does the mlb need to implement a salary cap? 

a handful of casts on competitive balance, the growth in team valuations and player salaries, and why owners want to implement a salary cap 

this thread uses data from various sources including spotrac, forbes, fangraphs, and statcast

is the common narrative that the dodgers are ruining baseball true? 

here's how much the dodgers spent in 2024: 
- committed over $1b to free agents (ohtani, yamamoto, hernandez) 
- payroll roll was ~$353m 
- luxury tax was a record ~$103m
- won the world series 

here's how much the dodgers are spending this year: 
- committed over $400m to free agents (snell, sasaki, scott) 
- payroll is ~$395m  
- luxury tax is projected at ~142m 
- one of the best teams in baseball 

while it looks like the dodgers may be buying their way to the top, that doesn't mean a higher payroll = better performance.

full time baseball data nerd | part time crypto degen

so, can teams actually buy their way to the top of the standings? 

some interesting stats when we look at the teams currently above .500
- 2 of the top 5 teams have a total payroll below the mlb average of ~$173m 
- 6 of the 16 teams above .500 have a total payroll below the mlb average of ~$173m 
- 11 of the 16 teams have a total payroll below the luxury tax threshold of ~$241m 

comparing teams above .500 to teams below .500
- 5 teams below .500 spend more than the tigers 
- 9 teams below .500 spend more than the brewers 
- 2 of the 5 worst teams in the league spend more than the brewers 

of the 5 teams under $100m in total payroll, only the rays are above .500. the rays are consistently one of the most efficient run teams producing competitive teams with payrolls under $100m. 

overall, competitive balance looks fine throughout the league and may actually tell us there are diminishing returns to buying wins.

okay, but what if advanced metrics suggest teams like the tigers and brewers are over-performing compared to their win-loss records? 

in this case, we're looking at team war and team xwoba which are helpful indicators for a team's success 
-the tigers are top 10 in team batting xwoba and team pitching xwoba 
- the brewers are top 10 in team pitching xwoba and bottom 10 in team batting xwoba 
- the tigers and brewers are not in the top 10 for team war 

this is actually pretty interesting where we see both the tigers and brewers outperforming team war. the problem with war is it's context-neutral, so it doesn't account for how teams perform in close games, etc. 

that's why we also take a look at xwoba for team batting and pitching. woba is a good measure of how good a team may be at creating or limiting runs which can provide a bit more context on why a team is outperforming its war. 

while it looks like both the brewers and tigers are over-performing by war, both teams place in the top 10 for xwoba team pitching. limiting runs (even with a bottom 10 offense in the case of the brewers) likely suggest each team is performing close to their current win-loss records.

advanced metrics mostly reinforce that competitive balance is fine at the top between the higher spending teams and lower spending teams.

if competitive balance is fine and the dodgers aren't ruining baseball, are player salary growth is growing faster than franchise valuations? 

player salary growth from 2022 to 2024: 
- from 2022 to 2023: 7.2% growth 
- from 2023 to 2024: 2.9% growth 

mlb gross revenue growth from 2022 to 2024: 
- from 2022 to 2023: 6.9% growth 
- from 2023 to 2024: 4.3% growth 

mlb franchise valuations 
- from 2022 to 2023: 12% growth 
- from 2023 to 2024: 12% growth 
- from 2024 to 2025: 8% growth 

while mlb gross revenue growth is slowing, we're still seeing franchise valuations grow faster than player salaries year over year. like all sports, investors recognize the earning potential and prestige of owning a franchise. 

owners and media will push that contracts like ohtani ($700m) and soto ($765m) show that players are overpaid, that focuses on the top 1% of players. the league average salary and league minimum (for younger players) are more representative of player earnings.