Economics Professor Advises MLB Teams

Economics professor Steve Walters has served as consultant to three MLB teams

By Magazine Staff  |  Wrigley photo by Nicole Potts

Dan Duquette had his sights on Bret Boone. General manager of the Red Sox, Duquette wanted to sign the second baseman as a free agent in 2002. One of his consultants, however, argued that another player would be a better investment.

“My big single achievement was convincing them to sign Johnny Damon,” said Steve Walters, Ph.D., professor of economics. The Red Sox signed Johnny Damon and—two years later—the team won the World Series.

Walters can’t—and won’t—take full credit for that decision. “It was the work of many hands, obviously,” he said. But as a lifelong Red Sox fan from Salem, Mass., Walters relished watching his team claim its first championship in 86 years and knowing his insight might have played a role in the victory.

After all, Walters’ suggestion was more than a lucky guess. As a consultant now serving his third Major League Baseball team, Walters has offered player valuation and other economic guidance to the organizations signing the players. “In the language of the front office, it’s putting a dollar on the muscle.”

Walters, who has taught at Loyola since 1981, started doing research on the economics of baseball in 1999, applying microeconomic rules to baseball and particularly to its labor market.

“Basically at some point mid-career you decide that you need to change what you’re researching and make the research more fun,” he said. From time to time, he sent his published research to teams suggesting they might be able to use the insight. For a couple of years, he just “kibitzed” with a few team officials. Then in the midst of a disappointing 2001 season, Duquette called and said, “We have to work together.”

At times, convincing a team not to sign a player is challenging. “An economist can throw some cold water on you and say, ‘He’s not worth it,’” Walters said.

Without even meeting a player, Walters can look at a player’s statistics and market information and calculate whether the player will generate more in revenue than the salary he is demanding. “The Yankees are paying Alex Rodriguez $32 million to play, and in that market, it’s so big and so rich I could believe that a player of that caliber could generate that revenue,” he said.

Just because Walters is hired as a consultant, however, does not mean the team will take his advice. “This is a funny industry and they do like to hear from divergent points of view, but they have a bunch of different advisors, and weigh things differently depending on the values that they have and the chances they want to take,” he said. “Sometimes I’ve counseled against signing particular players at a particular price, but the team says, ‘We’re this close. We’re going to do it.’ They ask opinions, but sometimes they want to roll the dice.”

Walters points out that any baseball organization could apply his research using
his published economic model, developed with John Burger, Ph.D., associate professor of economics.

Since his time with the Red Sox, Walters also served as a consultant for the Baltimore Orioles. He is now in his second year as economic advisor to the Chicago Cubs, a team that hasn’t won a World Series in 102 years, though his contract with them doesn’t permit him to discuss details of his work.

Although Walters calls his baseball research “a hobby,” he acknowledges that it does tie in with his primary research, which focuses on city revitalization.

“Contributing to success on a field has a big impact on a city’s morale,” he said. “You saw what happened in Boston. People were deliriously happy. Just imagine what will happen in Chicago when the Cubbies break through.”

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