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I apologise for any condescension, but basic economic theory really is important to analysing this. This really is stuff taught in econ 101, it's not like you
by ikeboy 9y ago
I apologise for any condescension, but basic economic theory really is important to analysing this.
This really is stuff taught in econ 101, it's not like you need a very advanced framework. All of the terms have a fairly easy to understand Wikipedia page.
Here's the simple definitions of the terms used:
Pareto improvement is a change made that benefits at least some people without making anyone worse off.
Kaldor-Hicks improvement is a change that, if it were combined with a transfer of money, would be a pareto improvement. In other words, the people who gain from the change gain more than the people who lose from it lose.
Externalities are effects of some action that happen to someone else - the classic example is pollution. If something produces externalities, that can be a reason to ban voluntary transactions or actions.
- YeGoblynQueenne 9y agoAh, thank you for clarifying. I must confess that the above were exactly my attempts at understanding the terms you used from the context of your comments- so of course my comments were spot on. For instance, in the case of scalping, those who are worse off are the concert-goers who don't (go to a concert) because either they can't afford the artificially inflated prices, or there is not enough space for them in the venue. etc.
- ikeboy 9y agoIf there's not enough space in the venue that is obviously not the scalpers fault. Regarding prices, assuming a ticket ends up going to someone willing to pay the price the reseller charges, then that state of a affairs is a Kaldor-Hicks improvement over the ticket going to someone else who paid less for it. Because the person paying more has more consumer surplus from going, and therefore it is more efficient if they go - any money changing hands is irrelevant to a Kaldor-Hicks analysis. Scalpers can only exist if there are more people wanting to pay list price than seats. Scalpers ensure those seats go to those who assign higher value to them, rather than randomly. This improves Kaldor-Hicks efficiency.
- fjsolwmv 9y agoCongrats on finishing exon 101. Now learn econ 201 where they teach about monopoly and monopsony and why someone having access to more money doesn't mean that person derives higher utility from their purchases.
- ikeboy 9y agoCan you point me to an analysis using more advanced tools that concludes that "scalpers" are not welfare promoting? I may have been a bit sloppy talking about utility interchangeably with willingness-to-pay, but it remains true that someone willing to pay more should get it instead of someone willing to pay less, or else the situation admits a kaldor hicks improvement. (There are weird cases with weird demand curves where this may not be true, which is why I specified "reasonable assumptions".)