As the cost of free agents continues to climb, the value of top MLB prospects rises

Imagine a team with a starting rotation of Dallas Keuchel, Sonny Gray, Jacob deGrom, Gerrit Cole, and Carlos Martinez, with Dellin Bentances and Ken Giles coming out of the bullpen. Imagine that same team has an outfield of A.J. Pollack, Kevin Kiermaier, and Mookie Betts, an infield of Miguel Sano, Joe Panik, Francisco Lindor, and Kris Bryant, with Stephen Vogt behind the plate...

Not only would that team have likely won something like 110 games last season, they would have had a payroll low enough to make even Jeffrey Loria blush. All of those players made basically the league minimum last year (roughly $550,000, prorated for how much time the player actually spends on an MLB roster), and most of the will make that again in 2016. There's no better deal for owners than pre-arbitration talent.

To get a sense of just how valuable that sort of talent is, the team at The Point of Pittsburgh have put together a fascinating study of how top prospects have performed over the last decade or so, and what sort of salary their production could have earned them on the open market, then compared that to what their production actually cost, more or less. The different between those two figures is surplus value.

For example, if Player A is going to provide $50 million worth of production over the next three years, at a cost of $20 million, while Player B is going to provide $60 million worth of production during that time, at a cost of $50 million, Player B is the better player, but Player A has a much higher surplus value to his team.

Surplus value exists for actual MLB players as well, not just prospects, but once a player reaches arbitration (generally after three full seasons in the big leagues), their surplus value tends to drop precipitously, and once they hit free agency, their surplus value is theoretically zero, and actually usually worse than that.

You can and should read their article in full to learn about the actual methodology, the sources for their data, and some changes they made to the system between last year and this. It's really good stuff, and there's far more of it than I'd republish here.

Here's some of the most notable information from their study, it's the present-day surplus value for top prospects, separated into separate tiers for hitters and pitchers, and for different places within the top 100 overall prospects:

• Hitters #1-10: $73.5M
• Hitters #11-25: $62.0M
• Hitters #26-50: $38.2M
• Hitters #51-75: $22.4M
• Hitters #76-100: $20.6M
• Pitchers #1-10: $69.9M
• Pitchers #11-25: $39.0M
• Pitchers #26-50: $29.8M
• Pitchers #51-75: $16.5M
• Pitchers #76-100: $15.6M

As you can see, position players have higher average surplus value than pitchers, mostly because top position-player prospects are almost certain to provide at least decent value, while pitchers are somewhat more likely to bust. The difference isn't massive though, and the bigger take away is that even near the bottom of the list, there's a ton of surplus value to be had. Near the top of the list, the surplus value is staggering, and helps convey why teams are loath to part with their top prospects.

Bradley Zimmer and Clint Frazier are both in that third tier of hitters, a group with close to $40 million in surplus value. Justus Sheffield and Brady Aiken can be found near the bottom of Baseball America's new rankings, giving them a surplus value a little above $15 million. Bobby Bradley is also found there, and as a hitter, his surplus value is a bit higher, just above $20 million.

A baseball team's goal should not be to simply trot out a roster with the greatest surplus value possible, because while the team I listed at the top would be a powerhouse, no team can actually assemble that much pre-arbitration talent, and a more realistic collection wouldn't be likely to finish with even a .500 record. Most of baseball's best players have reached arbitration or free agency, and have lower (if any) surplus value, but are needed if a team is going to contend. Teams with lower revenue streams need to develop as much surplus value as possible though, freeing up more of their limited funds for those better players. Another aspect of surplus value is surplus in a vacuum vs. surplus over existing options. If you already have a great catcher, a second great catcher doesn't do you very much good, even if that second catcher is an even better option in terms of surplus value in a vacuum.

There's a reasonable argument that the Indians should have been willing to part with someone like Frazier this offseason to improve their chances of winning in 2016 (because the team is expected to contend this year, making immediate wins somewhat more important than future wins), but if they were going to, they would have needed to get a lot of talent back in return.