Unfrozen Caveman Economist

Kevin Robinson sums up the whole Bob Geldoff ticket brouhaha in one pithy phrase:

Clueless, Bob. If you don't capture the consumer surplus, some other economic actor will.

It says a lot about Geldoff and people like him when their hatred of capitalism and markets outweighs their supposed desire to help poor people. Charity concert my ass.

And then we have knee-jerk anti-market bloggers like Henry Farrell who believe that "purely voluntary systems of blood donation did better on a variety of counts than did systems where some people were paid to donate blood."

Now, I may be just a simple caveman economist. My primitive mind can't grasp these concepts. But there is one thing I do know - under our current system of purely voluntary blood and organ donation, we constantly hear about massive blood and organ shortages. When was the last time you heard of a shoe shortage, a milk shortage, or a TiVo shortage?

Your irrational hatred of markets frightens and confuses me!


Update: Follow-up here. Share this

Paul Coulam, I take it his

Paul Coulam,

I take it his ends had something to do with charity. If, as some have indicated, he was more interested in starting a social movement than raising revenue that could be used to help poor people (which itself is an indication of where his priorities lie), then he should have either attached a name to the tickets and required ID on entry, not used tickets at all and just let people in on a first come, first serve basis, or some other equivalent mechanism. But the way he did it was just asking for a black market in ticket sales, and anyone with an ounce of economic sense could see that coming a mile away.

Well, CATO intern fails to

Well, CATO intern fails to understand economics – not much of a surprise there, is it? Your argument from ignorance is just as good as the book and the paper that Henry referenced in his article, I suppose.

Any reason we should give your commentary any more weight?

By the way, if you

By the way, if you libertarians were really so hot on the rights of contract, you’d be supporting Geldof’s right to set up the event as he desires. The fact that you’re not is illustrative.

I think most of us do support his right to set it up any way we wants. We're mostly just questioning the rationality of his desires and pointing out that he missed out on a good opportunity to raise money for the poor. If they really want to prevent transfer, they can do it the way airlines do: Print the names on the tickets and check ID at the gate.

What it shows is that you’re really for the principle that money should be able to buy anything.

As far as goods and services go, absolutely. Are you under the impression that we were trying to hide that? Am I supposed to be mortified because you've unmasked my true motivations?

The blood paper doesn't really address compensated donation because it no longer exists except for plasma, and there weren't sufficient data for that. It refers to Titmuss only briefly, and not always positively:

And the events surrounding the emergence of
HIV in the blood supply seriously challenged many of Titmuss’s central
claims. In particular, the AIDS disaster showed that the relationships blood collection organizations had with their suppliers and recipients were subtler than Titmuss realized. Relying on voluntary donors did not protect against HIV contamination, and in some ways, the commercial sector reacted more responsibly to the crisis than the voluntary sector (Healy 1999).

I haven't read the book, but the review doesn't really impress me:

The US system was regressive, Titmuss argued, because it often redistributed blood from poor donors to rich recipients.

How many of the "variety of counts" on which the volunteer system did better cannot be appreciated without the uniquely left-wing capacity to be horrified at something like that?

Titmuss's most powerful argument was that the blood market left the recipient defenceless if the donor was dishonest. A poor person, paid to give blood, would have an incentive to lie about an infection; the recipient would have no check on the quality of blood or, given the impossibility of identifying a donor, any redress.

I suspect that this is largely irrelevant nowadays due to improved screening techniques, but these don't strike me as insurmountable problems anyway. There's no reason blood banks couldn't create a tracking system and screen out undesirable donors by requiring, for example, proof of employment (or enrollment in school) and residence.

And the review mentions that Britain's "volunteer" system wasn't all that great, anyway:

Although Britain is now capable of self-sufficiency in blood products, the Aids crisis showed how a volunteer image fronted a system that was heavily dependent on an international plasma market organised by multinational companies operating in Africa and Mexico.

Besides, most blood recipients aren't indigent. They don't need charity. Why should I give away an hour or two of my Saturday just so a middle-class retiree can get a marginal price reduction on his surgery?

Ayn Rand used to talk about

Ayn Rand used to talk about the "argument from authority" whereby one refers to the authority of another as evidence of truth. "so and so said this is true, so it is".

Rich Puchalsky's "argument from ignorance" insult that he likes to throw around so much is just the inverse of this. Same idea. Equally stupid.

I was takling about

I was takling about anti-scalping laws and government enforcement in general.

In other words, nothing related to this particular instance. So why mention it here?

Geldorf could achieve his ends (charity)...

