Scouts versus Stats: the impact of Moneyball on the Major League Baseball draft

Abstract

Michael Lewis’ influential book Moneyball (2003) discusses several sources of inefficiency in the Major League Baseball (MLB) labour market; one of these being the failure of baseball scouts to place a draft premium on college players. We test this implication of the Moneyball thesis – the superiority of college players – by measuring the productivity of players who were drafted in the first round of five MLB drafts covering the years 1995–1999. Employing a variety of specifications, we find that the performance of college draft choices is no better than those of high school picks and argue that this is consistent with Hayek's (1944) work on the economics of information and his emphasis on the importance of localized knowledge. Additionally, we utilize data on the first three rounds of the MLB draft from 1965 to 2010 to test whether Lewis’ book had any impact on teams’ draft strategies. We find no significant structural change in the draft following the publication of Moneyball.

Keywords:

• baseball draft
• productivity
• inefficiency
• information

JEL Classification::

• C22
• C23
• D21
• D80
• J44

Notes

¹ J.D. Drew did not sign with the Phillies when he was drafted in 1997, but he was picked in the first round and signed by Saint Louis in 1998.

² We also estimate this equation for a sample that only includes players who have made it to the majors. The coefficient estimate on the college variable is similarly insignificant. These estimates are available from the authors upon request.

³ We also experimented with using a reciprocal (1/draft number) in place of the top five dummy. The results were similar to those presented and are available upon request.