Introducing Statistics: Replacement Level
Statistics do not exist in vacuum. They have meaning only in comparison to something else. While someone scoring 100 runs has some independent meaning, i.e. the player crossed home plate 100 times, that tells you nothing about whether 100 runs is good or bad. To determine that, you must have a point of comparison. This comparison is to what is called the reference group. In baseball, a number of different reference groups are used, but for today I want to focus on the replacement level reference group.
The concept of replacement level dates back to the introduction by Keith Woolner of the stat VORP (value over replacment player.) Replacement level is a measure of marginal utility. How much better is a player than the lowest level of players that will be paid by a major league team? That, in essence, is how much more valuable a player is than a replacement level player. To explain more, think back to the bell curve illustration from the post on Rivera and Lidge. If Albert Pujols is the best player in baseball, he is the far right end of the curve, all by himself. As you move back to the left, you find steadily more players at each equivalent amount of talent. At some point you run out of major league roster spots, but there are still large numbers of players of essentially equal ability fighting for those last spots. That pool of players, large numbers of whom play AAA baseball, are the replacement level players.
What does replacement level mean, in statistical terms? Woolner defined replacement level as 70 points of OPS less than the league average by position. That is, a replacement level shortstop is 70 points worse than the league average OPS of other shortstops. This controls for the fact that it is harder to play shortstop than first base. For pitchers, Woolner used 1.00 greater than the league average RA (Run Average, i.e. earned and unearned run average). He also controlled for park factors, to keep in mind the better offensive numbers of a replacement level third basemen in Coors Field than one in Petco Park.
So what? Who cares about the notion of replacement level? Think about how much a player is worth. A replacement level player, by definition, should be making the league minimum. They are not really a scarce resource, in baseball terms, as their supply greatly exceeds their demand. For that reason, they should only make $400,000, the league minimum. At each step above that, supply becomes scarcer, and compensation subsequently should increase. Further, replacement level explains how teams can increase productivity at the margins. The weakest players on a roster, as a rule, can be replaced by replacement level players, saving money and possibly increasing production. This is the central point of my criticism of the Griffey contract. At this stage of his career, Griffey is only a replacement level performer, yet he is being paid as someone much better. That is a waste of money and production.
The concept has morphed since Woolner first wrote about replacement level. Tom Tango created a scale of strict positional adjustments, in an attempt to quantify how much harder it is to find adequate shortstop play than it is to find adequate corner outfielders. Sean Smith added further support to this system by comparing the adjustments explicitly to expected contributions from the best players not on major league rosters. Where, then, does this get us in the end? Replacement level is key to calculating a variety of stats, most prominently Wins Above Replacement, which exists in numerous variations all across the internet. Replacement level, though interesting in itself, is most useful as a stepping stone to further considerations of production, compensation, and ability.