Monthly Archives: December 2013

Is it time to boycott the Mets???


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Last night before I went to sleep I got a message from the Boston Globe. “Jacoby Ellsbury and the New York Yankees have agreed on a seven year deal worth $153 million. My first reaction was, Typical Yankees. I wasn’t mad, just resigned and envious of the New York team that I haven’t invested most of my life in.

As a contrast, two weeks ago, the other New York team announced a big move. “Free-agent outfielder Chris Young has reached agreement on a one-year contract with the New York Mets, a baseball source confirmed to ESPN.com on Friday. The deal is for $7.25 million, a source said.”

While both players are 30 years old, the similarities end there. Last year Ellsbury hit .298 and stole 52 bases for the World Champion Boston Red Sox. He is a gold glove center fielder and lead off hitter. On the other hand Chris Young hit .200 with 12 home runs and lost his starting job with the A’s a year after suffering the same fate with the Diamondbacks.

Now those of us who are Mets fans are used to this. Over the past 38 years (the free agent era) we have watched other teams, particularly the Yankees pursue and land the best free agent players for their teams. The Mets on the other hand have for the most part avoided the best (read most expensive) free agent and typically gone after second tier players. Do any of you remember VInce Coleman?

Many of us have tried to convince ourselves that the Mets couldn’t compete with the Yankees, because they have so much more money. Why have we believed that? Both teams have luxurious new (somewhat publicly financed) stadiums, both own their own TV networks, and both play in the largest, richest city in the world. Maybe its that the Bronx is so much more luxurious than Queens!!!!!!

Once upon a time, New York was a National League city and the Mets consistently drew more fans than the Yankees. Now, its as if the Mets are the minor league team in town.

I can’t escape the fact that the problem with the Mets is the ownership. The real question is are the Wilpons stupid, cheap or both? 

To get a different look at this I have done a bit more than just look at payroll. What I have done is weighted each major league city by population and income. To be fair, for each city with two teams I divided the population in half. Then I looked at each team’s payroll in the context of the value of the team. While you may think that the Mets are being run like a mid market team, the results are clear. The Mets are the equivalent of the Houston Astros!!

Team Metro Area Population  Med Inc Regional Income (Millions)  2013 Payroll (Millions)  Ratio
Reds Cincinnati 1,979,202 22,947  $45,417  $106 0.23339%
Brewers Milwaukee 1,689,572 23,003  $38,865  $83 0.21356%
Royals Kansas City 1,776,062 23,326  $41,428  $82 0.19793%
Cardinals St. Louis 2,603,607 22,698  $59,097  $116 0.19629%
Pirates Pittsburgh 2,358,695 20,935  $49,379  $79 0.15999%
Giants San Fran 3,600,000 30,769  $110,768  $140 0.12639%
D’Backs Phoenix 3,251,876 21,907  $71,239  $89 0.12493%
Dodgers Los Angeles 8,200,000 21,170  $173,594  $216 0.12443%
Indians Cleveland 2,945,831 22,319  $65,748  $78 0.11863%
Phillies Philadelphia 6,188,463 23,699  $146,660  $165 0.11250%
Tigers Detroit 5,456,428 24,275  $132,455  $148 0.11174%
Rays Tampa 2,395,997 21,784  $52,194  $58 0.11112%
Rockies Denver 2,581,506 26,011  $67,148  $72 0.10723%
Nationals Wash-Balt 3,800,000 28,175  $107,065  $114 0.10648%
White Sox Chicago 4,600,000 24,581  $113,073  $119 0.10524%
Padres San Diego 2,813,833 22,926  $64,510  $67 0.10386%
Twins Minneapolis 2,968,806 26,219  $77,839  $76 0.09764%
Red Sox Boston 5,819,100 26,856  $156,278  $151 0.09662%
Rangers Dallas 5,221,801 23,616  $123,318  $114 0.09244%
Cubs Chicago 4,600,000 24,581  $113,073  $104 0.09198%
Braves Atlanta 4,112,198 25,033  $102,941  $90 0.08743%
Orioles Wash–Balt 3,800,000 28,175  $107,065  $92 0.08593%
Yankees New York 10,600,000 26,604  $282,002  $228 0.08085%
Mariners Seattle 3,554,760 25,744  $91,514  $72 0.07868%
Angels Los Angeles 8,200,000 21,170  $173,594  $127 0.07316%
Athletics San Fran 3,600,000 30,769  $110,768  $61 0.05507%
Marlins Miami 3,876,380 20,454  $79,287  $36 0.04540%
Mets New York 10,600,000 26,604  $282,002  $73 0.02589%
Astros Houston 4,669,571 21,701  $101,334  $22 0.02171%

