Sabermetrics Godfather Bill James coined the “Law of Competitive Balance” to explain the trend that teams that win in professional sports tend to slack off in the following year because team management doesn’t work as hard, resists taking risks to make the team better, and generally thinks defensively.

For example, Stros management reacted to the club’s playoff appearances in 2004-05 by rationalizing that “if we won with Ausmus and Everett in those seasons, then surely we can do it again next season.”

As a result, the Stros made minor changes to their roster over the past two seasons through free agency and continued a decade-long trend of failing to develop MLB-level players through their farm system.

The Stros’ decline over the last two seasons of the Biggio-Bagwell era (from 89-73 in 2005 to 73-89 in 2007) is powerful evidence of the validity of the Law of Competitive Balance.

Well, the chickens are really coming home to roost now as Baseball Prospectus has now deemed the Stros’ farm system to be the worst in Major League Baseball ($):

The worst farm system in baseball has no top-tier talent, but plenty of older prospects.

[On the top players in the Stros system under the age of 25]: The fact that Pence is the only other player [other than minor leaguers] to qualify for this list, and that he does so by a mere few days, speaks volumes about just how sad the state of affairs is in Houston.

The team’s recent drafts have been downright laughable, and its once-fruitful Venezuelan pipeline has dried up, as other organizations had passed the Astros in Latin America in terms of committing resources.

This is the worst organization in baseball, made even more dreadful by some early moves in the Ed Wade administration that merely upgrade the big-league squad from dreadful to bad.

The future is very grim in Space City.

Here is how BP rates the Stros prospects:

Five-Star Prospects: None
Four-Star Prospects: 1. J.R. Towles, C
Three-Star Prospects: 2. Felipe Paulino, RHP; 3. Bud Norris, RHP
Two-Star Prospects: 4. Brad James, RHP; 5. Josh Flores, OF; 6. Chad Reineke, RHP; 7. Mitch Einertson, OF; 8. Eli Iorg, OF; 9. Jordan Parraz, OF; 10. Sergio Perez, RHP; 11. Collin DeLome, OF

What’s particularly odd about all this is that the Stros built a consistent winner in the late 1990’s and early part of this decade through their farm system, by developing the Venezuelan pipeline of young players, and picking up productive college players.

But the Stros have drafted poorly this decade, which required the club to invest heavily in free agents to remain competitive. Not only is that approach expensive financially, it has had the additional impact of negatively affecting the Stros’ drafts of young talent.

In three of the last five drafts, the Stros have lost their first-round pick as free-agent compensation. Inasmuch as the Stros have generally not offered arbitration to their own free agents, the Stros only once during that period have received bonus choices of their own.

Meanwhile, the Stros have been unwilling to pay much over MLB’s “slot” recommendations for draft picks. Accordingly, the combination of few bonus choices, lack of first-round picks and financial conservatism culminated in a particularly awful 2007 draft.

As a result of the Carlos Lee and Woody Williams free agent signings, the Stros didn’t have a pick in the first two rounds of the 2007 draft.

Then, by electing not to offer arbitration to three of their own Type A free agents (Aubrey Huff, Andy Pettitte and Russ Springer), the Stros lost the opportunity to collect three first-round picks and three supplemental first-rounders as compensation.

The Stros thought they could sign their first two choices — third baseman Derek Dietrich (3rd round) and righthander Brett Eibner of The Woodands (4th round) — but the prospects ended up asking for more than “slot” money and wound up opting for college ball.

Consequently, the Stros spent just a tad under $1.6 million on the 2007 draft, which was $3.6 million below the average of the other 29 MLB teams.

Meanwhile, the Stros Venezuelan pipeline largely dried up after former general manager Tim Purpura fired Andres Reiner, the former director of the Stros’ Venezuelan scouting and development, who was instrumental in the Stros signing of Venequelan stars Bobby Abreu, Carlos Guillen, Richard Hidalgo and Johan Santana.

New Stros General Manager Ed Wade has reorganized the club’s scouting department and brought in former Brewers scout Bobby Heck to run it, but it’s far too early at this point to assess whether those moves will stem the downturn in the Stros’ farm system.

Frankly, absent a concerted effort to collect draft picks and do a better job of drafting players who are likely to opt for pro ball, I have my doubts that the Stros have done enough to turn around the decline in their farm system.

Given how bad it is currently, that’s a frightening thought for the future of the ballclub.