The most common (and my favorite) type of question that we get for our Effectively Wild email shows goes something like this:

What if Major League Baseball made a rule that the first hit by pitch of a game counted as a home run, but every hit by pitch after that counted as an out? Would teams (long list of hypothetical ramifications are pondered, with request for Ben and I to ponder further)?

I made that one up, but it’s representative. What if there were no outfield fences? What if baseball’s bases suddenly ran clockwise? What if you could put on full body armor and stand five feet in front of the batter? What if, instead of nine innings, the home team got to choose how many runs the game would go to? What if there were no rain delays; they just played through no matter what? What if teams alternated offense and defense only once, nine innings of offense followed by nine innings of defense? What if fans got their money back when the home team lost? What if baseball was played on ice?

These are great because, even though they’re mostly unrealistic and absurd, we get to talk about them from scratch, and to really think about why baseball is played the way it is and what’s truly entertaining, fair, or durable about it.

There are actual practices in baseball that are every bit as outlandish as the hypotheticals we get asked about. Some of them make almost no sense beyond the fact that they’re grandfathered in. Some of them should really be thought about, from scratch, and eliminated. They actually did play baseball on ice, you know. Then they stopped, because it was stupid.

Draft pick compensation is just the stupidest thing.


Let’s approach draft pick compensation like you would if somebody suggested it out of the blue, into a non-compensation system. If you were really wise, you’d spot three parties that are affected, in three different ways:

1. Teams that sign the best players would be taxed
2. Players that leave one team for another would be taxed
3. Teams that lose their best players would get compensated

If you determined that these were three goals you actually had for your baseball league, then you would be encouraged. But these are not actually the goals of the compensation system. (Note: Two-thirds of the consequences of this system are taxes. It might be more accurately labeled the free agent tax system.)

1. Teams that sign the best players are not taxed. Only teams that sign a particularly defined subset of the best players are taxed. Some team will sign Matt Garza, and not be taxed, because Garza was traded in mid-season. There is no tax unless the player is leaving a team with whom he began the previous year. But none of that—the mid-season trade—has anything to do with the team that signs Garza, so we can conclude that the system does not actually want to tax the signing team. If it did, it would tax Garza’s new team. Because it doesn’t, this is an unintended consequence of the system.

2. Players that leave one team for another are not taxed. Andres Torres can change teams without getting taxed. Mark Ellis can change teams without getting taxed. Hundreds of players can. There are only 13 players who can’t change teams without getting taxed. Now, we might say that the rule specifically wants to tax the very best players who switch teams, except this isn’t true, either. Bronson Arroyo doesn’t get taxed not because he’s worse than Kendrys Morales, but because his team was unable to afford him while Morales’ team decided it could afford him (or decided that Morales, and his agent, were unlikely to accept the offer). If compensation were connected to the players who actually got paid the most over the offseason, you could sort of accept it. But that’s not how it works; instead, we use a strange sorting mechanism—a totally unnatural one-year contract offer that rich teams can extend without blinking but poor teams can’t—and we make teams measure the risk that it will be accepted. The qualifying offer system doesn’t sort the best players; it basically makes teams do a little IQ-test puzzle to decide whether the risk and reward are worthwhile.

Further: The system actually benefits players who switch teams—all the players who aren’t in the 13. The compensation system, as it is now, is a league-sanctioned rebate to players (like Bronson Arroyo, Jason Vargas, Jarrod Saltalamacchia, Omar Infante, Mark Ellis, Andres Torres, etc.) who switch teams without dragging compensation requirements with them.

Long paragraph short: the system does not actually show interest in keeping players on their original teams. There are maybe two players in this year’s free agent market who are likely to stay with their original teams because of this system. Of the two, maybe one is actually homegrown.

3. Teams that lose their compensation do get compensated. This one works! Sort of, only.
If the goal is to compensate teams based on the size of their loss, this fails. The Yankees could lose Robinson Cano, one of the five best players in baseball, and get a pick at the end of the first round. The Mariners could lose Kendrys Morales, one of the five best designated hitters in baseball probably, and get a pick just below, a pick of roughly equal value. The Reds could lose Bronson Arroyo, who will (I’ll predict) get paid more than Morales, and get nothing.

