Developing players is a more crucial and hands-on skill for Major League Baseball Clubs than for any other major sport club. In no other sport is there such a structured minor league development system which spans six levels, not to mention the baseball teams outside of America.
The top players can zip through a minor league system in two years, but most major leaguers played minor league baseball for four or five years before reaching the majors. Strong minor league systems are cheap and efficient ways to restock a major league club, as apposed to the free agent market where multi-million dollar contracts are the norm. Staying competitive requires proper drafting, development, and retention of major league prospects.
I quantified the value of each major league club's farm system based on the prospects that it currently contains. The value of prospects that are higher in the farm system (AAA, AA, A, rookie) are more valuable because they are closer to the major leagues, have logged more innings, and therefore are more projectable as major league players. A player who is performing well at triple-A is more valuable than a player having a great year in rookie ball. Not only is the value of the triple-A player much less volatile, the realization of his value is in the near future as opposed to the distant future.
Baseball America, the scouting and minor league authority for baseball fans, ranked the top 20 prospects in each of the 16 minor leagues. In the table I noted how many players each major league club had on the lists and I called them "prospects". Any player in the top ten in triple-A, top five in double-A, or top three in single-A is a "stud" and therefore is more valuable than other prospects relative to their level.
The value of the prospects in the farm systems is based on the average contributions that former minor league players have made once they reached the majors. I incorporated that an additional win is worth $2.14 million dollars on average to a major league team based on Nate Silver's analysis. I used a metric called WARP (wins above replacement player) to quantify the wins each player contributes to their major league club. By multiplying WARP by $2.14 million, the value of a player is determined. From this number, subtract the player's salary and the marginal value of each player is obtained.
For example, if a player's WARP is six wins and is paid $10 million per year, then his marginal value=(6*2.14)-10=$2.84 million. Since players are on one-year cost-controlled contracts for their first six seasons, they are paid well below market value, and generally have positive marginal values to their clubs. "Farm value" is the sum of the projected marginal costs of each major league club's current prospects.
The two Los Angeles teams lead the pack in farm values, followed by Atlanta, Boston and Minnesota. This displays the tremendous job Theo Epstein has done in stocking the once barren Boston system in only three years. Teams with high payrolls that also have strong farm systems can expect to be division favorites for years to come due to the savings they get from their prospects coupled with millions of dollars in free agents. Teams with low payrolls rely almost entirely on their farm system, which means bad teams with weak systems like Cincinnati, Pittsburgh and Kansas City can expect more losing seasons in front of them.
Only a team like the Yankees could win with almost no farm system, but their $200 million payroll could not buy a World Series the past five seasons. In two years when Sheffield, Mussina, Rivera, Posada, Johnson, Giambi and Matsui are too old to play, the Yankees will have no prospects to fill their roles and even Steinbrenner does not have enough money to replace them all with free agents.
Jonathan Rissin is a senior majoring in economics.
