Saturday, October 23, 2010

The Used Book Seller: Social Benefactor or Pariah?

Slate features a heart-felt memoir of a used book seller. The writer, Michael Savitz, explains his feelings of shame and embarrassment he experiences as he attends used book sales looking for good prospects to buy and re-sell. Instead of feeling emotionally beaten down, he should be satisfied at a job well done. He and used book sellers like him should be celebrated for the service they provide for the vast book-reading public.

When explaining the nature of voluntary exchange both in my introductory economics courses and in my book, I explain that in order for a voluntary trade to occur, both parties must value the respective goods in reverse order. In other words, both parties must value what they receive in exchange more highly than what they give up. If either party values what they already have more than what they would receive in exchange, they would not trade to begin with.

Additionally, each party must own the good in question. Each must have ultimate control over the good to the extent that they can trade it away if they wish.

Finally, both parties must know of the others existence. Even if two parties owned books they valued in reverse order, they would not be able to benefit from exchange unless they knew of the other person. If someone in Glasgow, Scottland owned a copy of Treasure Island and really wanted to trade it way for a copy of The Last of the Mohicans, while at the same time, someone in Cooperstown, New York with a copy of The Last of the Mohicans was willing to trade it for a copy of Treasure Island, the fact of reverse preferences does neither any good if they are unaware of their potential trader.

It is this need for knowledge of other trading partners that opens the door of profit opportunity for the one everyone wants to cut out--the much maligned middleman. Middlemen such as retailers and real estate agents provide the very productive service of making it easier for potential traders to know of each other by reducing search costs. Far from being a parasite leeching off the economic system, middlemen bring people together and in doing so allow each to satisfy more highly valued ends.

This is precisely what Savitz the used book seller does. He serves both book seller and book buyer by providing money to the seller and help channeling the books to those readers who value them the most. What is not to like?

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