Hi, I am writing a paper on the economics of baseball and was wondering any one here has written a study or has seen one on the issue of player development. As in, how much money on average do baseball teams save in the first 6 years of a player’s career when they can’t file for free-agency, and how much do team on average invest to develop a single major league player, anything related to this issue of the economics of player developement would also be great. I would appreciate any help on the matter.

I hope Ron Johnson drops in - if anyone knows, he would.  This sort of thing might be very hard - MLB is very, very quiet about how much they spend and how much they earn and while we can get actual signing bonuses for signed players in the draft, only the big name foreign free agents have bonuses on public record and that’s before we get into the development costs.

I’d have no idea how to get an accurate figure, but I’m sure that teams spend tens of millions of dollars developing players each year.  It seems to me that I once saw an MLB financial breakdown somewhere that had a “player development expenses” column, and it gave me the impression that on average teams spend in the $20 million per year range to draft, sign and develop players.  It is probably higher than that now. 

The closest thing that I can find to a breakdown like that is
this report from MLB in 2001.  The player development budget would have to be some portion of the “National and other local expenses” column, whch averaged $55 million per team.  That would also include marketing, travel, equipment, coaches, front office salaries, stadium maintenence, ticket takers, etc, so it’s hard to say how much goes to what in there.  But $20 million for player development would easily fit in that $55 million, I would think.  When I estimate that in my head in todays terms, I’d guess that it might be closer to $30 million.  That’s just a WAG, though. 

It would be almost impossible to break it down to an individual player.  I guess you could say that it’s $30 million per year spent, and the team takes in maybe 40 kids each season, so they spend on average of $750,000 per player they originally sign.  But the money isn’t spread close to evenly throughout their development, so that’s not even close to fair (and again is just more wild guesses).