The Z Files: The Truth About Inflation

A comment I made in the discussion section of last week's Z Files proved a bit controversial. I was asked how I handle inflation in keeper league. My response was surprising to some. "Probably not the answer you want but I don't bother with calculating inflation." Based on some of the replies I thought I'd elaborate, as there's still plenty of keeper leagues yet to hold their 2017 auction.

For those not familiar with the concept, inflation refers to the dynamic resulting from players being retained from last season's squad at a price below that which they'd cost in a redraft league. For everyone to spend their entire budget, it's necessary to pay inflated prices relative to what the available players would go for in a one-year league.

Several years ago, someone who got an A in algebra in high school devised a formula to calculate keeper league inflation. This has become the industry standard, used far and wide. The problem is, it's wrong ditty, wrong, wrong, wrong.

Mathematically, it's fine. Practically speaking, it's useless.

Here's the conventional means to calculate inflation:

1. Sum up the prices of all keepers.
2. Sum up their projected value, as determined by an auction calculator customized to your league.
3. Determine the total amount of money to be spent by all the teams.
Inflation = (Step 3 – Step 1) / (Step 3 – Step 2)

Let's look at an example for a 12-team league with a $260 budget per team.

1. The sum of the keeper prices is $1000
2. Their projected value is $1500
3. There's 12 x $260 = $3120 budget to be spent, so (3120 – 1000) / (3120 – 1500) = 1.31

This league has 31 percent inflation. That is, every player needs to be purchased at 1.31 times their projected value for everyone to spend their entire $260.

The algebra is elegant. Except a $1 player is still a $1 player, not a $1.31 player. A $2 player inflates to $2.62, which rounds to $3. Anyone who's been in an auction, be it keeper or redraft, knows $2 and even $3 players sell in the end game for a buck. There are far more $1 bought than projected. For what it's worth, conventional valuation methods don't yield ample $1 players. This gets exaggerated in a keeper league setting.

Back when I wanted to come up with an alternate means of computing inflation, I proposed adjusting the conventional valuation process to account for inflation. Sparing the math, worst player in the draft-worthy pool is set to $1 with everyone else scaled up in proportion to their projected production. Exactly enough players to fill everyone's active roster are assigned a positive value with the total being equal to Step 3 above. My suggested method of determining inflation involved adjusting Step 3 by subtracting out Step 1. This reflects how much total money is available to be spent at the auction. This money is distributed among the available players, using the same valuation methodology you always use (SGP, PVM, Standard Deviation).

Again, the math works out perfectly. The remaining budget is allocated to exactly sufficient players so everyone fields a legal lineup. The worst player is $1, which is what he'll cost. The prices of the top end players are higher than what would be rendered using the linear inflation factor. From that perspective, my out-of-the-box means of setting inflated bid values is more practical than simply multiplying everyone by the same factor.

But it's still wrong ditty, wrong, wrong, wrong.

Everyone has their own agenda in a keeper league. Purchase prices follow no rhyme or reason. There will always be owners with a bevy of cheap keepers opting to spend whatever it takes to acquire the studs. They're not bound by so-called inflation prices. They feel they have the money so they spend it. In addition, in leagues with liberal dump-trading rules, there's usually someone entering the auction with an eye on the future, looking to buy studs to deal for cheap help for next season and beyond. This behavior can't be modeled. So why try?

I've written and talked about this previously with the usual obstinate retort being, "Well, I still want to have something to use as a guide." OK, whatever floats your boat. Your team, your call. I have a question for you, though. How often do you recalculate inflation? Yes, recalculate. If you care so much, you better be doing it after every purchase, because inflation literally changes as each player comes off the table.

As alluded to, the top available players will sell north of their so-called inflated prices, lowering the inflation factor. If you enter the auction with a set of adjusted bid prices based on a linear factor, or even the new-fangled Zola method, you won't buy any of the studs and will be in danger of chasing middle tier players to spend your funds. Further, your sheet gives you the false sense of security that you're doing the right thing, since the players will eventually sell for less than your cheat sheet prices. Remember, those prices assume the original inflation factor. Using the 31 percent above, by the time the studs are all auctioned, the inflation drops considerably since most sold for much more than the suggested inflation-adjusted price.

In the spirit of "don't come to me with a problem, find a solution", here's how I handle keeper league inflation. One of the biggest mistakes in keeper leagues is a reticence to freeze higher-salaried players. I'd much rather carry over a few top players than get in bidding wars with the drunken sailors. Sure, this precludes me from acquiring the upper-echelon talent, but I'm also not giving back my built-in potential profit by overspending at the top. I'll be patient, waiting for the auction to level off or even enter a deflated phase before spending my money. I froze my foundation, I don't have to buy it.

That said, it doesn't always work out that way. If I have a decent amount of money to spend, I'll figure out my likely purchases in the middle to latter part of the proceedings and target something else early. Perhaps the middle tier of starting pitching is largely kept, I'll spend on a top-end hurler. Or maybe, there's limited speed available so the only way to get it is to buy it.

Even if I have the money, it's still best to spend it wisely. Keeper leagues aren't won at the auction; they're won with the best present-for-future trades. If your league uses an in-season salary cap, leaving money on the table isn't a big deal as that avails more space to take on salary. Instead of paying $60 for Mike Trout, deal for him instead, facilitated by having more cap space than others.

For me, the bottom line is instead of undertaking a mathematical exercise generating numbers that end up being moot, I'd prefer to spend the time researching the available player pool along with the tendencies of my league mates. Your team, your call.