So what does it mean?

We are dealing with something perhaps mentioned in economic textbooks but rarely encountered in real life: an entity with infinite financial resources. Not literally, of course, but when the Yankees are willing and able to spend twice as much as any other team, the practical differences between the hypothetical and the reality are slight. And where the Yanks formerly had advantages over other teams in brainpower and a deep farm system, those have, respectively, eroded (due to the spread of Beane-ball-think) and withered away to nothingness (thanks to trades and bad drafting). So the Yankees have had to rely on their financial advantages more than ever. Fortunately for them, the current marketplace is presenting unique benefits to such financial advantages.

The A-Rod deal exposes certain ramifications of the Yankees' exclusive financial status:

1) A year ago, Will Carroll wrote that as other teams learned not to throw millions of dollars at relievers, non-star regulars and other unworthies, the Yankees' financial dominance would cease to be a competitive advantage and might even begin to work against them. (He wrote this in the Yankees' 2003 "Team Health Report" for Baseball Prospectus; I'd link to the piece, which you wouldn't be able to read anyway without a subscription, if BP's website archives had been updated since the beginning of 2003. Guys?)

It sounded plausible, and may yet prove accurate in the long term. But in the short term, the effect of the Yankees' financial exclusivity has been exactly the opposite of what Carroll predicted. As his BP colleague Joe Sheehan pointed out even before the A-Rod deal:

The willingness the Yankees have to assume contracts is such a huge advantage over just about every other team in baseball that any hole that develops, they can probably fill. It actually doesn't matter. If George Steinbrenner decides he wants to go out and assume a contract, he can fill a hole, even if Jeter goes down, Soriano, Posada, the Lofton/Williams platoon in centerfield. I honestly think that we may be seeing a perpetual success machine... I now realize money simply isn't going to be an object. With so many teams willing to give up contracts regardless of the talent they get back, the Yankees are in a great position.

In a market that is a) deflationary and b) characterized by teams that are unwilling/unable to spend money on players, there is no shortage of contracts that seemed reasonable when signed, and where the players are actually delivering value, but the teams nevertheless are looking to dump (or, in the case of free agents, feel unable to pay in the first place). In that market, the team free of such financial constraints is king.

And if the Yankees really have no financial constraints, then financial efficiency becomes irrelevant - value added on the field is the only concern.

2) The problem with building a team solely through free agents has nothing to do with "chemistry" or some other virtuous benefit imparted via the farm system. The problem is that historically, most players who hit the free-agent market are on the downside of their careers, and thus are unlikely to be valuable parts of a championship team several years after their signing. And historically, star players in or approaching their prime are rarely available via trade.

But things change. What if, due to financial straits (self-imposed or otherwise), stars in or approaching their prime are widely available via trade or free agency to anyone willing to pay the freight? From the a) perspective of a team that has the wherewithal to acquire such players and b) needs to win now due to existing age concerns, which is a riskier strategy - trying to develop new stars through the farm system, with the according uncertainty risks, or acquire those players who are already stars yet are likely to retain their value? The Yankees have turned their only good young players into...players who are just about as young (exactly so, in the A-Rod / Soriano case), but much better. And Vlad the 28-Year-Old-Impaler was also available.

A commenter on Baseball Crank opined that "it's as if Steinbrenner uses the majors as his own farm teams." That's exactly right. Another way of putting it is that the Yankees are outsourcing player development to the other teams - they're letting those teams take the risks of developing stars in the belief that they can obtain such stars, once developed, at less risk.

No, I don't like it either. But I can't say it's irrational, given the system and the Yankees' current needs. (And one could also blame the unwillingness of other clubs to spend past the luxury tax threshhold. But I digress.) And more importantly, it might even work (as Sheehan pointed out). Bill James famously compared the Yankees of the late 80s to a team on a treadmill, constantly buying short-term solutions due to their inability to produce younger replacements from the farm system (or to trust the potential replacements that were produced). Most people assume the problem was in the buying itself, but the real issue was with the products bought. If the Yankees can buy stars aged 26-28 rather than 33-35, the war with the treadmill may be won. I'm still skeptical for the long term, but hope to be proven wrong.