Dump trades and free markets

As an American, I take free markets as seriously as apple pie and baseball. Though some treat free markets dogmatically and think they’re always better than the alternatives, most of us prefer to think of markets (free or not) as a means to some ends. What really matters to us is whether we get the health care, the cars, the television shows that we want (loosely speaking). Often times we think that a free market is the best way (or at least just as good as any other way) to ensure that people get what they want. Just as often, we recognize that at least some regulation makes society better—think of anti-trust protections against monopolies.

When it comes to fantasy baseball, there are many commentators and experts that despise the trade veto. They say (paraphrasing), “If two consenting adults think that a trade makes each of them better off, who are we to impose our judgment? Variety in tastes and in player forecasts makes fantasy baseball fun and interesting. Vive la free market.” By and large, they are correct. But of course, nobody argues for a completely free market. Everyone, for instance, thinks that a trade should be blocked if two teams collude to enable one team to win.

In other words, we all believe that some regulation in fantasy baseball is good, the question is really just how much. Whereas most believe a trade should be blocked only in the case of collusion or cheating, I believe that there are other (albeit rare) trades that can be rightfully blocked. Dump trades, where a team that is not going to win this year trades its high value players for good keepers, are prime candidates for the veto.

Let’s first dispel a myth: a trade between two players is not like consensual activity in the bedroom in the privacy of one’s own house. A trade always affects the competitive balance of the entire league (even if only slightly). If a trade totally upsets the balance of the league, a veto may be warranted. Sometimes free markets hurt competition (an economist would say there are externalities in trading market).

Now let’s go through some trade scenarios where no one is cheating but a veto could be appropriate.

An owner (let’s call him Ralph Wiggum) is new to the league. The first week after the draft, Ralph decides that he doesn’t have his favorite player on his team. He trades Albert Pujols and Ryan Howard to Bart’s team in order to get Carlos Beltran. Why a veto is warranted: This trade is clearly one-sided and it is seems like Ralph isn’t playing to win. It would make the league much less competitive if the trade were to go through.

A team decides to play for next year. Your league only allows one player with rookie eligibility to be kept. The team trades all of his best players to one of the leading teams in exchange for Chris Tillman, the player that this team thinks is the best rookie.

Why a veto is warranted: In this case, since the team is out of it, the owner is willing to pay any price to get the best keeper. If that owner wants Tillman, there is no offer from any other team (besides the one that owns Tillman) that could compete. Why not give up Pujols and Hanley Ramirez to get Tillman? But this dump trade makes the league much less competitive this year. Obviously, the problem here is the keeper rule (more on that in another article), but rather than try and change a faulty keeper rule mid-season, it may just be better to block these kinds of trades.

OK. So all trades change the competitive balance and some extreme ones clearly distort it so much that a veto is called for. But how much is too much? This is a judgment call. Like many others, I would err on the liberal side and be inclined to allow the trade unless it is grotesque. Nevertheless, these kinds of trades are proposed in leagues and they can ruin a beautiful season.

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  1. Jonathan said...

    Honkbal –
    I would definitely say that the veto shouldn’t and wouldn’t be used nearly as often in leagues where the owners have been playing together for years and they have settled norms on what the rules (both written and unwritten) are.

  2. Greg Pattreson said...

    I agree with Honkbal. We have similar rules, and have taken it a step further with an 8-man minor league roster.

    This keeps things interesting all year, we have trading all year except late August until the World Series is over.

    This time of year, we’ve had heavy trading this week as all the high priced players gravitate towards the contenders while the lower teams stock up on prospects….kind of like what happens in real life such as yesterday.

    The trick is to gain players to help you this year, while maintaining your pipeline, sort of like the Phillies did in the Lee trade.

    …and if someone had Albert and Hanley and they were totally out of contention, they should be playing in a competitive league in the first place.

  3. Andrew said...

    I disagree that the Pujols an Howard for Beltran trade should be vetoed. While obviously terribly one-sided, again we all value players differently and have various needs as the season progresses. There are instances, for instance, in which trading Pujols and Howard for Jacoby Ellsbury or perhaps for Fernando Rodney might actually benefit a team substantially.

  4. digglahhh said...

    This is one of the most often discussed issues with fantasy baseball. The ideal situation is to develop a consistent and knowledgeable group of GMs to play with on a yearly basis. I mention this only because I want to note that these types of articles may be slightly less relevant to the THT readership because I assume it is comprised largely of experienced, knowledgeable fantasy players who seek out competitive leagues with competent opponents.

    First of all, fantasy baseball is much like poker in the sense that if you aren’t playing for money, you aren’t actually playing. The constructs of the competition must be built so that it is in your maximum interest to play the game seriously, take risks only after you’ve calculated them, and have a disincentive to lose. Quite simply, you can institute financial penalties for finishing in last place. That doesn’t preclude anybody from rebuilding, but it sets the tone for what will and will not be tolerated. There are certainly ways to dissuade reckless behavior.

