An Economic Evaluation of the Moneyball Hypothesis
Journal of Economic Perspectives
vol. 20,
no. 3, Summer 2006
(pp. 173-186)
(Complimentary)
Abstract
Michael Lewis's book, Moneyball, describes how an innovative manager working for the Oakland Athletics successfully exploited an inefficiency in baseball's labor market over a prolonged period of time. We evaluate Lewis's claims by applying standard econometric procedures to data on player productivity and compensation from 1999 to 2004. These methods support Lewis's argument that certain baseball skills were valued inefficiently in the early part of this period, and that this inefficiency was profitably exploited by managers with the ability to generate and interpret statistical knowledge. Consistent with Lewis's story and economic reasoning, as knowledge of the inefficiency became increasingly dispersed across baseball teams the market corrected the original mispricing.Citation
Hakes, Jahn, K., and Raymond D. Sauer. 2006. "An Economic Evaluation of the Moneyball Hypothesis." Journal of Economic Perspectives, 20 (3): 173-186. DOI: 10.1257/jep.20.3.173JEL Classification
- J31 Wage Level and Structure; Wage Differentials
- J44 Professional Labor Markets; Occupational Licensing
- L25 Firm Performance: Size, Diversification, and Scope
- L83 Sports; Gambling; Restaurants; Recreation; Tourism
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