Sure - he isn't producing what he *says* he wants to in the most efficient manner. Is that really what he wants though? I find it far more credible that Geldorf is primarily concerned with producing warm fuzzies for himself.

The libertarian sentiment

The libertarian sentiment expressed above is admirable in its purity. So much for the “civil society” volunteerism that Nicholas wrote about on another thread.

That charity should be directed towards those who both need and deserve it is simply a matter of common sense. I've always suspected that libertarians have cornered that market, but I'd never thought that I'd actually hear a leftist admit it.

Lopez, I was takling about

Lopez,

I was takling about anti-scalping laws and government enforcement in general. In this case, I think eBay made the wrong decision, but at least it didn't cost us anything.

Geldorf looks to me like he’s producing something that he wants, he sure seems pleased with the results. So what’s inefficient, here? Geldorf isn’t producing what you want?

Geldorf could achieve his ends (charity) better with different means (setting a rational pricing mechanism rather than complaining about scalping after the fact). Efficiency has nothing to do with producing what he or I want or being pleased with the results. Effeciency describes the relationship between means and ends.

I don't have a problem with

I don't have a problem with Geldoff hiring his own private security guards to police scalping at the venue, or paying to means-test every ticket customer to make sure only the poor are getting in. I do have a problem with ticket sellers free riding off of the socialized law enforcement system. If the costs of contract enforcement were internalized, I sincerely doubt we would see very many ticket venues give a flying fuck about scalping.

And I openly admit that I am not as concerned with "rights" as I am with efficiency. It's not a big secret; just read almost any of my posts on this blog.

Ghertner: "... I do have a

Ghertner:

"... I do have a problem with ticket sellers free riding off of the socialized law enforcement system."

Seems to me that Ebay's auctions weren't trashed by government cops but rather by private individuals. Also seems to me that all of the actions surrounding this were an example of *market law enforcement*.

So how does your complaint apply to this particular case, Ghertner? *Which* "socialized law enforce[ers]" did Geldorf (or anyone else) unleash on the ticket scalpers?

"If the costs of contract enforcement were internalized, I sincerely doubt we would see very many ticket venues give a flying fuck about scalping."

Obviously if you have a bunch of eager drones to do your bidding for free, you don't need to worry about "internalizing costs".

"And I openly admit that I am not as concerned with “rights” as I am with efficiency. It’s not a big secret; just read almost any of my posts on this blog."

Geldorf looks to me like he's producing *something* that he wants, he sure seems pleased with the results. So what's inefficient, here? Geldorf isn't producing what *you* want?

Who's the monkey in the

Who's the monkey in the middle with the big mouth?

The argument from authority

The argument from authority is not invalid if the person quoted is actually an authority -- and Henry provided some references to back up his claim. The argument from ignorance is always invalid. I complain about it a lot on this blog because I see it a lot on this blog.

Micha is honest, at least, when he says that he's not concerned with rights, just the efficiency of sale of everything. I look forward to the day when the "socialized law enforcement system" is replaced by the machinery of freedom and a rich, pissed-off guy like Geldof can pay to have the scalpers beaten up. Now there's efficiency.

"Besides, most blood recipients aren’t indigent. They don’t need charity. Why should I give away an hour or two of my Saturday just so a middle-class retiree can get a marginal price reduction on his surgery?"

The libertarian sentiment expressed above is admirable in its purity. So much for the "civil society" volunteerism that Nicholas wrote about on another thread.

Well, CATO intern fails to

Well, CATO intern fails to understand economics -- not much of a surprise there, is it? Your argument from ignorance is just as good as the book and the paper that Henry referenced in his article, I suppose.

By the way, if you libertarians were really so hot on the rights of contract, you'd be supporting Geldof's right to set up the event as he desires. The fact that you're not is illustrative. What it shows is that you're really for the principle that money should be able to buy anything.

Your argument from

Your argument from ignorance

If you are referring to the logical fallacy by that name then you are misapplying it. http://www.datanation.com/fallacies/distract/ig.htm

My 2 cents: 1. It sounds

My 2 cents:

1. It sounds like Geldof is whining because he doesn't like the laws of supply and demand. Somebody oughta pass a law to rescind those pesky laws of economics.

2. For those of you against "monetization": Are you against money, or the underlying concept of trade in general? Or are you against money/trade only for specific goods (e.g., blood, food for impoverished Africans)? How can you ignore the wealth-building effects of trade and money?? What is it that is gained from the principle you adhere to?

If it's money you hate, then maybe you should direct your anger toward Geldof himself, since the whole point of Live 8 is to increase the flow of money to Africa!

