How much is Theo worth?
LOST IN the midst of all the dark speculation about the relationship between Theo Epstein and Larry Lucchino is the fundamental question: How did a baseball GM come to command a salary upwards of $1.5 million? Just three years ago, after all, Epstein signed a contract that paid him $350,000 annually.
One GM, the Oakland A's Billy Beane, was offered $2.5 million a year back in 2002. Baseball's owners saw an A's team that went to the postseason three years in a row on a low payroll. What owner would not like to spend $50 million on a team and go to the postseason instead of spending $127 million (the Red Sox) or $202 million (the Yankees)?
Herein lies the answer to the puzzle. If a smart and innovative GM can produce a winning team and save the owner tens of millions of dollars, then, by inference, the GM is worth the money he saves the team. As player salaries have escalated since the advent of free agency from an average of $51,501 in 1976 to an average of nearly $2.5 million today, the potential for the GM to make a large financial contribution has grown commensurately. So, ironically, the more all GMs spend on players, the more a particular GM is potentially worth.
The trick, of course, is identifying what the incremental contribution is from an individual GM. The typical GM is supported by a large staff. Theo Epstein has been assisted within the Red Sox organization by Peter Woodfork, director of baseball operations, Jed Hoyer, his assistant, Ben Cherington, director of player development, Bill James, the doyen of statistical analysis of player performance, a stable of scouts, and many others. Theo's Sox have done well, but they have also spent handsomely for their success.
In theory, the GM helps to run this massive organization and ultimately makes the decisive choices, subject to the budget constraints and advice and consent of the owners. From the outside, we can observe that Theo Epstein was the GM when the Red Sox made the signing of the century in 2002, inking then free agent David Ortiz to a contract for $1.3 million a year -- and then signing him to a three-year extension at just over $5 million annually through the 2007 season.
But only on the inside do they know how large a role Theo played in these decisions. Epstein, of course, also presided over the signing of other very productive players, including Curt Schilling, Kevin Millar, Bill Mueller, Mike Timlin, and Keith Foulke. And some less productive players, such as Ramiro Mendoza, Jeremy Giambi, Mark Belhorn, and ball thief Doug Mientkiewicz, as well as the decision not to resign Pedro Martinez, and the failure to sign others, such as Jose Contreras.
Another issue is whether the good signings are based on a special ability to evaluate players or just good fortune. Even if a player has raw talent, it is a different matter to make the player perform up to his ability. The latter depends on chemistry in the clubhouse, the coaches, the manager, and the health of the player. Even if a GM can do a better job at spotting talent, only a lucky GM can divine how the intangibles will play out.
The Michael Lewis bestseller ''Moneyball" purported to lay out a scientific basis for Billy Beane's success in Oakland. Lewis argued that Beane had integrated the new statistical methodology of Bill James and the ''sabermetricians" to identify underappreciated (and, hence, cheap) players. This insight, the argument goes, enabled Beane to build winners with little money.
When ''Moneyball" was published, Beane's A's had gone to the postseason three years in a row. There must be something there, people thought. Left out of the Lewis tale was that the A's never got beyond the first round of the playoffs and that the team fundamentally owed its success to its superlative starting pitchers -- none of whom had been identified using sabermetric techniques. Today the Beane magic seems to have faded altogether: the A's did not make it to the postseason in either 2004 or 2005.
So Brian Cashman will earn $1.7 million a year with the Yankees, Theo Epstein rejected $1.5 million with the Sox, and Billy Beane passed up even more than that. Theo is a good man and the Sox are a good team. Both will land solidly on their feet.
Meanwhile, don't be surprised when you read about the next GM signing a multimillion-dollar contract. If corporate CEOs can take home tens of millions, who's to say that a baseball GM ain't worth it?
Andrew Zimbalist is a professor of economics at Smith College. His next book, ''In the Best Interests of Baseball?" will be published in March. 
