What The Dodgers Missed Out On: The Value of Draft Picks

The Dodgers declined arbitration today to Randy Wolf and Orlando Hudson, along with their five Type B free agents as well.  As a result, the Dodgers won't get any compensation if these players sign elsewhere.  The Dodgers will probably claim there was too big a risk that Wolf and/or Hudson would accept arbitration, even though:

  • Wolf is the second-best starting pitcher on the free agent market, behind John Lackey.  He would have received multiple multi-year offers whether or not he was wearing a scarlet Type A on his chest
  • Hudson is still steamed at his benching in September and October, and didn't want to come back

I think the overwhelming likelihood, especially in the case of Wolf, was that both players would decline arbitration.  Apparently the Dodgers didn't think that.  But, for now, I'm concerned at just what the Dodgers missed out on in terms of compensation.

If the Dodgers would have offered arbitration to either Wolf or Hudson, they would have received two draft picks as compensation had they signed elsewhere.  One pick would be a first rounder, if the signing team had one of the best 15 records in 2009, or a second round pick if the signing team had one of the worst 15 records in 2009.  The other compensation pick would be a supplemental pick between the first and second rounds.  So, if the Dodgers offered arbitration to both players, they could have possibly had four extra picks in the first two rounds of the 2010 draft.

The real question is figuring out just what those draft picks are worth.  Earlier, courtesy of Jay Jaffe, we pointed to a study from four years ago by Baseball Prospectus which showed that, on average, a team losing a Type A free agent is compensated with $12 million worth of draft picks.  Is that value the same today?  I don't know, but the value of those picks would have to drop quite a bit in order to make the signing bonuses -- likely between $1-2 million each -- not worth it.

I wanted to look at it a different way.  I decided to use Wins Above Replacement (WAR), available on Fangraphs, just as a quick way to identify the best players in baseball.  In 2009, Randy Wolf provided 3.0 WAR and Orlando Hudson provided 2.9 WAR to the Dodgers, so I used 3.0 WAR as the cutoff.  In 2009, there were 124 players in MLB that had 3.0 WAR or higher.  Now, where did these players come from?

Almost a quarter of  the players -- 30 of the 124 -- were drafted in the first 16 picks of the draft.  That's a good cutoff point since the top 16 picks of the 2010 draft are protected from compensation, so the Dodgers wouldn't get those picks anyway.  The types of picks we are concerned with start with #17 and go through the end of the second round.  Another near quarter of the top players in baseball -- 29 out of 124, 23.4% -- were drafted in picks 17 through the end of the second round, the very types of picks the Dodgers could have received as compensation if they weren't so risk averse.

3.0 WAR Players 2009
Draft Picks No
1st (1-16) 30
1st-2nd (17-75)   29
3rd-4th 11
5th-6th 7
7th-8th 4
9th-10th 1
11th-12th 1
13th-14th 3
15th-16th 2
17th-18th 2
19th-20th 1
21st-25th 5
26th-30th 2
31st + 4
International 22
Total 124

Don't get me wrong; the draft is no exact science.  There are far more misses than hits.  But, it seems to me trying to accumulate as many picks in the first two rounds as possible would be a good way to add talent to the roster.

Today, the Dodgers missed a chance to do just that.

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