Judging from what Geldof himself has said (increasing financial aid, forgiving debt), it looks like he is against trade with Africans, which is a terribly ignorant (and destructive) stance. Where does he think the wealth of the West came from? Certainly not aid from other nations.

I believe that the milk

I believe that the milk market is far from free and unhampered.

A market with distorted prices causes either a shortage or a glut. Government Surplus Cheese, anyone?

Now, I may be just a simple

Now, I may be just a simple caveman economist. My primitive mind can’t grasp these concepts. But there is one thing I do know - under our current system of purely voluntary blood and organ donation, we constantly hear about massive blood and organ shortages. When was the last time you heard of a shoe shortage, a milk shortage, or a TiVo shortage?

I believe that the milk market is far from free and unhampered.

Regards, Don

Similarly, you people have

Similarly, you people have no idea what you’re doing with the economics of the blood supply. Blood has special economics because its supply will always be limited, as there is only a certain amount that can be donated by a healthy adult within each time period.

Nonsense. The supply of all goods and services is limited in this way. We can only make so much, ever, of anything with nonrenewable inputs. Even for goods with renewable inputs (food, paper, etc.), supply is limited by the rate at which we can replace the inputs (land is limited, and food and trees take time to grow). The number of people working at any particular task is bounded absolutely by the population, and bounded practically by the demand for people to perform various other tasks.

The point is that the amount of blood that can be produced dramatically exceeds the amount that's needed. Suppose that there are 100 million people in the US who can donate blood. That means that 650 million units of whole blood can be supplied each year. In reality, it's probably more; if a 110-pound woman can safely donate six and a half pints per year, I know I'm good for at least ten. The actual amount donated in 2001 was about 15 million units.

Does our ability to produce food exceed our need for it by a factor of forty or more? Probably not. But we manage anyway. Certainly a market system produces much better results than one which relies on "social solidarity" to induce people to produce food.

To put it in purely individual terms and miss out on the sociological meaning, people donate blood in order to feel good about themselves in various ways. Turning it into a monetary transaction and into something done “for charity” destroys most of this benefit, as happens whenever a market fundamentalist tries to monetize something that can not be fully monetized.

How many times do I have to say this? The typical recipient of blood is not indigent. He doesn't need charity. He can afford to pay an extra $25-50 per pint to save his life. If poverty caused bleeding, and the people who needed blood couldn't afford to pay for it, you'd have a point. But it doesn't work that way.

Also, the idea that you can't or shouldn't feel good about doing something just because you get paid for it is absurd, and it's a big part of what's wrong with the world. One should feel just as good about doing a hard day's work and collecting his paycheck as one does about donating part of that paycheck to charity. To work is to serve, and voluntary exchange has done a lot more good for the world than charity has.

Charity's a fine thing, but returns diminish rapidly, so there's only so much of it that you can expect people to do. Why waste charitable impulses on those who don't need them? Why not pay people for blood, and then, before they leave, ask them if they'd like to donate that money to a real charity? Isn't it better to save a life and give money to the poor than it is to save a life and give money to the middle class?

Of course, this is all somewhat academic when talking about blood, because as far as I know, the volunteer system is more or less getting the job done, and no one's dying for lack of it. But people are dying for lack of bone marrow and organs, and the only thing standing between them and the Pareto-efficient exchanges that could save their lives is anti-market ideology.

You can talk about social solidarity all you want, but unless you're willing to let a surgeon cut you open and remove a lung, a kidney, and a piece of your liver, with no compensation other than the knowledge that you've saved three strangers' lives, it's just talk.

Ughhhh.... This blog

Ughhhh.... This blog software frightens and confuses me! My link above does not go where it should. Copy and paste the http://... above into your browser.

John Lopez is right. It is

John Lopez is right. It is a form of market fundamentalism to imagine that everyone's utility function must be monetized. Micha is perfectly willing to insist on the rights of the rich to purchase whatever they want, as long as what they want is a monetized good or service, but if not -- so much for their rights of contract.

Similarly, you people have no idea what you're doing with the economics of the blood supply. Blood has special economics because its supply will always be limited, as there is only a certain amount that can be donated by a healthy adult within each time period. If you increase the population, you increase the number of potential donors, but you also increase the statistical number of people who will need blood.

Now, if the only reason to donate blood is purely monetary, then the middle class will tend not to donate, as the process of donating blood is unpleasant. That means that supply will either be limited to blood from the poor, or the price will have to be raised enough to draw in the middle class. In either case, the poor will likely be priced out of the market, and the middle class will find blood to be much more expensive than it is now.

