James Stanley

Why minimum wage is bad, illegal immigrants are good, and ticket scalping is fine

Tue 17 January 2017

At first glance these three topics might seem unrelated, but the same basic argument of supply and demand applies in each case.

The existence of a minimum wage is bad

The existence of a minimum wage is telling people "if you're not worth at least this much, you're not allowed to work at all". More generally, it is preventing consenting adults from engaging in mutually-beneficial transactions, and preventing businesses that rely on cheaper labour from being able to operate profitably, putting them out of business, and leaving the staff unemployed.

Nobody would credibly argue in favour of a minimum price for a packet of crisps. And if I can produce crisps that I'm willing to sell more cheaply than anyone else, then everyone benefits if I am allowed to do so. I benefit: I sell my crisps at a profit. My customers benefit: they get cheaper crisps. Most other businesses benefit: my customers now have more money left over to buy their things. Everyone's a winner, except the other crisp suppliers who have now been out-competed. Good.

Identical logic refutes the existence of a minimum wage.

The presense of illegal immigrants is good

(Although the illegality of their presence is decidedly not good: free people ought to be able to travel the world freely. But that's a rant for another day.)

I recently watched a documentary on BBC Three called "Illegal Job Centre". The presenter, in a very solemn tone, reports on the goings-on of some people who are working in the UK illegally. The reaction this is supposed to elicit is clearly somewhere between "oh gosh, how awful" and "this must be stopped".

But I don't think a rational analysis of the facts leads to anything but a positive conclusion.

The backstory is that the illegal immigrants hang around outside the likes of Wickes and Buildbase, waiting for a building contractor to offer them a job labouring for the day. They receive less pay than British workers would receive for doing the same work. They live in houses shared with upwards of 20 people, from which the landlords collect comparatively high rents.

And I think that's great: the immigrants get work that they otherwise wouldn't. The builders get labourers more cheaply than they otherwise would. The immigrants get accommodation more cheaply than they otherwise could. The landlords get more rent than they otherwise could. Everyone's a winner, except the British labourers who have now been out-competed. Good.

Ticket scalping is fine

A friend of mine was recently telling me about "ticket scalping". Ticket scalping is where a "scalper" buys up as many tickets as he can, as soon as they come on sale, and then sells them to legitimate fans at some higher price than he initially bought them for.

The argument against this is something like: "it harms the fans, because now they have to pay more money to get the tickets".

Apart from the fact that I don't think a ticket seller has any right to tell people what they can and can't do with the tickets that they've purchased at the going rate, I don't think ticket scalping does harm the fans. In fact, I think the emergence of a mature secondary market only benefits the fans.

Assuming the gig is sufficiently popular, and has a finite number of tickets, there will always be more people who want to go than are able to get a ticket. 2001 people can't have a ticket each if there are only 2000 tickets.

So whether there are ticket scalpers or not, somebody is going to miss out. In the absence of ticket scalpers, whoever gets in quickest gets the ticket, and that's the end of it. But if ticket scalpers are able to buy some of the early tickets, and are able to resell them at a higher price, then it is easy to decide which of the 2001 people wants the tickets least. Whoever is willing to pay the least amount of money for a ticket doesn't get a ticket, and everyone else does.

I don't see this as at all unfair. I don't see it as any different to the way any other scarce resource is allocated: whoever is willing to pay the most to acquire it, acquires it.

The "official" ticket sales company sells all of their tickets at the price they wanted. The ticket scalper makes a profit. Fans who are willing to pay fair market value for tickets are able to ensure they can get a ticket. Everyone's a winner, apart from the fans who were not willing to pay fair market value for tickets. Good.

And if the original company is so sure that the tickets are worth more than what they're charging, they should be charging more. If they're not sure they're worth more, they should be happy to sell them at the price they have decided is fair.

But that's just ruthlessly capitalist

Capitalist? Yes. But that's not a bad thing. Ruthless? I don't know. I don't think it's ruthless, so much as it is merely fair.

All of this emerges naturally as a result of individuals maximising their own utility in a free market, and I think any moves to prevent that outcome lie somewhere between misguided and outright harmful.

So here's my prescription to governments of the world: abolish the minimum wage, abolish all restrictions on the travel and occupation of immigrants, and abolish laws preventing ticket scalping.

I understand that a large proportion of the population disagrees with my logic here, but I can't for the life of me figure out why.

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