If the goal is to compensate teams regardless of the size of their loss, then a) lol what, that doesn’t make any sense, and b) we move on to asking why teams get compensated at all. Teams don’t get compensation if their player is injured. Teams don’t get compensation if their player is suspended a year for PEDs. Teams don’t get compensation if their player retires. That last one is particularly apt for a comparison: We’ve already concluded that the system (by indication of its own actions) doesn't want to tax teams that sign players, or tax players that sign. If the goal, then, remains compensating teams for their losses, then why do the Yankees get nothing for losing Mariano Rivera? Why would the Pirates (had they offered A.J. Burnett a qualifying offer) get compensation should he sign with Baltimore but not get compensation should he simply walk away? The effect is the same for the Pirates. Presumably, then, the system doesn’t actually care about compensating the team that loses the player, either.

(Nor should it. It makes sense to compensate a team that loses an asset it actually owns. If the Dodgers had somehow signed Robinson Cano away from the Yankees in July, the Yankees would rightfully be aggrieved and demand restitution. But their contract with Cano is up. He is not part of their portfolio. “Losing” a player whose contract has expired is not a loss, any more than you “lose” your home to somebody else when you check out of a hotel room. This seems like a suspiciously obvious point, which makes me nervous.)

Further, if the point of the system is to keep players on their original team—by giving teams a disincentive to sign another team’s players—then why give teams an incentive to not sign their own? The incentive should reward the team that keeps its players. If that’s what the point of the system is, at least.

And while an admirable ambition of such a system might be to preserve competitive balance by rewarding small-market teams, you don’t need me to point out that this doesn’t come close to working. Expensive free agents tend to come from rich teams. And rich teams have the financial might to make more qualifying offers.

So the system doesn’t seem to care about compensating teams, or taxing other teams, or taxing players. Those are just consequences. What the system does care about is limiting players’ ability to move around. It doesn’t do that particularly well, impacting a small handful of players at most. But that’s what it’s for. That’s what it’s always been for. The league has tried various schemes in the past to do this, each dumber than the next. They tried to limit how many teams could actually negotiate with free agents. They allowed a player strike over compensation for free agents. Remember the free agent compensation draft? In the early-to-mid-80s, teams got to protect a certain number of players in their organization. The rest went into a pool. When a team lost a top free agent, it got to draft a player from that pool. Not from the signing team, mind you; from any player from any team in the pool. What a stupid, stupid idea, peaking in stupidity when the A’s (having lost a pitcher to the Orioles) got to steal the no. 1 overall pick, Tim Belcher, from the Yankees because he was drafted too late to be protected from the compensation draft.

Which, fine. Owners were worried about free agency. They thought it would bankrupt some of them. They thought it might bankrupt all of them. Nobody knew what free agency’s effects were going to be on competitive balance and the league’s finances, and so owners took steps to limit the impact. Now we do know free agency’s effects on competitive balance and the league’s finances. We all survived! We actually all like free agency, I daresay. It turns the four dark months of winter into an extended party. It gives last-place teams a chance to spend smartly and win the World Series. If it hurts competitive balance—which seems probable, but which I wouldn’t concede—the effect on the league seems to be relatively small. Why, without free agency, the Mariners might have been stuck with Alex Rodriguez all these years; imagine the horror, Seattle. Imagine.


The hypotheticals we get asked on the show often come down to one question: What really is the role of the league? The answer, more often than not, is to get out of the way. The league had a respectable reason to engineer a “fix” to free agency 35 years ago. That fix turned out not to be necessary, and the engineering was sloppy. It’s the stupidest part of baseball, and somebody should feel bad about imposing it on us.

Thank you for reading

This is a free article. If you enjoyed it, consider subscribing to Baseball Prospectus. Subscriptions support ongoing public baseball research and analysis in an increasingly proprietary environment.

