The movie "Moneyball" was a smash hit in 2012 and was nominated for best picture. The movie is based on the true story of the Oakland A's baseball team during its 2000–2002 seasons. The A's coach decided to try something different. He hired an economics graduate. Beane does this, and he drove the cost per win to about $100,000. Meanwhile, the New York Yankees had an enormous budget and their cost per win was about $1.4 million. What name do we give to "cost per win"? Suppose we think of each baseball player as a different input into the production of baseball wins. By looking for players that produce the most runs for a given cost, what equilibrium condition was Billy Beane trying to exploit?

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Efficiency or cost effectiveness are the two names one gives to “cost per win.” Moneyball, the 2011 film adapted from journalist/author Michael Lewis’s 2003 nonfiction book of the same title, is about former baseball player-turned-baseball executive Billy Beane’s innovative approach to managing a professional baseball team. As fans and nonfans alike know, discussions of that sport often revolve around the New York Yankees, the legendary and much admired and equally loathed franchise that almost defined the sport for many decades. Discussions of baseball legends invariably begin with Babe Ruth, Lou Gehrig, Whitey Ford, Mickey Mantle, Joe DiMaggio, Yogi Berra, and other Hall of Fame players who wore the Yankee pinstripes. Thanks in no small part to the sitcom “Seinfeld,” millions of people have an image of the late George Steinbrenner, long-time owner of the team who was notoriously brutal in his handling of personnel matters while spending astronomical sums of money to field the best teams imaginable. Lewis’s book, Moneyball, begins with the assumption common throughout professional sports that the deeper the owner’s pockets, the more talent he or she can sign to contracts. Lewis, however, devoted his book to an alternative approach to managing a professional sports team. Instead of focusing on the Yankees, he compares them unfavorably with the managerial success of Billy Beane.

Billy Beane was a student of statistic and metrics. To him, success was about fielding a winning team for the most appropriate amount of money. He wasn’t out to be cheap; rather, he used metrics to identify the most cost-effective players at each position. In other words, careful analyses of player performance could and would lead one to conclude that a less-expensive player could be more beneficial to an organization if properly utilized. This was the essence of “Moneyball,” and it was Beane’s enduring legacy to the game. Rather than spending enormous amounts of money to attract the biggest stars, he would identify individual, often little-known or underappreciated players that analytics suggested would provide, to apply the old nuclear weapons aphorism, “more bang for the buck.” At one point in the film the character of Beane, portrayed by Brad Pitt, rhetorically asks fictional colleague Peter Brand, “would you rather get one shot in the head or five in the chest and bleed to death?”

The Oakland A’s the team for which Beane was working, and it is what is known as a “small market team.” Cities like Oakland, Cleveland, Kansas City, and others lack the population and cachet of “large market teams” like those from New York and Los Angeles, the two largest cities and markets in the country. There was no way the A’s could compete with the Yankees on a purely financial basis. Beane understood that the key to success would be to be smarter than the other guy—an approach he believed would revolutionize the way teams are managed. In another exchange with Peter Brand, he says, “if we win, on our budget, with this team . . . we'll have changed the game. And that's what I want. I want it to mean something.”

Perhaps no character in the film better sums up Beane’s accomplishment of turning the A’s into a winning team for a fraction of the cost of what the Yankees were paying athletes, than John Henry, the owner of the Boston Red Sox, a “big market team,” who observes,

“For forty-one million, you built a playoff team. You lost Damon, Giambi, Isringhausen, Pena, and you won more games without them than you did with them. You won the exact same number of games that the Yankees won, but the Yankees spent one point four million per win and you paid two hundred and sixty thousand.”

Basically, then, Beane was applying cost-benefit analysis to baseball in a way no other manager or front office executive had before. The equilibrium condition that Beane was trying to exploit was the lack of financial success of players who had demonstrably proven, to those who bothered to look, that they could play the game well-enough to contribute to a winning record for a team. Big-name stars were not affordable to a small market team like Oakland. By applying metrics to each part, Beane was able to maximize the efficiency of the whole. Players complimented each other, as opposed to perhaps the most famous of Steinbrenner’s actions, the signing of Alex Rodriguez, a star shortstop for the Texas Rangers and the biggest free-agent signing of the time. The Yankees signed Rodriguez in 2007 to a contract paying him $275 million over ten years—an astronomical sum even today (although now eclipsed by Bryce Harper’s new contract with Philadelphia). Problem? Rodriguez was a shortstop, and the Yankees already had future Hall of Fame shortstop Derek Jeter. Rodriguez had to play third base, an out-of-position situation that can throw-off a player’s mental preparedness. Beane’s third baseman: Eric Chavez, hardly a household name but a good player who got the job done. In short, Beane put together a team that could be said to have been in a state of equilibrium, to the extent that principles of physics could apply to a baseball team. The pieces fit together; there was balance in the A’s universe.

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