Are GMs overoptimistic in their signings?

Economist Steve Walters had an article recently on the Baltimore Orioles and "optimism bias," which you can read on the "Wages of Wins" blogsite.

Optimism Bias is the tendency of human beings, when considering a decision, to overweight the positive possibilities of the decision, while underweighting the negative ones. (Here's the Wikipedia definition.)

According to Walters, optimism bias is rampant in baseball:

"Economist John Burger and I have researched the baseball labor market, and (in a paper that will soon appear in the Southern Economics Journal) found that teams, on average, under-value consistency and over-value players who produce eye-catching but rare “big years,” resulting in considerable red ink."

This is very interesting stuff, and I'm excited about reading the paper when it comes out. For now, Walters argues that this bias is part of the reason the Orioles are in last place. He argues that the O's signed three relievers over the winter -- Danys Baez, Jamie Walker, and Chad Bradford -- and all three have had careers with lots of ups and downs. Orioles' management must have been seduced by these guys' good years, and ignored their bad years – optimism bias at work.

I'm puzzled by this. Admittedly, I don't follow the Orioles, but looking at their 2007 stats, it does seem that Walker and Bradford are doing pretty much what you'd have expected from their recent years. The third pitcher, Baez, is indeed a disappointment, but he's even worse than his worst year ever, so you can't argue that you should have been able to predict his collapse. And while his 2006 ERA was indeed much worse than his 2005, the difference in his basic stats appears to be only about six extra hits, which is partly compensated for by three fewer home runs.

My take is that while optimism bias might be a factor, you can't see it in these three signings. Unless there's something going on deeper than you can see in the stats ... as I said, I don't follow these guys much.