Look at me being all socially redeeming and all...

So via this post at Ross Douthat's blog at The Atlantic, I came across this post at the NYTimes Paper Cuts blog (which is, as the subtitle kindly points out, a blog about books). The post is about the insanely high prices you can find for certain not-that-old, not-that-special-seeming used paperbacks on services that allow you to sell used books, Amazon being a primary culprit according to the post.

Because most people are economically illiterate and Times readers are not as different from ordinary people as their egos would suggest, the common thread in the comments immediately seized upon "greed" as the reason for these high observed prices.

So I offered the following comment, in response to the first commenter who had suggested "greed" as the reason for the high prices (and who was, as my theory of economic illiteracy would suggest, the very first commenter):

quisqualis - As a general rule, greed is a tremendously unsatisfactory explanation of any price set in a market, as a moment’s thought will reveal.

While it may well be true that the seller is the very picture of greed, in a free market no one is compelled to buy their product and, in the case at hand, certainly no one is compelled to buy paperback books.

So while that greedy, greedy seller might well set the price at absurd heights and then cackle in delight when thinking of all the marvelous lucre they will get — they will not actually get anything unless someone decides to pay that price.

The person who decides to pay the price may well feel that it is too high, but in actually paying the price they clearly feel that the benefit they will get from the purchase exceeds even that high price, otherwise they would not buy it.

This is the crux of free-market transactions. Both parties must feel that the transaction adds to their well-being in some way or they would not pay it.

Personally, I do not like coffee and feel that at even a nickle a cup it is way, way overpriced, so I am shocked to see people shelling out 100 times that every day at Starbucks. But to the Starbucks shopper, the coffee (and perhaps the experience or whatever else makes up a part of the transaction from their standpoint) is worth more to them than the $5. From Starbuck’s point of view, the $5 is worth more than the coffee. So the coffee is sold for what to me seems an unreasonable price and both parties are better off.

Even if they are both greedy. In fact, BECAUSE, they are both greedy. If they didn’t see any benefit to be had from making the transaction, it would not be made.

Thus greed, while no doubt present in alarming amounts among most everyone, is not a good explanation for prices that we feel are outrageous.

— Posted by blighter

I thought that my habit of occassionally dropping comments on the odd blog here or there was totally unredeeming. After all, as the old saw has it: "Arguing on the Internet is like running in the special Olympics: even if you win, it's still retarded."

But low and behold, look what a later commenter dropped on the blog:

Appreciated ‘Blighter’s’ economic analysis (greed/ well-being) I had never thought of it quite in those terms but it sounds right. However one occasionally sees irrational prices that dealers are asking, sometimes 100 times the market value. I guess the explanation here is mania, delusion and temporary insanity. However one cannot help feel that it is initially provoked by greed. How do you explain the dealer who wants $9000 for a signed edition of 1000 of Galsworthy’s Plays, available at less than $100 all over the web? It has been for sale for 4 years to my knowledge.
— Posted by Laker

If I have helped even one person finally realize that free market transactions require both parties to be better off to become actual transactions, I have done the world a service. Even if they cling to their stupid love of "greed" as an explanation for other prices they feel are absurd.

So I think this counts as my good deed for the day week month.