I Bet You Thought You Were Supposed to Hate These Guys
Like most Americans, are you frustrated by ticket scalpers? These middle men buy tickets for events and then resell them at more than face value to make a profit. If you’ve ever purchased from a scalper, you may have been frustrated at having to pay higher than face value for your seats. But what were the alternatives? Since there may be more people who want to attend an event than the event can hold, an efficient market mechanism is to ensure that the people who are willing to pay the most are the ones who get to go. This cannot be accomplished by a lottery system to allocate leftover seats, as that would fall to pure chance to decide who won. Waiting in a long line might be an option, but maybe your time is more valuable and you’d like to get a ticket now. The scalper is able to help you get the tickets you want in the amount of time you desire.
Prof. Stephen Davies explains that although ticket scalpers and other middle men are often looked down upon by the public because they don’t physically make any goods, they do provide a service that improves the efficiency of the market. Middle men who connect buyers and sellers and profit for their work do add value to society by enabling people to get what they want or sell what they don’t.
In some cases, the ability to buy goods at a low price and sell them at a higher price has saved lives. In 18th century France it was illegal to purchase food in areas with low prices and sell them for a profit in areas where food was scarce due to a shortage or a failed harvest. As a result, many people literally starved to death because no one would supply them with food. At the same time, England did not have these laws. So while food prices increased in areas struck by famine, we don’t see many cases of people actually starving to death. The middle man’s ability to buy food inexpensively in one area and sell it for a profit in an area with a food shortage literally saved lives. Though looked down on by society, middle men perform a useful function in improving human well being.
Munger on Middlemen (podcast): Mike Munger of Duke University talks with EconTalk host Russ Roberts about the often-vilified middleman–someone who buys cheap, sells dear and does nothing to improve the product. Munger explains the economic function of arbitrage using a classic article about how prices emerged in a POW camp during World War II.
Desert Island Game (game, beginner): Can you learn something about trade and cooperation by being marooned on a desert island?
Trade Ruler (game, advanced): As the Supreme Ruler of an island, you want the country to prosper. By engaging in international trade, you can achieve this goal.
All Hail Ticket Scalpers! (article): Jim Caple at ESPN argues that ticket scalping is the epitome of a victimless crime and should not be made illegal
Middlemen and Markets (article): Professor Stephen Davies explains how the middleman can save lives and increase well-being
Cavemen and Middlemen (article): Richard Fulmer discusses how middlemen expand markets and offer greater opportunities for specialization and growth.
The Paradox of the Middleman (article): This blog posting argues that the middleman will exist as long as information exists and that the information age calls for a new type of middleman.
Is Ticket Scalping Legitimate? (debate forum): Join the debate! This website offers users the opportunity to argue the pros and cons of ticket scalping
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