The Yankees first used numbers on their jerseys to reflect their batting order. I don't know exactly when they started, probably during the Gehrig/Ruth years.
According to Baseball Almanac.com, the Indians were the first to use numbers. They were experimenting with numbers and on 16 April, 1929 played the first game with numbers added. The Yankees had added numbers permanently but had been rained out a couple of times, so the Indians beat them to the punch. The Yankees also played the same day, but I guess the Indians game was earlier.
The NY Yankess put numbers on their jerseys reflectong the batting order. This put numbers in order to indentify each player so that the fans sitting far away would see the Babe. Ruth is the reason we have numbers today. Please check out Ken Burns' baseball to find out more.
From the website: http://www.all-baseball.com/ref/retired.HTML
Here are a few key dates in the evolution of uniform numbers:
* 1907: The Reading Red Roses are the first team to experiment with uniform numbers. * 1916: The Cleveland Indians are the first major league team to experiment with uniform numbers. On June 26, they wear numbers on the left sleeve. The project lasts only a few weeks. * 1917: Indians try again, this time with the numbers on the right sleeve. Again, they abandon them after a brief trial. * 1923: The St. Louis Cardinals try numbers on the sleeves. It is short-lived. * 1929: The Yankees and Indians wear numbers on the backs of their jerseys. * 1932: NL president John Heydler issues an edict on June 22 that all NL teams should number their players "With each club to inaugurate the system as soon as possible." * 1937: The Philadelphia A's become the last team to add numbers to their home uniforms. The team, and the rest of the AL, had added numbers to their road shirts in 1931.
On July 4, 1939, Lou Gehrig became the first Major League Baseball player to have his number, 4, retired by his team. Since then, over 120 other people have had their numbers retired. The Yankees were the first team to retire a number. Number 4, Lou Gehrig was the first player to have his number retired
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