| "Your analysis is too simple.
Different consumers place different amounts of value on goods. " My analysis is not 'too simple' because the 'averaging assumptions' I made are valid in the context of illustrating my point. Obviously, there are 'supply and demand curves' and that everyone is going to gain different surpluses - but it doesn't matter, and just confuses the issue. .. which is why I used an 'average consumer' with some arbitrary, made-up price points. Your example is flawed: "the likelihood of the product going to the consumer who values it more goes up by a lot." This is not true, in fact, just the opposite (given the same supply/demand curves), when a middleman 'buys low and sells higher' there is definitely a lower chance that consumers will yield greater surplus on any given transaction, all things being equal. Now - in any given random transaction, sure there will be greater/less surplus, but that's beside the point. In fact, when the market clears fully there's a 100% chance that fewer surpluses are going to consumers with a middleman. There is a special assumption in your example that's not overt which is 'when prices don't move' - I suppose you're hinting at a change in the demand curve, given the 'new calamity' of coronavirus. Whereas people valued Purell 'less before' and 'more now' there's the possibility that a 'middleman' has created 'value for society' by buying up Purell when the did not need it a lot, and selling it when they really did need it a lot more. The problem with this argument is 'inventory'. There was already quite some inventory of Purell 3 weeks ago. The 'middleman buying it all' would have only decreased usage of Purell during 'nonessential' times very marginally, the overall supply really wouldn't change. So even with a shifting demand curve, it's still no material value creation by a middleman. If you were to expand this activity across time - for example, the US stockpiling of Oil reserves etc. - I would say this isn't really arbitrage, and the US is not acting as a 'middleman' - there are very real working capital costs involved in doing this, with measurable strategic advantages. Finally - your note about 'queuing' is flawed as well: "that price will mostly be made up of wasteful queuing" No - it's not 'wasteful queuing' - they are queuing because they get better prices! They are 'playing with time' instead of 'paying with money' which is absolutely a choice many people might take, depending on how they value their time. Again - pure arbitrage doesn't 'create value' for society, small caveats aside as illustrated in my previous note. |