Saturday, April 23, 2016

PSU Auction: The Market Creates Inefficiency Sometimes

I went to a PSU surplus electronics auction yesterday. I had been looking for a cheap car for a while and knew that Penn State has extra cars and things, so I sorta stumbled upon the electronics auction and I mentally bookmarked it. 

The room was dusty but the people made it buzz. My friend came along and I don't think he liked the buzz. I think it tired him. But I liked it. The vibe was sort of "weed and energy drinks". You were free to walk around and look at the items while the auction was going on, so people were examining stuff while the auctioneer was barking mumbled numbers.

There were a lot of "networking solutions" type objects that I didn't understand. Sometimes they'd hold up an old piece of machinery and be like "It's testing equipment!" and no one would know what it did or if it worked. But people bought it anyway. I was looking for a monitor and wanted to grab some mics. But when the auction started, I wanted more things, ya know, cuz buying is fun.

Some nikons d7000s went for $360 and up. I would've bought that if it was like $100 less. Some Macbooks Pros sold for around $500. Some ancient mixing boards sold for $50, and if they weren't like 400lbs (and I didn't bike there) I might've grabbed one just for fun. That's part of the feeling of the auction, a lot of people buying things just for fun.

I like the shaking loose the rust from the gears of commerce. There is some stuff that's just sitting in storage, and now it’s being re-homed for use. I can get some mics no one is using, to make music for less than what it would normally cost. It's the free market working right in front of you! It's great!

Unfortunately, free markets are open to anyone. And while there were many hobbyists/nerds/collectors there. There were just as many resellers.

Professional resellers come in and buy up multiples of one product, pushing the price higher and increasing the time from the end user. They create market inefficiency by putting another barrier between the users/hobbyists/nerds. Of course this is only true if those hobby/nerds are here at the auction. Otherwise the resellers just make the products people want more accessible, because then end up in places where hobby/nerds then go look.

But if you have a hobbyist bidding against a reseller, then market competition is actually inefficient. Because the price is being driven up. Unless you're rooting for the Penn State surplus store, an odd hero to choose in this story, then this kind of competition is bad. Which is sort of earth shattering for capitalists, like myself, that market competition creates a worse product to consumer flow.

Unless! And now I’m not sure who I’m rooting for, if all end users are not created equally, say hobbyists who purchase from resellers (likes call them 2nd gen hobbyists) are not the same people who are at the auction. Because now, the hobbyist who pays the reseller effectively employs the reseller and gives them a job. No new value is being created, but the total number of people employed is higher. And people who weren’t the auction can now purchase the mics I wanted before me because they’re willing to pay more money.

Obviously this one auction isn’t a perfect illustration of “the market” at large, but it is a nice charcoal sketch. Middlemen provide products to more people and increase employment, at the expense of increasing bureaucracy and giving total control to fewer people who have more money.

And this isn’t to demonize resellers, one nerdguy told me that a reseller gave him one of the products (I forget which one) for free cuz he saw that the nerdguy wasn't going to resell. So resellers are people too guys.

I ended up with a 19 inch LCD Dell monitor for $30. Not a steal but better than normal shopping, I was bidding against a reseller. I also wanted some directional mics that I was sure no one else here would be using, but they went to a different reseller. He bought all three.

I’ll think of ways to reduce inefficiencies later. Maybe a student first auction earlier in the day?