Dividends: Computer Games

Critics say that economists know the price of everything and the value of nothing. But Paul M. Sommers, an economist at Vermont’s Middlebury College who seems to know both, is arguing that baseball owners who have paid huge prices for free agents have got value for their money. Assistant Professor Sommers concluded this after studying the original 25 free agents of 1976. Included were Outfielder Reggie Jackson, Relief Pitcher Rollie Fingers and several stars hampered by injuries in the ensuing year. Sommers’ key finding: the free agents more than earned their keep during the season that followed their signing. Jackson, for example, was easily worth the $400,000 salary that the New York Yankees paid him.

Sommers used an econometric model to measure the “marginal revenue product” of the players. He fed such facts as the players’ on-field performance plus the attendance at home games and the number of hot dogs sold at the ballpark into a computer that measured costs against income. The study, to appear next year in the Journal of Human Resources, showed that five of the top 14 players brought in nearly triple their annual salary in extra earnings for the owners. Yogi Berra probably never talked to Casey Stengel about his “marginal revenue product,” but Yankee Owner George Steinbrenner undoubtedly understands. Says he: “You measure a ballplayer’s value by how many fannies he puts in the seats.”