Baseball’s Blue Ribbon Economic Report

Abstract

In July 2000, Major League Baseball published a report claiming a recent marked decline in competitive balance. The alleged cause is growing disparities in team revenues and payrolls driven ultimately by market size. Consequently, sweeping changes in the game’s economic structure are necessary, mainly composed of new labor market restrictions. The report, however, fails to present evidence of a decline in competitive balance or of a significant link between market size and winning. The present study seeks to provide the missing analysis. Although competitive balance might have declined in the American League (AL), it improved in the National League (NL). The difference is important, as both leagues are subject to the same governance structure—that is, the AL decline is likely due to idiosyncratic causes. Also, there is (at most) a weak relation between winning and market size that has not worsened in recent years.