Imagine, if you will, that you have just gotten a job at Wal Mart. Further suppose that you could never work at another retail establishment without first getting Wal Mart's approval. That's basically how baseball's reserve clause worked. It was a shameful restriction placed upon players for shameful reasons (to solve a prisoner's dilemma-type problem between teams: competition for players).
Skip has a great post at The Sports Economist on the great Marvin Miller, the former players' union head. Marvin Miller has not been voted into the Hall of Fame although he, more than any other one individual, helped dismantle baseball's reserve clause and smooshed baseball's monopsony. Why was he not elected in? Politics, probably.
Baseball business history lesson: two players, Andy Messersmith and Dave McNally, played out the final years of their contracts in 1974. In each contract there was a clause that read something like this:
“It is further understood and agreed that the party of the first part (team) shall have the right to “reserve” the said party of the second part (player) for the season next ensuing… (Subject to the condition that) the said party of the second part shall not be reserved at a salary less than that (paid in the present season)…”
That comes from James Quirk and Rod Fort's Pay Dirt book (p 182 in my copy) and the emphasis is mine. This, dear reader, is the so-called "reserve clause." Each player was "reserved" by his current team and, without the team's approval, he could not negotiate with any other team.
Messersmith and McNally played the 1975 season with their old clubs but without signing new contracts. With backing from Marvin Miller and the union, the players argued that the clause provided a one-year option for the club and they had fulfilled that option, making them free agents. The teams interpreted clause this as a perpetual option, meaning players were the property of their respective clubs until the clubs decided to release them.
The case ultimately went to arbitrator Peter Seitz who sided with the players (and was promptly fired by the teams). That decision ultimately led to the institution of free agency, where players are free to choose what team they want to negotiate with and the teams are free to choose what players they want on their teams. Before that the decision rested solely with the teams for all intents and purposes.
But MLB remained bitter and, as Skip notes, spent much of the next 20 years trying to bring back the reserve clause in one way or another. Skip concludes:
Miller's leadership reformed the reserve clause system. This led to a significant transfer of income to players from owners, who were ultimately forced to pay market prices. The owners responded with a twenty year long, Sisyphus-like ordeal of lockouts and strong-arm tactics in an attempt to turn back the clock in the labor market. Miller and the players were unfairly tarred by the media's brush throughout this period. Yet the game did not suffer from free agency, as economics implies. Indeed, the commissioner himself now proclaims the financial state of the game to be better than ever.
If there were ever a time to make peace between MLB, former commissioner Kuhn, and Marvin Miller, the Hall of Fame vote is a fit and proper place to do it. But MLB's executives have indeed succeeded in turning back the lock, once again cloaking their legacy in shame.
MLB said that the reserve clause was there to promote competitive balance. Without it, players would congregate on the best teams, undermining competitive balance. Starting with Simon Rottenberg, economists were skeptical about this claim (as Skip notes). In fact, the diagram below backs up this skepticism.
The diagram shows the historical record of the spread of win percents - standard deviation of win percent* - from 1901-2004. The yellow spike is where free agency became part of the labor landscape in MLB. There was already a downward trend in win percent spreads**, possibly due to the ever-expanding labor pool that came with integration and an overall increase in the population (more people means more baseball players). If anything, there was less volatility.
Did Marvin Miller ruin baseball? Hardly. Does he belong in the Hall of Fame? That depends on how you view MLB.
John Helyar, who penned the column about which Skip writes, notes:
Then the Hall of Fame changed the format. Instead of allowing all Hall of Famers to vote for "veterans" nominees, it created three new panels. Nominees in the "executive/pioneer" category were no longer being considered by 81 voters, but by 12, and that group is comprised primarily of former MLB executives.
Suppose Wal Mart became unionized and this unionization was due to the efforts of one
person. Would you expect Wal Mart to make this person the employee of
the month? Probably not. MLB is, in part, a cooperative of individual firms that, at least to some extent, maximizes joint profits.
So, should Marvin Miller be in the Hall of Fame? That depends on how you view MLB. If you view it as a profit-maximizing cooperative, probably not. If you view MLB as something higher and you think the Hall of Fame should include people who made MLB substantially better off by their contributions, then the answer is yes. How did he make MLB better? By fighting for players' rights to contract with teams of their choosing.
Will he get there? Sadly, probably not with the voting rules as they are right now, at least not for a long time.
Update: King has some thoughts here.
*Econerd alert: the standard deviation of the win percent presented is the actual standard deviation normalized to an "idealized" standard deviation. Idealized means the standard deviation we would expect if there were perfect balance. The idealized value is non-zero because the outcome of games is partly determined by random events (such as a ball hitting a dove). The number presented in the diagram is the ratio (actual std. dev.)/(ideal std dev). A value of 1 means actual competitive balance was what we'd expect if all teams were perfectly balanced.
**Of course there are other ways to measure balance, such as the spread of championships. From 1950 - 1975, the Yankees won 8 world series. From 1976 - 2000, they won 7: not much difference at all.