hiring freese: arbitration for the cardinals' world series hero

the cardinals entered the off-season knowing that one of the consequences of the improved youth movement in recent seasons came with a reckoning. this year, five players would be arbitration eligible.

of those five, mitchell boggs and edward mujica signed deals in lieu of arbitration before they had to announce their salary demands or the club had to announce its starting point on salary.

then, this week, jason motte signed a pricey (and probably club-unfriendly) deal with the club for $12m to buy out two years of arbitration.

to give a brief overview of why that deal was a little bizarre, one has to take a look at the underpinnings of the arbitration process. in the wake of the demise of permanent reserve clauses in baseball, the owners settled on a new program of club control. obviously, a scheme where all players are free agents would be bad for everyone. if clubs had no control over players in their systems, they'd have no incentive to run large, expensive farm systems. allowing some measure of club control provides adequate incentive for clubs to run player development programs.

currently, players are under club control for the first six seasons in the majors. for three years, they are entitled to nothing more than the league minimum (which, at $500,000, is generous relative to the general population, but far less than most players would earn if they were free agents).

for the fourth, fifth, and sixth years, they are entitled to salary enhancements set by an arbitrator. the arbitrator is not taxed with giving the player a salary comparable to what he would earn as a free agent. instead, in a player's fourth year, the arbitrator typically awards about 40% of what the player would earn as a free agent; in the fifth year, 60% of what he would earn as a free agent; and in the sixth, roughly 80% of what the player would earn as a free agent.

the process starts when the team names what it would pay for the player, and the player names what he thinks he should be paid. should they go to a hearing, the arbitrator does NOT pick a number between the two. instead, he has to pick either the team's proposed salary, or the player's proposed salary. so, there's some exciting game theory stuff going on about wanting to be just close enough to the "true" value of the player to be more appealing than the other party's offer.

actually going to an arbitration hearing is kind of a pain in the butt. the team, of course, has to make its case as to why the player actually kind of stinks. the player hates hearing this, and the club has to deal with a resentful player. and each party runs the risk of getting (or paying) a lot less (or a lot more) than it otherwise would, in the event that the party doesn't win. and of course, it costs money to hold these hearings ("transaction costs" for the overeducated and jargon inclined).

that's why, each year, we see this uncomfortable dance between player and team, as they both try to settle on an amount that is acceptable, without giving too much away.

jason motte's proceeding was interesting, because he demanded $5.5M for his second arbitration year (his fifth service year). if "x" is his ideal, free agent salary, and we solve for "x" in the equation [ 0.6x=$5.5m] we find that x= $9.17M. so, if jason motte were a free agent closer, he'd get somewhere around $9m on the free market this year.

that assumes that motte's proposed salary for this year is better than the clubs proposal - $4.5m. if we accept the club's proposal, x= $7.5m.

i know, you were told there would be no math. (you were never told there would be no math.)

the funny thing is, we're paying him $12m over two years. so, if nothing changes, and jason motte remains the kind of closer who would get $9m as a free agent, that means he would get paid about $7.3m next year. if the club is right, and he's the kind of guy who would get $7.5m on the free market, he should only expect $6m next year.

so, putting these numbers together,using motte's estimation, he should get $12.8m over the next two years. by the club's estimation, he should get about $10.5m. $12m is kind of in the middle of those two numbers.

but that treats the likelihood of motte improving on his 2012 performance as about equally likely as his performance diminishing. first, there's a pretty decent likelihood for any pitcher to get hurt in any given year and post very poor numbers. second, jason just put up about the best numbers one could reasonably expect in a single season: a 2.75 ERA and 42 saves. remember, these are the kinds of stats that influence what gets people paid, not predicts future performance.

so, even liking motte's performance a lot, the likelihood that he improves on it (and thus earns a bigger payday) next year is pretty small. i mean, i guess he could save 50 games and have a 2.20 ERA, but he has a lot farther to fall than he does to climb.

that brings us to marc rzepczynski. he and the club are about $400k apart ($900k versus $1.3M), and it's hard to see a scenario where they don't work that out. (p.s., marc, you're no longer being paid in loonies, and you're not getting the high end of that scale.)

david freese is the interesting one of the two players still trying to settle his arbitration eligibility. he and the club are far, far apart. the club submitted a bid of $2.4m, and the player proposed $3.75m.

for what it's worth, MLBtraderumors.com does very good arbitration projections, and they think david should get about $2.6m. so, it seems on the surface, that the club has targeted freese's value very well. FWIW, MLBtraderumors also thinks rzepczynski should get $900k, exactly what the club is offering. they also projected exactly what mujica ultimately got ($3.2M) in his settlement, and were very close to boggs' settlement ($1.475M versus a projected $1.3M).

so, taking the mlbtraderumors numbers as reasonably authoritative, why is frees asking for more than a million above the best educated guess?

well, certainly a reasonable suspicion is that freese thinks he can bank on his intangible reputation of world series hero. the club risks looking petty if it takes the champion of Game 6 to a hearing over the money that matt holliday earns in the first two weeks of april.

i'm not sure that the arbitrator is likely to care; i don't have any data on how, if at all, arbitrators factor in post-season performance, especially of the spectacular variety or abstract ideas like "hometown hero" status. i suspect it's more likely that freese and his agent think that they'll prevail in this early negotiation period and the court of public opinion than in an arbitration hearing.

so, now we see whether the club is ready to play a game of PR chicken: the closer they get to the arbitration date, the more freese will fear that the club will call his bluff and go to a hearing. but, if you're the club, you have to wonder whether freese and his agent can cause you $1m in PR damage in the upcoming weeks, or whether it's worth it to play this out to a hearing.

my guess is that the club and freese will ultimately settle for something significantly above the projected $2.6M but nowhere near $3.75M: $3M? $3.1M? they won't play the full chicken with freese for the same reason they won't capitalize on his trade value and start matt carpenter at third base. he's worth more to the club than what he puts on the field. he's a club icon.

freese's arbitration is a somewhat unique case, different from the typical case where the club picks a number $200K less than what they think they should have to pay, and the player picks a number $200K more than he thinks the club should pay, and they settle on the number everybody thought they were going to pay in the first place. whatever happens, i think it will be interesting to see it play out. at least, as long as you're someone who cares about this kind of stuff.