    If you have somebody trading Pujols and Howard for Beltran, then a veto is warranted. But a far better solution, since you obviously care enough to lodge a veto vote, would be to find a new league! And that is really the crux of this situation; the league must be structured in a way that promotes healthy competition and competitive balance. This means determining keeper rules that don’t promote swapping multiple top 50 players for a prospect. It means setting an entry fee and pay scale that enables you to motivate with both “carrots” and “sticks.” It means recruiting participants with similar levels of knowledge and dedication. Being a good commish actually entails considerably more than the casual player realizes.
    Every year before my main league, the GMs meet (mostly in person, some we just put on speaker phone).  We run our league in four-year cycles. Keeper rules expand and entry fees increase yearly. The idea is both to reward well-performing GMs by allowing them to retain a core of players and build a dynasty, but also allow teams to rebuild, and ensure that next year’s championship is always more lucrative than this year’s.  Every fifth year, we re-draft and level the playing field once again. We have an annual offseason meetings where we discuss, propose , and vote on any amendments to the rules. Our commish actually happens to be a lawyer, so we write up an informal contract and all sign. Some think it’s grandiose, but it’s been working for us since “wait until they call up that Mark Prior kid…”

    We still allow vetoes, but the bar is set high. A simple majority of the non-involved GMs is not enough to get a veto through. It’s like Congress overriding the prez; it’s gotta be two thirds.

  5. digglahhh said...

    Really, Andrew?

    Explain to me such a situation.

    …and before you do, you have to also explain why:

    it wouldn’t benefit the owner more to trade that package for a different set of players that gives him more of whatever he needs from Beltran

    the owner wouldn’t be able to acquire Beltran for far less.

    Maybe the owner already has Jose Reyes at SS and Albert Pujols at 1b, right? Maybe Howard is on his bench? I mean, this is the strawman of all straw men. Thomas Friedman is that you?

    I mean, at least construct a reasonable example if you are going to create a strawman. Other than playing a different position, there is nothing Beltran brings to the table over Ramirez and Howard; there’s no way to net gain. Now, if you said Carl Crawford, or Tim Lincecum, or Jonathan Broxton, you’d still have to explain the caveats above, but at least one could consider the possibility that the owner has insurmountable leads in several offensive categories and needs to make up ground in pitching categories, or has a ton of extra power and just needs more speed.

  6. digglahhh said...

    Re-reading your post, I see you subbed Ellsbury for Beltran in your hypothetical, satisfying the differing skill sets requirement, but price is still an inherent element of fairness.

    I need electricity to run my computer. Con Ed decides to charge me $2,000 dollars a month. I need my computer to work, so I have to pay it. Is this a fair transaction because I benefit (by being able to work) and Con Ed does, by getting crazy paid? Even if I make A-Rod money (not to be confused with Busta Rhymes making A-rab money) and can afford 2K like nothing, that doesn’t make the transaction any more “fair.” in any remotely objective sense of the word.

  7. Andrew said...

    I can’t explain away either point that you would like me to argue.

    Look, as THT readers, none of us are in leagues in which a trade like that would take place. Still, it is my opinion that if an owner negotiated well enough that he was able to get Pujols and Howard for Beltran, then all the power to him. The owner receiving Beltran is unlikely to last long in that league, unless he’s fine with losing money on an annual basis.

    Now, I do feel that that sort of trade would have to be looked into for possible collusion. If I felt that no collusion was at play, though, then that trade would have to be processed in my mind.

    Also, yeah, you pretty much got at why I chose to provide Ellsbury and Rodney as examples. Maybe with Pujols and Howard, the owner is already way up in all of the offensive categories except home runs. So a trade of that pair for a Crawford or Ellsbury could be all it takes to wrap up first place, making for a good trade for that owner. But yes, certainly that owner should have been able to get more.

    At any rate, my keeper league uses the best policy that I have come across when it comes to dump trades, an Open Market policy.

    Taking from the Constitution, “In the event of a dump trade, the pending deal will be put forth in front of the league for 48 hours. During that period, the rebuilding team will be able to negotiate with other owners so as to make the best deal possible for his team. Each owner is allowed to make up to 5 counter-offers to the rebuilding owner.”

    This policy has gone a long way toward avoiding collusion and hard feelings in our keeper league. There is no way to complain about a dump trade in our league.

  8. Mike Podhorzer said...

    To be honest, I think the ultimate solution is just to try your very best to get good owners. A good owner wouldn’t be dumb enough to make any of those trades.

    I honestly would still have a hard time vetoing any of those trades, especially the Tillman one. He has a clear strategy, whether he needed to give up that much value or not is moot. Obviously this owner is a moron, but that is something that needs to be found out before he is invited into the league!

    You can’t make rules to protect your league from foolish owners making stupid trades, but you can screen potential new owners to ensure they don’t end up in your league to begin with.

  9. digglahhh said...

    Yes. Prevention is a better and cheaper strategy for preservation than is cure.

    But, I still question whether the Tillman owner “having a strategy” is a sufficient criterion to preclude regulatory action.

