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What will the Great Recession mean for baseball?

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While I was still a college senior, trying desperately to procrastinate out on things like "finding a job" or "finishing my thesis," my RSS feeds were constantly cleared of unread items.  Then, I graduated and stopped spending the majority of my day in front of my laptop (school starts back up again in August...can't wait).  My RSS feeds filled up with thousands of unread articles. Then Tommy Bennett somehow convinced me via Twitter that Google Reader was something worthwhile.  Since signing up for Google Reader, my RSS feeds are constantly cleared and the slew of econ blogs, baseball blogs, and random assortment of other information that I chose to digest daily.

My internet reading habits are not the point of this story.  Nor is the assortment of products that Google is using to slowly sink its hooks into every facet of my life.  The point is that in reading all of this relevant news/commentary daily has started my creative juices flowing again (i.e. subjects from one area of my interests are having dots connected to other facets of my life).

I've read several articles in the last few days from several sources that were written from several perspectives about the labor market after the Great Recession runs its course.  The point has been relatively the same (argued from differing views on the political spectrum...of course): the return to full employment will be slow because there will need to be a fundamental shift in the labor market in order to attain full employment again.  Articles have speculated as to which fields, technologies, business practices, and policies could/would/should facilitate this, but they have all been in agreement that there will be a lot of change.

At this point, you, the reader, may be wondering why you've been forced to read reading through three paragraphs of my ramblings.  The short answer is that I once convinced someone at SBN to give me a soapbox. The longer answer is that reading about truly important matters (national unemployment and jobless recovery) made me think about baseball (I cannot even begin to recount the number of truly weighty subjects I have bastardized into baseball thoughts).

The common thread of all the reading has been that there will be a massive reorganization that has to take place (i.e. that labor market has to develop new skills, mobility, etc., and that businesses will have to abandon inefficient, and in some instances, archaic, management solutions).  What made me jump from a potential decade of slow growth and static-unemployment to baseball was the fact that the effective cost of WAR has decreased to $3.5 million this offseason.  

Coming out of 2008, WAR was valued around $4.5 million, I believe it dipped $4.1 million in 2009, and now we're down to $3.5 million.  That's a staggering drop.  However, that drop doesn't mean a whole lot because baseball teams don't get to reduce payroll for profit margins like most businesses (coincidentally, I just described Scott Boras' nightmare).  The Yankees don't get to tell A-Rod that his $30 million a year is being reduced by 20% to readjusted for the change in $/WAR.

What we have seen this offseason is that the bloat is falling out of most free agent contracts (Lackey, Bay, and Holliday's contracts not withstanding).  There seems to be a reluctance to pay for only marginal talent that could possibly reflect a genuine adoption of some of the more saber-slanted principles (Brandon Lyon's contract not withstanding).  On the other hand, it could also just reflect penny-pinching, and not a rational bent with a clear focus on the marginal cost for an added win that a player can bring above that of a freely available replacement.  Whether the decrease in the cost of WAR is a rational reaction to the economic times, or purely reactionary measures, it seems clear that there is definite shift in baseball's labor market that is taking place.  

The unclear aspect is not just what is driving the shift, though.

So, the question(s) that I'd like to discuss is what effect, if any, will the Great Recession have on the labor market for baseball players in the next decade? Will these lean times affect enough free agent classes to blot out the excesses of the previous decade? In order to succeed with less, where will savvy teams go to find bargains? And will saber-principles/evaluations drive them? Or, as clack as posited here before, will there be a surplus of player's with skill-sets that aren't saber-ideal and therefore cheap value?  Will teams continue to pay a premium for top-teir draft picks and international free agent? Or will the high-risk/high-reward value of these players fail as their employers become more and more risk adverse?

I don't know where to begin in answering these questions.  My gut feeling is that the Great Recession will likely mark a permanent drop in the effective cost of WAR, but I can't say what will drive it.  Perhaps it doesn't even matter. After all, it's a Tuesday afternoon, baseball games start up in a few days, and it's raining down in Florida.  So what else is there to do but discuss all of these questions?

Also, feel free to answer/discuss any question I didn't directly ask.