Major League Baseball is a prime example of the effects of an almost completely free market economy. The gap between Major League Baseball's highest spending teams and lowest spending teams is ever expanding. The Los Angeles Dodgers, the team with the largest team salary, currently has a payroll that is 650% larger than the Tampa Bay Rays, the team with the lowest team salary. The Dodgers won their division and made it to the playoffs whereas the Rays finished with a record below .500 and finished fourth in their division. When the Dodgers have a weakness on their team they are able to go out and buy the top free agents available for that weakness, and the Rays do not have that same luxury. This is only one example, but it is similar to a trend that affects the entirety of Major League Baseball.
The MLB is the most lenient organization out of the four major American sports leagues (NHL, MLB, NFL, NBA) when it comes to regulating team finances. Professional leagues implement a tool called a salary cap, which limits how much money a team is allowed to spend on all of their players' salaries combined. There are two main types of salary caps: the hard cap and the soft cap. The hard cap does not allow any team to go over a league-wide overall payroll under any exception, whereas a soft cap allows teams to go over the limit, but they will be charged with a hefty fee known as a luxury tax. The NFL and the NHL implement hard caps on salary, and the MLB and NBA use soft caps. There is still a difference between team finances when comparing the MLB and the NBA though. The NBA luxury tax is an extremely hefty fee that deters almost every team on a consistent year by year basis, minus a few outliers that will go over the limit on one or two seasons to give their team that extra push. On the other hand, the MLB luxury tax is still a considerable fee, but it's not strong enough to deter a team like the Dodgers. There are currently two teams in Major League Baseball that are above the soft cap, and thats the Dodgers and the Yankees, both of which are in the largest markets in America.
The major issue within the financial side of baseball is the extreme disparity between the high spending teams and the low spending teams. Teams like the Tampa Bay Rays do not generate enough revenue to keep up with teams like the Dodgers due to their small market status in a city with a smaller population. There are not enough people in Tampa Bay to support the team on the same level as the Dodgers have in Los Angeles, even if they have a strong number of dedicated fans that love the team. The Rays organization is not able to go out into the market and sign the best players to ludicrously expensive contracts. Instead they have to draft players, develop them, and use them for a limited amount of time before they become free agents and join teams like the Dodgers. That process takes years to fully accomplish, and it's a gamble because usually prospects do not pan out into successful players in the MLB. An example of a team that didn't get lucky with their players is the Kansas City Royals. They are a small market team, like the Rays, and had a streak from 1986 until 2013 where they did not make the playoffs a single time. Their fans suffered through 28 seasons of losing teams, all because their team didn't have enough money to keep up with the big market teams across the rest of the league.
The sad truth is that teams in low market economies like Tampa Bay and Kansas City will never have as much money as teams in cities like Los Angeles or New York. The issue is that the front office of Major League Baseball does not do enough to help those small market teams be equally successful. Sometimes it does work out; for example the Kansas City Royals won the 2015 World Series, defeating the New York Mets who are in a big market economy. The Mets do not spend as much money as they should being in New York City, but that's besides the point and a story for another time. Major League Baseball needs to be more creative in their support of small market teams, like the NBA is. It's not a coincidence that a team like the Yankees dominate the rest of the sport when it comes to total amounts of championships won. The NBA uses rules that help their smaller market teams retain their stars and play on a competitive level that is equal to major market teams. If the Tampa Bay Rays had that same luxury then they would be a much better team then they are now.
Unfortunately, Major League Baseball has always been an organization that supports a more free market for their teams, and it does not look like there are any signs of change. If teams were able to compete on a fair playing field that would strengthen the game of baseball. Every team would have a chance to win The World Series, and it would allow for more competition on a league-wide basis. If only the front office of Major League Baseball could realize this, the sport would benefit immensly.