    To make a grandiose analogy, those recklessly dealing with credit default swaps “had a strategy” and a rationale as well. Those who decided against regulating such market transactions also had a strategy and rationale for doing so. In the end we, the externalities, got kicked in the collective groin for it. I’m certainly open to regulating the market in a league where there is a high degree of variance in owner savvy. I’m less of an idealouge in that sense and more of a pragmatist; I’d say the trades should be evaluated individually on their own merits. Protecting the non-involved parties is more important than protecting the sucker.

    Again, I’m more a STRONG proponent of a well structured league with a fair amount of parity among owner experience and skill. Once you do that, you can pretty much set things on auto-pilot, everybody has a track record which speaks for the owner’s competence, and that gives them greater latitude to take greater risks or make more counterintuitive moves without upsetting the watchdog.

    At times, we’ve also had an independent party who we used as an arbiter to rule on the fairness of certain trades. That’s another tool leagues can use, provded the participants can agree on a person to serve as such.

  10. Jonathan said...

    As a THT writer, I do play in some very good leagues with skilled owners. One such league does have a keeper rule that is only slightly different than the one I characterized in the second example: a team can keep one or two high value players each year in place of their first draft picks.  So, unless you have the first round pick, Pujols would be a great keeper. If I’m an owner way out of the money this year, I would definitely try and trade my entire team (Teixeira, M. Cabrera, Granderson, etc…) for Pujols.
    This kind of trade would make the other team a prohibitive favorite for this year.  The league would have 2 choices: rule out these kinds of trades with vetos or entirely change the keeper rules (or just accept that the winner each year is going to be the team that can pull this whopper off).

  11. Honkbal said...

    In our auction standard 5×5 keeper league we have battled this problem for years.

    We buy in completely to the rule “only veto if there is collusion”. 

    In the example where someone trades multiple great players for a great rookie (cheap player) we don’t see anything wrong with that.  One strategy is to have great keepers that you can trade if you are one of the leaders.  This is not so unlike MLB (think Pirates).

    This can get out of hand so we have established a salary cap.  This allows one or two lopsided trades but still allows another team to give up some keepers and stay competitive. 

    This benefits all teams.  It is no fun when you are out of it.  The only thing keeping your interest is next year.  Now with great keepers you are still interested.  These kinds of trades help both teams.  One it helps this year and one it helps next year.

  12. Love Em said...

    as a player in mostly public leagues, I will veto a trade solely for competitive reasons,i.e. being in 1st by a few points.. but in my long-term private leagues..I exercise the veto rarely. That is the nature of Fantasy…and the Internet..generally, if you have to face people day by day you won’t be nearly as cocksure as in some anonymous far-away place like the ‘net

  13. KY said...

    Here’s the rub.  Say you do have veto power in your league.  You veto my dump trade.  Why wouldn’t I just put through another slightly less dumpy trade?  If that gets rejected I make it slightly less, until there comes the point where it passes.

    Either you league has to allow dump trades and live with the fact that, once out of it, every team in the league should logically seek to sell every non keepable player it has for something that will be keepable. 

    OR, do what you league does and disallow the freezing of traded players.  This is the only thing that can stop a dump from making sense. 

    If there is even a slight bit to be gained in the dump, any team who is not going to win should logically go after that slight gain for next year, without that rule.

  14. Dullboy said...

    @ Love Em

    Why differentiate between public leagues and those where you know all the participants? This is the attitude that absolutely kills me when it comes to public leagues. At this time of year, you’re lucky to have 3 or 4 active managers who will typically occupy the top spots. God forbid you try to improve your 7th place team by trading to the 3rd place guy. Instant veto, just for the sake of preserving your spot.

  15. Furtah said...

    We have a keeper league going on its 8th year.  Most of the owners come back each year (maybe 1 or 2 new each year).  We have a $260 cap and can keep as many players as you want up to $90 each year.  I had won 5 years in a row before this year.  I did my best until ~ the all star break, but I was still in 11th place (out of 12).  I’ve since made the following dump trades;

    Give Howard $36/Manny $30 for A Gonzo $22/Choo $5, Give Tulo $12/Ellsbury $20/B Wilson $12 for Ad Jones $4/Bard $5 and give J Vazquez $16 for Scherzer $8.

    I think I’ve done a pretty good job of not giving up many stars for one or two keepers, but nevertheless they are dump trades and I’ve helped guys in 3-4th place and made my team better for next year.  What do you think of these?  Would you veto them? 

    I’ve also offered B Phillips $24/A Ramirez $26 and AJ Burnett $13 for J Upton $5, but the owner (in 3rd place) has declined because upton is such a good keeper (I think he’s crazy but…).

  16. KY said...

    What if you have one dump trade to offer, you’ve got three decent guys.  You could sell them to the 3rd place owner or the 2nd place owner, both of which have an equal prospect to offer.  You’d probably sell to they guy you wanted to win more.  Dump trade can also lead to playing favorites because the dumping team doesn’t really have much at stake.

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