In his 2003 book Moneyball, financial reporter Michael Lewis made a striking claim: the valuation of skills in the market for baseball players was grossly inefficient. The discrepancy was so large that when the Oakland Athletics hired an unlikely management group consisting of Billy Beane, a former player with mediocre talent, and two quantitative analysts, the team was able to exploit this inefficiency and outproduce most of the competition, while operating on a shoestring budget.The publication of Moneyball triggered a firestorm of criticism from baseball insiders (Lewis, 2004), and it raised the eyebrows of many economists as well. Basic price theory implies a tight correspondence between pay and productivity when markets are competitive and rich in information, as would seem to be the case in baseball. The market for baseball players receives daily attention from the print and broadcast media, along with periodic in-depth analysis from lifelong baseball experts and academic economists. Indeed, a case can be made that more is known about pay and quantified performance in this market than in any other labor market in the American economy.In this paper, we test the central portion of Lewis's (2003) argument with elementary econometric tools and confirm his claims. In particular, we find that hitters' salaries during this period did not accurately reflect the contribution of various batting skills to winning games. This inefficiency was sufficiently large that knowledge of its existence, and the ability to exploit it, enabled the Oakland Athletics to gain a substantial advantage over their competition. Further, we find
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