Moneyball was one of my favorite reads from the last few years. I actually binge-read it while preparing for my comprehensive exams. In it, Billy Beane and the Oakland A’s try playing a brand of baseball that’s never been tried before, one that questioned old assumptions both about in-game strategy but also on the value of players and how to evaluate talent.
What strikes me about the book is how many of the assumptions surrounding how markets are supposed to work in the real world break down immediately.
Baseball is a competitive market, and unlike in many industries where competition occurs the results are a) highly observable; b) harshly judged; and c) structured and simple enough to be modeled and analyzed. I’m not saying that baseball is simple, rather that the unit of runs, innings, at bats, etc., repeat. We have a sample size of hundreds of thousands of innings to analyze likelihoods of generating runs in various conditions.
However, it took baseball decades of competitive play to learn some very simple truths about itself: it was evaluating players and strategies completely wrong. A striking example is the value of a walk vis-a-vis a single. Both result a player on first base. Yet baseball couldn’t recognize the value of walks for two decades after Bill James, an amateur analyst praised in the book, demonstrated it mathematically.
Baseball addressed the uncertainty of analyzing prospects and hunting for talent by assuming there could be no fact collection, and that an analyst developed an ‘eye’ over years of experience that gave them the best chance of identifying the next big slugger or ace. By doing so, they in essence were discriminating against players who did not look the part of a big league, regardless of the player’s success in helping the team win.
There are many real-world parallels that are important to policy. For instance, the wage-gap for women is a comparable market failure. Women are being undervalued in corporate work-spaces much as batters who get on base by taking walks are undervalued by baseball.
Economists often assume that the best thing to do is to let markets self-correct over time. Competitive pressures should lead some smart company to realize they increase profits by hiring more women, perhaps at 78 cents on the dollar of male employees instead of the prevailing rate of 77 cents. Others must either also adjust or go out of business.
Slow corrections would infer that the market is sticky, and that frictions slow the process. However, no movement leads economists to too often assume that the market is at a competitive equilibrium and the wage-gap does not exist. Some other factor (like individual choice and preferences over working hours and flexibility) is inferred to be driving outcomes. However, what I took from Moneyball is that frictions in entrenched institutions can be so overwhelming that they halt progress entirely and indefinitely.