Correcting the ImbalanceOver the last ten years, evidence suggests that Major League Baseball (MLB) has been competitively out of balance. We can examine this inequity by presenting standard deviation results, measuring the frequency of playoff qualification, and observing World Series qualifiers and their payroll. Finally, we can discuss how a salary cap would correct some of the inequity found within baseball.
In November 2000, Bud Selig stated: "At the start of spring training, there no longer exists hope and faith for the fans of more than half our 30 clubs (SportingNews.com)." To support this, we can examine the dispersion of winning percentages (standard deviation). They are shown in the table below. In the American League, the standard deviation of winning percentages is more than twice what it would be in a league with absolutely balanced teams. In the National League, the actual-to-ideal result is just under 2 (1.874). The larger the standard deviation, the greater the dispersion of winning percentages.
These two numbers strongly suggest that both leagues are not balanced competitively.
Another way we can measure competitive balance is the frequency of teams qualifying for the postseason. The table to the left measures this frequency. In the A.L., the Yankees made it every year while in the N.L., the Braves made it every year except one. In a perfectly balance American League (14 teams), 12 teams would make the playoffs three times and two teams would make the playoffs twice, for every ten years. In the National League, eight teams would qualify three times and eight other teams would make it twice, for every ten years. Using this, the HHI formula can be incorporated with the frequency of qualifying for the playoffs. Instead of using a "first place finish" as the criteria we can replace it with "qualifying for...