This metric clearly is biased to the small market teams but it does make you think. If the economic opportunity is larger, and you believe that success creates higher attendance, merchandise sales and TV ratings, shouldn’t you want to spend more to field a successful team?

So either the Mets management think that they are stupid and that they will spend money poorly or they think the fan base is stupid and that fans will still spend a lot of money without getting a quality product. The latter is a low risk proposition if you are confident that you have a captive audience.

Lets look at a different metric. Here I will look at salary as a proportion of estimated franchise value. These values are from 2013 and are taken from Forbes

Team  2013 Payroll (Millions) Franchise Value Ratio
Tigers  $148 $643 23.02%
Reds  $106 $546 19.41%
Phillies  $165 $893 18.48%
Nationals  $114 $631 18.07%
Royals  $82 $457 17.94%
Giants  $140 $786 17.81%
Angels  $127 $718 17.69%
White Sox  $119 $692 17.20%
Pirates  $79 $479 16.49%
Cardinals  $116 $716 16.20%
D’Backs  $89 $584 15.24%
Rangers  $114 $764 14.92%
Orioles  $92 $618 14.89%
Brewers  $83 $562 14.77%
Braves  $90 $629 14.31%
Indians  $78 $559 13.95%
Rockies  $72 $537 13.41%
Dodgers  $216 $1,615 13.37%
Twins  $76 $578 13.15%
Athletics  $61 $468 13.03%
Rays  $58 $451 12.86%
Red Sox  $151 $1,312 11.51%
Mariners  $72 $644 11.18%
Padres  $67 $629 10.65%
Cubs  $104 $1,000 10.40%
Yankees  $228 $2,300 9.91%
Mets  $73 $811 9.00%
Marlins  $36 $520 6.92%

So once again, our beloved Mets have the 2nd lowest ratio of spending to the factor. This time its spending to value. So what the owners are being told is don’t bother to invest you will still be rewarded with a very high value. Of course, if THEY were smart, they would very quickly see what happens when you do invest. You become the Yankees who manage to have 3X the value for a very similar product just four miles away. Incredible.

My fellow fans. We have lived with this for most of the past 35 years. The problem is ownership. Unfortunately, we the fans enable ownership to continue to damage OUR franchise and essentially steal our money.

The bottom line is the Wilpon’s are STUPID AND CHEAP!!!!!!

The only way to let the Wilpon’s know that we are sick of this is to completely boycott our beloved Mets. Than means no going to games (even with free tickets), no watching on television, canceling our MLB packages if applicable, and certainly no purchases of Mets merchandise.

It will be painful but I want my team back. I want to care about games in September. I want to be able to not have to whisper that Im a Met fan!!! 

Lets do this!!!

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Remember, Economics are Just Opinions and Opinions are Like……

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Some of you may be aware that this Thursday will bring strikes and rallies in 100 American Cities. These strikes and rallies will be held in and near fast food restaurants across the country. The strikers will be rallying in support of a living wage for fast food employees. Presently, the average fast food worker earns between $8-9 dollars per hour. This is significantly below the official poverty level in the United States. The strikers seek a minimum wage of $15 per hour ($30,000 per year assuming a 40 hour work week) and the right to organize.

This is an issue that is seemingly gaining steam. While there is no traction for a minimum wage increase at the federal level (Congress likely wouldn’t vote on observing Christmas if it was put to a vote), there are a number of states that have either passed laws for higher minimum wage or are debating them at this time.

