All Commentary
Tuesday, November 1, 1994

Hoarders, Speculators, and Other Scapegoats

Professor Clites teaches at Tusculum College in Tennessee.

Enemies of society. That is what most people have been conditioned to think about hoarders, speculators, ticket scalpers, and various others whose activities are actually beneficial. Among the others are savers, whom John Maynard Keynes seemed to equate with those who hold money idle.

Even a quick analysis shows that each of these groups is composed of people who provide a useful service to their fellows.


What is a hoarder? During World War H hoarders were painted as people who gained from, or possibly were even responsible for, shortages of such things as coffee and sugar. Someone who had even a small amount of sugar on hand when the announcement was made that sugar was to be rationed was required to declare it so that it could be counted among the rations to which he was “entitled.”

Does that make sense? Does his having sugar deny it to other people? No! Much to the contrary, if there is actually a shortage of something the person who already has the product on hand does not have to compete with others to obtain it from a seller. It might be better to turn around the emphasis and say that someone who needs to buy it does not have the hoarder competing with him for it.

The hoarder actually reduces the impact of a shortage by reducing demand during the time of shortage. Foresight caused him to purchase previously, during a time of greater availability. That enables him to avoid standing in line, searching from store to store, or otherwise competing for the scarce item with those who are in immediate need to acquire it.

People who have an urgent need for the product that is in short supply should actually be grateful to the hoarder.

We must not overlook still another point: The person who hoarded or stocked up might have anticipated incorrectly. A surplus could have developed and pushed the future price downward. Then the hoarder would have paid a higher than necessary price for the product plus he would have given up use of his funds during the period of stockpiling. So-called hoarders take on a risk for themselves as well as provide a service for others. Castigating them is irrational.


Similarly, speculators are almost universally reviled. Yet, they, too, act in a beneficial way. Contrary to widespread belief, they do not destabilize markets, cause gyrations in prices or profit at the expense of others. Simply stated, a speculator tries to buy when prices are relatively low and sell when they are relatively high. Like the hoarder the speculator also takes a risk. He may buy only to discover later that he was wrong. He may be forced by future circumstances to sell at a still lower price, to take a loss.

But, suppose that a speculator does succeed in buying low and selling high. If price is low it is because demand is low relative to supply. The speculator by purchasing at that time adds to demand and keeps price from falling quite so far.

If price is later at a relatively high level it is because supply is short relative to demand. By selling at that time the speculator keeps price from rising quite as far upward.

Thus, the speculator reduces the amplitude of price swings, supporting prices when they are low and holding them down when they begin to climb to higher than usual levels.


Scalpers are a specialized type of speculator. When they perceive that tickets to an event will bring a higher-than-original-price on the free and open market. Scalpers try to buy tickets with the objective of reselling them for a higher price.

A scalper may be wrong in his analysis. He may find himself stuck with tickets that he must resell at a lower price than he paid for them, if he can sell them at all.

Often a scalper cannot just walk up to a box office and buy all of the tickets he wants. They may be rationed at so many per buyer. In that case he may have to pay a premium price himself to obtain them initially. Or he may have to wait in line for them, possibly even have to wait all night in an extreme case.

The person who buys from the scalper is paying for a service. He is obtaining something that he might not have been able to obtain directly for himself. Or he may be avoiding waiting in line for hours, perhaps even overnight, to obtain highly valued tickets. In any event, he willingly pays the scalper’s price. He is not forced to buy from the scalper. He prefers the tickets to the money that he pays.

What the scalper has done is bring together the two sides of a market in which the initial price was set too low to bring about market clearing. The price may have been set too low because of misjudgment or it may have been due to social pressure. Whatever the reason, the marketers of the event set the price below the market clearing level and caused an artificial shortage to develop. The speculator guessed that this was the situation and tried to profit by correcting the error.

Remember, it is always possible that the scalper may lose. Regardless of the outcome the scalper is not an exploiter. He is a benefactor. Even when he is wrong he helps someone. He helps the seller to sell more tickets than he otherwise would have.


Even savers are looked on with disfavor. Keynes postulated that savers reduced the flow of spending and that in doing so they reduced the level of economic activity. Savers seldom hold their money idle. They may invest the funds themselves. They may lend them to someone who will invest them in production or they may leave them with a bank or other lending institution which will lend them for productive investment. The saver gives up current consumption to bolster future production.

Even in the rare case in which a saver holds funds idle he does not injure others. He reduces demand. That holds prices to a lower level and benefits consumers.

The terms hoarder, speculator, scalper, saver—and even black marketer are used in an attempt to automatically discredit various people who actually perform useful economic services. When we hear such pejorative labels we must look into the motives of the person who is using them.