China is readying for its annual New Year, or Spring Festival, celebration, which presents a travel chaos worse than our Christmas holiday. The government estimates the Chinese will make 210 million train trips.
So here's a question. Would it be easier to make this travel orderly if everyone was forced to buy a ticket at the low government price from an official travel agent or rail station, or if people were allowed to buy at prices set by the free market?
The Chinese government answered that question by cracking down on scalpers. That's a natural response from a government that believes there is virtue to a controlled economy. It's also a recipe for chaos, long lines and frustration.
Now let's switch the focus from China to Utah. I'm not trying to say that Rep. Lynn N. Hemingway, D-Salt Lake, is communist. The bill he is sponsoring to rein in ticket scalping in Utah (HB76) is all-American. Several states and cities have such measures.
But I am suggesting it is misguided.
I can't recall ever meeting someone who likes scalpers. They rank somewhere alongside guys selling fake watches on street corners, perhaps even below newspaper columnists, in terms of public opinion. They swarm outside events like mosquitoes. They can be pushy, and sometimes the worst of them peddle counterfeit tickets. And nowadays, many of them represent ticket brokers who stand in line to gobble up tickets as soon as they go on sale.
But, show of hands now, how many of you have been happy to find one, either online or in person, when you really wanted to get into a sold-out event and were willing to pay a little extra?
I thought so.
Hemingway's bill would make it illegal to sell any ticket at a price greater than what is printed on the ticket, other than a service charge of either $10 or 15 percent of that price.
The obvious questions to ask here are, who sets the price printed on the ticket, and why is that price automatically assumed to be fair? The answer is that the folks who produce the show or athletic event do so, trying to gauge supply and demand. But supply and demand change with each event, and sometimes several times leading up to an event. The price is best set by the market.
The truth is, it's impossible to do away with scalping as long as people are allowed to buy tickets in advance. In a crowd of thousands, someone is bound to develop a scheduling conflict and have to unload a ticket. When it comes to a really hot item, such as tickets to an NBA finals game, the temptation to profit from tickets becomes too great.
People who don't want to invest the time to stand in line often consider it a fair trade off to pay a little extra for a ticket later on. This, as the Chinese don't seem to understand, actually reduces lines and makes ticket purchases more orderly.
And the bill's biggest flaw is that, although it provides a class C misdemeanor penalty for pocketing a big profit, it would be hard to find anyone to testify against such a crook. The "victims" tend to be happy they got a ticket.
That doesn't mean Hemingway is wrong to bring up the subject. Scalping is confusion. Sellers give up tickets at below-market costs and buy too high because they lack the proper information.
About 15 years ago, economics professor Stephen K. Happel and legal and ethical studies professor Marianne M. Jennings wrote an essay for the Cato Journal that offers an interesting solution.
Pass a law that sets up a certain number of booths in a designated area near an event. Allow licensed scalpers to use these to trade. The results, "most of the time," will be "smaller economic profits for scalpers, as competitive pressures and greater open-market access reduce the range between bid and ask prices," they wrote.
As the Chinese are sure to learn, laws don't end secondary markets. They drive them underground, and that's never good.