A reader emails:
This topic (ticket scalping) has come up among football fans at work and I hear lots of complaining about how unethical scalpers are and how scalping should be illegal. I protest that “scalping” while much maligned, is a valuable service to the marketplace. I think that the re-sell price (often 3-5 times retail) scalpers make on tickets is reward for the risk of ending up with unsold tickets by game time. Also, if scalper’s prices were really “too high,” they wouldn’t sell their tickets and would either lose money or lower their prices.
How do you rationalize the existence of scalpers and how do you explain their demonization among the general public?
I think the first paragraph captures what scalping is all about. It's a speculative activity where people can profit if they guess right, but can also potentially realize a loss if they guess wrong. There are also other risks as well, like fines in places where scalping is illegal, and any expected return is balanced by a possible loss.
Scalpers benefit society by making tickets available to people who otherwise wouldn't have access to them. But like anything beneficial, this access comes at a cost: one of those being higher ticket prices. The question for society is "do the benefits outweigh the costs?" As the reader implies, when someone buys a ticket from a scalper, both parties are making a rational, optimizing decision. In other words, it's like most other market exchanges. So in that sense, yes, scalping is good for society.
The demonization question is very interesting. Perhaps the demonization comes from people disliking having to pay more for something when they know that it carried a lower price to someone else. Maybe there's a sense of entitlement that the posted price is the "true" price.
Or maybe people feel that speculation activities impose some sort of negative externality on them and are, thus, unfair in some sense. If scalpers do impose a negative externality on society, then it's not clear that scalping is good overall, theoretically speaking. My sense is that the negative externalities* aren't all that large.
In any case, a similar demonization was floating around regarding speculation in oil markets this past summer. But nowadays nobody is demonizing oil speculators because the price of oil has plummeted about 33% from its summer highs. I don't know this for sure, but I wouldn't be surprised if many oil speculators are taking a bath.
*Addendum: My original thought was that the perceived externalities imposed by scalpers were akin to someone buying the last loaf of bread on a shelf. But the analogy is inexact because there will be more bread in the future, while the event is a one-shot deal. When it's gone, it's gone.
Update: Kip notes in the comments that it is a question of rationing.
Since the tickets have to be rationed somehow, the burden is on the anti-scalper to explain why some other system of rationing (e.g., who is willing to spend the most time waiting on line; who has the best insider connections, dumb luck of a lottery, etc.) is "superior" -- morally or otherwise -- to a price-based system.