Cleveland Indians Colorado Rockies Detroit Tigers Houston Astros Kansas City Royals L.A. Angels of Anaheim Los Angeles Dodgers Miami Marlins Milwaukee Brewers Minnesota Twins New York Mets New York Yankees Oakland Athletics Philadelphia Phillies Pittsburgh Pirates San Diego Padres San Francisco Giants Seattle Mariners St. Louis Cardinals Tampa Bay Rays Texas Rangers Toronto Blue Jays Washington Nationals Team Payroll (USD) 74,284,833 82,409,942 80,804,000 146,371,619 87,229,033 97,919,500 76,305,878 66,430,300 78,069,571 119,276,000 60,651,000 61,391,300 154,940,524 93,686,077 111,598,000 98,049,444 94,085,000 93,357,465 195,998,004 49,137,500 173,458,939 62,466,000 55,871,900 117,936,667 81,978,100 110,297,862 65,008,071 120,510,975 75,009,200 80,584,145 Number of Wins 81 94 93 69 61 85 97 68 64 88 55 72 89 86 69 83 66 74 95 94 81 79 76 94 75 88 90 93 73 98 Number of Homeruns 165 149 214 165 137 211 172 136 166 163 146 131 187 116 137 202 131 139 245 195 158 170 121 103 149 159 175 200 198 194

Graphical Representation of Data

Team Payroll vs. Number of Wins
120 100 80 60 40 20 0 0 50,000,000 100,000,000 150,000,000 200,000,000 250,000,000

Number of Wins

Team Payroll

Team Payroll vs. Number of Homer Runs

300 250 Number of Homeruns 200 150 100 50 0 0 20 40 60 Team Payroll 80 100 120

Summary of Findings
Team Payroll vs. Wins: The scatter plot suggests that there is a weak positive linear relationship between Major League Baseball franchises payrolls and win-loss records. The correlation coefficient between payroll and wins is r = 0.227. The coefficient of determination of this relationship is r (sq.) =.051, meaning that only about 5% of the variance of wins of MLB teams can be explained by the variance of team payroll. The equation of the least-squared regression line is (predicted y) = 73.65 + .000000008X. The slope b = .00000008 means that for every increase of 10 million dollars, on average there would be an expected increase in wins of .8. Team Payroll vs. Homeruns: The scatter plot suggests that there is a relatively weak positive relationship between MLB payrolls and team homerun production. The correlation coefficient of the relationship between payroll and homerun production is r = 0.277. The coefficient of determination of this relationship is r (sq.) = 0.077, meaning that only about 8% of the variance of home run production can be attributed to the variance of team payroll. The equation of the least-squared regression line is (predicted y) = 139.6 + .00000026X. The slope b = .00000026 means that for every increase of 10 million dollars, on average teams will see an increase of 2.6 homeruns.

Conclusion
Based on the significantly small correlation coefficient and coefficient of determination of the relationship between team payroll and wins, I am able to substantiate my hypothesis and conclude that there is little or no correlation between how big a teams payroll is and how successful the team is. A feasible explanation of this could be that teams with young talent have the motivation to perform at the highest level whereas teams with established players with larger long-term contracts lack the required motivation to play at maximum potential. However, I must reject my other hypothesis that teams with higher homerun production have higher payrolls because the correlation coefficient and coefficient of determination are significantly low, suggesting that how high a teams payroll is does not have a strong connection with how many homeruns the team hits. This could be so because some teams invest more in pitching and hitters for average than power hitters.

Extension
Due to the fact that there is little correlation between how high a MLB teams payroll is and win-loss records or homerun production, the least-squared lines are not appropriated to predict any changes in wins or homeruns based on payroll changes. Other factors including farm system development, pitching, fielding, coaching, and competition within a division contribute to the success of a MLB franchise. Because MLB is a capitalist sports league unlike the NFL, small market teams will always find difficulty in outbidding large market teams in free agency. This circumstance forces small market clubs to plan for the future by drafting young players and developing them

in the minor leagues. The roots of the Tampa Bay Rays and the Washington Nationals success stories are strong farm systems while the failures of the Boston Red Sox and Chicago Cubs stems from weak farm systems.