The blood donation system works because of social solidarity, a concept that I do not expect any libertarian to be able to understand. To put it in purely individual terms and miss out on the sociological meaning, people donate blood in order to feel good about themselves in various ways. Turning it into a monetary transaction and into something done "for charity" destroys most of this benefit, as happens whenever a market fundamentalist tries to monetize something that can not be fully monetized. That's why I was always sceptical about Nicholas' idea of libertarians volunteering as part of civil society to start to replace the state -- how can you, when you don't even understand it?

As for "argument from ignorance", you underrstand what I mean -- the assertion that because you, as an ignorant person, don't believe in something that is supported by science, then it must not be true. If you'd like to find the proper name for this fallacy, feel free. Note that there is a flavor of deliberate ignorance about it; as in the case above, Micha could have read the references, but chose not to.

"Efficiency has nothing to

"Efficiency has nothing to do with producing what he or I want or being pleased with the results. Effeciency describes the relationship between means and ends."

Micha,

If we're not interested in his 'ends' or your 'ends' then what are the 'ends' whose relationship with the means, the efficiency of, you are so concerned with?

Rich, as it happens, I

Rich, as it happens, I donate blood at my local hospital appx. 4 times/year, not because of any nonsense about "social solidarity" but because it's a nice thing I can do that requires relatively little of my time and effort and has a direct, obvious, local benefit. If give-blood-for-pay were instituted, I could continue to indulge my charitable impulse either by:

1. continuing to donate blood and refusing the proffered payment or

2. donating money to a fund that would pay for others to give blood.

Which method I'd choose would likely vary over time depending on factors such as my salary and working hours. But having both (1) and (2) available would make the indulgence of my desire to do good easier and more effective. So the bit about how monetizing things that supposedly "cannot be fully monetized" is bad for their provision seems, well, unpersuasive to me.

On a tangent, if it is true

On a tangent, if it is true that monetizing a market may reduce the supply, I can think of two courses of action that opens up:

1. Don't monetize the market.

2. Monetize the market and also work to help people overcome their contempt for monetization.

I favor the latter, myself, since from what I can tell, much harm in general comes from a misunderstanding and antipathy to money.

Micha, "then he (Geldof)

Micha,

"then he (Geldof) should have either attached a name to the tickets and required ID on entry,"

The tickets all sate: "No cash or credit alternatives will be offered. Tickets cannot be transferred, replaced or re-sold."

Why is it unreasonable for him to rely on people behaving honestly?

It's not unreasonable to

It's not unreasonable to assume that Bob Geldof is trying to raise as much money (economic resources) for African aid as possible. If that's the case, he could have done what another poster (Kevin, I believe) suggested: 1) Had the auction sites (Ebay, others)compete with each other to become the auction site of of Live 8. 2) Use an auction mechanism of some sort to distribute the tickets. Given the context, this would have been quite novel and might have brought in a LOT more money.

I understand why Mr. Geldof is upset. But as others have posted, he (or certainly his advisors) should have anticipatd the inevitable black market and planned accordingly.

Unreasonable, no. Naive,

Unreasonable, no. Naive, yes.

Living in Detroit, this would be equivalent to me handing out highly-sought-after Pistons NBA Finals tickets in front of a strip mall, with the "anonymous promise" that they (and ONLY they) will attend the Pistons game. Naturally a sizeable percentage will sell the tickets for a high price, and watch the game at home or bar (if at all).

If I felt so strongly about having the recipients of my handouts going to the game, I'd most certainly have to explore a different avenue of ticket distribution or identification.

Nicholas writes: "I donate

Nicholas writes: "I donate blood at my local hospital appx. 4 times/year, not because of any nonsense about “social solidarity” but because it’s a nice thing I can do that requires relatively little of my time and effort and has a direct, obvious, local benefit."

In other words, you give blood because of social solidarity. The word "local" is a key indicator, I'd say, though not absolutely necessary. You give blood because you like having the feeling that it's a nice thing you can do to help people -- all people, which means that you can imagine that you're helping other people in your community as well as those further away. That is not a charitable impulse; a charitable impulse like it or not comes when people consider helping people who they think are somehow different from they are. Many people donate blood out of similar feelings to yours who would not if it were a matter of charity.

Doug, Quite, I don't dispute

Doug,

Quite, I don't dispute that Geldof has been either naive or stupid about the ticket resale market in the same way that people are naive and stupid not to lock their doors and and rely on people's honestly not to be burgled, but burglary is still wrong, not just 'inefficient'.