It's the post-season, and once again the Yankees and the Red Sox are in the playoffs. Here's a very simple reason why: There are too few baseball teams in New York and Boston relative to the size of the local economies. As a result, New York and Boston teams have access to more economic resources than anyone else. The conclusion: If baseball wants competitive balance, the best way is to add an extra team in NY and Boston.

My reasoning is simple. The economic resources potentially available to a baseball team depends on the size of the local economy, and the number of baseball teams in the area. In cities with two teams, the economic resources have to be shared (this updates an analysis that I did in 2002 in BusinessWeek).

Take a look at this table. The first column reports the 2003 personal income, in billions, for each local area with a baseball team. The second column reports the 2003 personal income per team...that is, for cities with two teams, we divide the first number in half (the data is based on BEA economic areas).

Local personal income, 2003
Area billions billions per team
New York (2) 926 463
Boston 315 315
Los Angeles (2) 590 295
Philadelphia 245 245
Detroit 234 234
Dallas 226 226
Atlanta 203 203
Houston 196 196
Miami 195 195
San Francisco (2)* 376 188
Chicago (2) 355 178
Washington-Baltimore (2) 348 174
Minneapolis 171 171
Seattle 157 157
Cleveland 141 141
Denver 134 134
Phoenix 116 116
St. Louis 105 105
San Diego 105 105
Pittsburgh 93 93
Kansas City 77 77
Milwaukee 76 76
Tampa 76 76
Cincinnati 72 72
*Includes Oakland and San Jose

The cities which jump out, as having the highest personal income per team, are New York and Boston. New York has a local economy nearly 60% larger than LA's, with the same number of teams. And Boston has only the sixth largest local economy--but the five larger economies support two teams, while Boston only has one.

On economic grounds there absolutely should be a third baseball team in the New York area, as was true until the Dodgers and the Giants left. With three teams in the New York area, personal income per team would still be ahead of almost everyone, but the difference would no longer be so enormous.

The case for an extra team is less clearcut for Boston, where an extra team would push personal income per team into the lower half of the distribution. Still, it's probably a good idea.

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