Additionally, there seems to be increasing support from a diverse group of interests in finding a way to mitigate inequality. A number of economists including Joseph Stiglitz, Robert Reich, and Jeffrey Sachs have come out in support of raising the minimum wage as a way to create greater equality. They noted that the minimum wage has declined in real dollar terms from $12 to $7.25 in the past 45 years. Most interesting is the recent statement from Pope Francis Evangelii Gaudium, a manifesto for the renewal of the church. In the document the Pope decries trickle down economics and inequality.

[S]ome people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting. To sustain a lifestyle which excludes others, or to sustain enthusiasm for that selfish ideal, a globalization of indifference has developed. Almost without being aware of it, we end up being incapable of feeling compassion at the outcry of the poor, weeping for other people’s pain, and feeling a need to help them, as though all this were someone else’s responsibility and not our own. The culture of prosperity deadens us; we are thrilled if the market offers us something new to purchase; and in the meantime all those lives stunted for lack of opportunity seem a mere spectacle; they fail to move us.”

Of course, the other side is in an uproar. In addition to some of the usual suspects (Fox News, Rush Limbaugh) branding the Pope a Marxist or a Socialist, there is real concern among the business community around the possibility that their labor costs may increase. They realize correctly, that if the movement gets traction in the fast food sector and in some of the higher population stats that there will be a defacto national increase in the minimum wage regardless of the federal governments inaction. Walmart and other retailers are more than a bit interested in what happens this week.

The central argument against a minimum wage increase is and always has been the same. It is an oversimplified supply and demand argument. Basically for a given demand curve for labor, if price goes up, demand will go down. So it would follow that if the minimum wage goes up, then the people that the increase was intended to benefit would be hurt as businesses would cut employment. This argument is laden with a number of assumptions:

1) Businesses have no pricing power and would have to fully absorb the increased cost of labor. If we assume that this isn’t true (if you have been to the supermarket lately you know this isn’t true) then we understand that business will likely pass some of the increased cost along to everyone. This is especially true if ALL businesses are impacted by the increase in labor cost.

2) That there is a one for one relationship between labor costs and total costs. Again a fallacy. McDonalds labor costs are approximately 20% of revenue. Walmart’s are much lower, say 2-3%. So again, the cost of a Big Mac wouldn’t double. It would increase somewhat but by less than one initially assumes.

3) Large retailers and fast food restaurants can make significant cuts in labor and still serve their customers. Have you been to a McD’s or a Walmart recently??? Yes, I am sure that over time there will be continued technological innovation that will reduce the units of human capital needed to produce a unit of product. I don’t think that an increase in minimum wage will materially change the pace of innovation and I am certain that if Walmart uses any less labor we will all be able to “shop” there for free.

4) None of the increased money paid in labor will be spent in the stores/restaurants that pay the labor. Even Henry Ford understood that paying workers a living wage was good because they then bought stuff that you produced. Not to mention that turnover would decrease and worker satisfaction would be better. It shouldn’t shock any one that minimum wage workers are significant customers of fast food restaurants and big box retailers. Its likely that these entities would capture a significant amount of the increased money available to minimum wage workers in the form of increased sales.

Now there is a another point. At present, there are significant social service transfers (EITC, food stamps, housing credits) to the working poor. These people aren’t the welfare mothers of Ronald Reagan. They are people who work hard in jobs that don’t pay well. We may not like the fact that some of our taxes go to support the working poor but I suspect that most of us would like the results of not supporting them even less. It’s important to note that these government subsidies are not just a transfer of wealth to poor people. They are a direct subsidy to large for profit entities in the form of wage subsidies that allow them to pay less. Also, these wage subsidies get spent in their businesses.

Now, I’m not sure which is more economically efficient higher minimum wages or government assistance, but subsidizing both poor people and corporates is essentially two government transfers and we all know how inefficient the government is. Wouldn’t it just be better to force business to pay a living wage and have them allocate their costs accordingly?

All I ask is that on Thursday you consider the state of minimum wage workers and avoid fast food restaurants and large retailers. It won’t be all that difficult and if enough of us act it will send a message to businesses to do the right thing.