What does the Roy Oswalt trade tell us about the Astros future?

Yesterday was a day that will probably be referenced by us often over the next decade. How we remember the trade in isolation as a success or failure will depend largely upon how the players acquired pan out, and also the immediate deals that Ed Wade strikes as well (possibly trading Berkman or extending Myers). As such, it is difficult to assign terms like success or failure in this kind of a move, but it is possible to evaluate the direction that Wade is taking the franchise based on the signals it gives us.

We are all probably familiar with the specifics of yesterday's dealings: the Astros took Roy Oswalt ($11 million lighter in his contract) and turned him into J.A. Happ, Jonathan Vilar, and Anthony Gose. Ed Wade then turned Anthony Gose into Brett Wallace a few hours later. The Gose for Wallace swap then set the internet a flutter with speculation that Lance Berkman is being aggressively hustled on the trade market, but where we stand as of now is Ed Wade has saved the Astros $12 million while adding Happ, Villar, and Wallace to the fold.

But the bare bones description doesn't necessarily tell the story we are looking for. This is a trade that can't be summed up a simply a win or a loss for the Astros, nor should we try to interpret it as such. What we should try to do instead is understand what exactly took place and examine the clues found therein about the trajectory of the franchise.

I am going start by analzying what other people have said in terms of winning and losing the trade, but I am not concerned with their conclusions. Rather, I am focused on how it can serve as a launching pad for another vein of analysis.

There has been a lot of talk in the national media and national sabercircles about whether Ed Wade got enough for Roy Oswalt. Many outlets have taken the perspective that for the value Roy Oswalt represented to the Phillies in the short term, coupled with the fact that the Astros are paying $11 million of his contract, that a return of a mid-to-back end of the rotation starter, a toolsy SS, and a nothing but league average 1B is a disappointing haul.

I'll be honest, I am inclined to agree with that sentiment—on its face. The added value Oswalt has to the Phillies is tremendous in terms of positioning them to print money, via ticket sales for postseason baseball. It is staggering. Combine that with the fact the Phillies are not even being forced to add a ton of payroll to increase their odds at hitting paydirt and it seems ludicrous that we are not talking about a haul of blue chip prospects the Astros acquired. The operative word in all of this, though, is seems.

Somewhere in Intoduction to Microeconomic Theory 101, I learned that rational agents engage in trade because it benefits both sides. In an ideal market situation with perfect information and perfect competetion neither side of a transaction "loses" in trade and neither side "wins". That's why people champion "the marketplace," because it reaches Pareto efficiency. Ed Wade and other GMs did not conduct their trade negotiations in a vacuum. There were real constraints placed on Ed Wade and other GMs had ample information to properly access what the market value for Oswalt's services were because a very close substitute's price had recently been set.

The first constraint Wade faced was that Oswalt's trade demands were very public. Wade had his bargaining postion cut out from under him from the words "trade me." Secondly, Wade had to find a trade partner that would satisfy Oswalt so that he would waive his no trade clause (and from the last ten days of worth of rumors and reports, that was not an easy task). Thus, it is not as though Ed Wade had a ton of room to bluff or bully his way through these negotiations. Finally, every other GM in MLB had just witnessed Dan Haren, who is owed less money per year and is younger than Oswalt, go to the Angels for a package of Joe Saunders, an intriguing prospect, a nothing prospect, and potentially someone of note once we know who the PTBL is.

All of this is to say that the market price for Roy Oswalt had shifted very much in favor of a trade partner like the Phillies. The decision left to be made was whether the market would offer the Astros something for Roy Oswalt that could meet Ed Wade's reservation price (something likely to be low given Oswalt's relative value to the Astros, his contract, and Wade's weak bargaining position). Obviously, Ed Wade felt like the Phillies package, and his ability to flip Anthony Gose to Toronto for Brett Wallace did. Ed Wade also must have managed to convince Drayton McLane that trading Roy Oswalt yesterday was the best they were going to be able to get for Oswalt and Drayton McLane must have accepted the reduced haul was necessary to begin scaling back payroll as rebuilding begins in earnest. Either that, or Ed Wade believes, and then made Drayton McLane believe, that J.A. Happ and Brett Wallace offered enough immediate talent to justify the trade. But even if the latter is the case, I cannot believe that Wade and McLane actually think that is the true market value of Oswalt; just the maximum value that could be extracted from Oswalt while Houston owned his contract.