Subscribe now
You need to be logged in to comment. Login or Subscribe
This qualifying offer is a proxy for "losing a player better than level X." The problem with a proxy is that it is never as good as the real thing. Another with a single-level system is it has cliff effects. On the other hand, it is easy to administer.

What the system should do is admit that large market clubs sign several players to big contracts, and smaller market clubs sign only a few to big contracts. Only the large market clubs usually do the monster super-size contracts, and certainly only a couple do multiples of those.

What the small market clubs need in exchange for feeding that are draft picks. The salary cap tax system needs to move draft picks as well as money. The Yankees can do what the Yankees do, but pretty much operate without anything resembling a decent farm system. Meanwhile, Milwaukee, Baltimore, Tampa, etc. operate on oversize farm systems. If you want a cost-controlled player, you have to go to a mid- or small-market club.
Just follow the NFL system - award draft picks to teams based on the difference in players lost vs. players brought in (using AAV of the contracts) and teams that lost the most get awarded picks. You could even tier it (e.g. team loses $20+MM in AAV players gets a sandwich pick between rounds 1 and 2, team loses $10+MM in AAV players gets a sandwich pick between rounds 2 and 3, etc.). Players you re-sign are excluded (since you didn't really "lose" anything to warrant compensation).
And, if you want to add a penalty aspect, then do the same in reverse - if a team brings in more in FA than it loses using AAV, then it loses picks based on certain tiers.
Using this proposal, teams still get compensated (penalized), no group of players is singled out, every player who changes teams is involved in the calculus, the lower revenue teams that act as farm teams get more draft picks and the big spenders usually lose picks (unlike the current system where BOS and NYY stand to get 6 of the 13 comp picks available).
I'm sure there are other tweaks that could be made and I'm sure there are loopholes that I'm missing. But this seems better than the current system which seems to hurt smaller revenue teams more than help as they are the ones who likely can't afford to make qualifying offers in the first place.
I for one like the current system. Not because it accomplishes any higher goal, but because it doesn't. For all the reasons Sam mentions, I concede that as a mechanism for "fixing" free agency it is utterly stupid. But as a consumer of baseball news and gossip, I like the intrigue it creates. Without the draft pick compensation system, who would care about what Kyle Lohse was up to in late March, or what Michael Wacha was doing in October? Sure, it has all sorts of unintended consequences and likely shaved several millions off of Michael Bourn's latest contract, and Kendrys Morales's next one, but it gives astute GMs another way to separate themselves from Jim Bowden, Sam Miller something to write about (passionately), and the rest of us something to read and argue about.
Here's my stupid "what if"...

You hit a gapper that the LF cuts off deep in the alley, you round first and are headed for second when the LF makes a throw to the 2B who is straddling second base. Instead of sliding, you keep on trucking and attempt to round second as if you were going for a triple the whole time.

The 2B catches the throw from the LF (which beats you to the bag) and turns to apply the tag (he assumes you're sliding), and you collide with the 2B and the ball comes loose. While the SS corrals the loose ball, you get up, stand on second and brush the dirt off your uniform.

The other team's manager screams WTF but you say, "shoot, I was going for a triple the whole time and your 2B obstructed me." Maybe you don't get the obstruction call (because the 2B was in the act of "fielding a ball" when the collision happened), but at least you're safe at second.
Baseball would be far, far better off if they just put more teams in densely populated areas like NYC. Of course, that isn't going to happen.
The draft pick compensation does not change the overall demand teams have for players. If the QO system reduces some players' salaries, it will increase others'. Money that would otherwise go into these mid-level free agents might instead go to player development or low/high-level free agents. The compensation system does not fundamentally change the demand for or supply of player talent. So I would add a 4) Players unaffected by QOs get paid marginally more.
Teams should only get compensation for losing players they developed.

For example, the Red Sox getting compensation picks for Napoli and Drew, both of whom were signed to 1 yr FA deals w/o compensation or loss of a draft pick is absurd.

In the case of Ellsbury, they lose a player they drafted and developed, and compensation makes sense.

MLBPA should play hardball to get this changed, and also remove the revenue sharing rebates link to the luxury tax.