The immediate impact on the Astros payroll is that it will be $12 million lighter in 2011 and that 2012 will not see the obligation to buyout Oswalt's option for $2 million. In place of Roy Oswalt's talent, the Astros will now immediately substitute J.A. Happ and his league minimum salary through 2011 with escalations through arbitration increasing it for three seasons thereafter. Happ seems to have a ceiling as a number three starter and a floor as number five. In other words, he's a non-payroll burdening filler that will be appropriately seasoned by the time the Astros are in a position to contend again.

Happ for Oswalt obviously saves the Astros a lot of money in the short term and some in the long, but it is Brett Wallace's acquisition that I believe signals Ed Wade's plans for the franchise the most. Wallace is by all accounts MLB ready—now. Most also believe that he will be a serviceable, league average first baseman with his own set of pluses (pop) and minuses (defense). His acquisition sends only one message: Lance Berkman's days as an Astro are numbered.

Not picking up Berkman's option saves the Astros $14 million in 2011, boosting their total savings after paying Happ and Wallace league minimum to about $25 million. This leaves the Astros with a minimum of payroll obligation (with generous estimations for arbitration bonuses) of about $65 million—nearly a third of which is Carlos Lee's contract. It is about as bare bones as the Astros payroll can get (yes, I will gloss over Lyon's $5.1 million).

What I gather from all of this is that the Astros are trying to dump payroll in the short term as they see how things pan out on the farm. In the interim, they will seek out affordable, yet serviceable players to keep the big league club young and possibly interesting without drifting into historical levels of terrible. They will also have the financial wherewithal to extend sensible contracts for players like Myers, Pence, Bourn, Wandy, or even players from outside the organization to have an experienced group of players to complement the crops the farm yields over the next few seasons. Simply put, it gives Ed Wade the both the means and opportunity to pursue a forward looking agenda because Drayton McLane is no longer unrealistically focused on the present.

Viewing Roy Oswalt's trade from this perspective, I have to disagree with some of the national writers (and even some of us) who are convinced the Astros were fleeced. This trade has been deemed a failure and a disappointment because the Astros didn't receive a true blue chip prospect. Yet, we have no indication that such a talent could have been acquired, nor did Ed Wade have any real incentive to keep Oswalt with the Astros just because the market has changed its pricing on veteran pitching. There is really no "winning" in this situation, and given all the offers that Ed Wade heard for Oswalt, he likely accepted either the best or close to the best package out there (i.e. as Pareto efficient as it was going to get)

But what Ed Wade really acquired for the Astros is a new outlook. In getting Drayton McLane to accept that the veteran nucleus was no longer capable of being a "champion," progress can be made. Money saved at the big league level can be reinvested on draft signings (DDJ, anyone?), player development, and acquiring players with a strong focus on the future ramifications—both in terms of their output and contract. In the process, Wade acquired a plan B for Jio Mier and two major league ready talents to buoy the big league club while we see how Heck's drafts pan out.

Trading Roy Oswalt will not dramatically accelerate the rebuilding process for the Houston Astros. I wanted it to—as I am sure all of us did. In hindsight, it doesn't appear that Oswalt could really have been the catalyst for fixing a barren farm system. Ed Wade's trade of Oswalt will likely never be remembered as sexy (unless Villar or Wallace defy expectations) and that's OK. What trading Roy Oswalt does do for the Astros franchise is allow it to finally change gears. Something that is necessary and beneficial for future efforts to rebuild the franchise.

So I believe that all we can really say about this trade is the following: It is the moment where Ed Wade got Drayton McLane to say "Uncle." And that is nothing to sneer at.