All Commentary
Friday, February 1, 2002

In Defense of Scalping

What's So Wrong about Ticket Scalping?

I submit that it’s not disingenuous for the Broadway producers of The Producers to say they’re trying to “strike a blow at the heart of the scalping operation” by setting aside at least 50 seats for each performance and charging a cool $480 a ticket.

That price is almost five times the $100 charged for its best seats, itself a Broadway record–yet one still too low, I further submit, as evidenced by the long lines at the box office. So this move is simply smart entrepreneurship, a service to the theater public, who may be relieved of coping with the box office or dealing with scalpers, a kind of reduction in transaction costs, in the jargon of Nobel economist Ronald Coase.

Good then that Rocco Landesman, a producer of the show, is up front, saying the scalpers’ money will now go to “the people who created the show.” Good too that the move wins a nod from New York State Attorney General Eliot L. Spitzer, who favors repeal of New York’s anti-scalping laws to “let the market function.” Yet, pray, apart from possible scalper payoffs, or “ice,” to some theater operators, box-office employees, and theater agents to breach, sub rosa, their contracts, what’s wrong with scalping?

Nothing really. It’s simply an aspect of our market, or voluntary-exchange system. A hit’s a hit, and The Producers is a super hit. Supply and demand are at work, with here a daily fixed supply of tickets at set prices. It’s that fixed supply and those set prices that change things. Prices ration goods and services, as almost everybody knows. When demand is off, producers can cut prices, as attested by that same-day discount ticket pavilion in the middle of Times Square. But when demand is red-hot, as with The Producers, in come, at least until recently, the scalpers to collect what the market-that is, the buyers-will bear. They perform a service by saving time for those anxious to see the show without standing in long lines to do so. For isn’t the scalper but a middleman performing a valued service, despite his putdown name and often illegal but not necessarily evil status? Scalpers convert time cost into money cost for those who buy tickets from them. Outlawing scalping favors those with time to spare over those with money to spare. Why should the government take sides?

Peaceful Action

Don’t scalpers deserve their day in the court of public opinion? Aren’t they, like the rest of us, simply responding to supply and demand in one way or another. Don’t their activities come under FEE founder Leonard Read’s rubric, “anything that’s peaceful”? For isn’t this, broadly, how the New York Stock Exchange itself works-without set stock prices? Or the Chicago commodity futures market without set commodity prices? Or art and antique auctions mostly without set or “minimum” prices but with their free-bid prices? Or even your local gas station, albeit with “set” pump prices but ones subject to frequent ups or downs? Or soft realty markets, where asking prices drift down as demand eases?

Meanwhile, how nice to see ticket sales to New York theater and sporting events move onto the Internet or into Connecticut or New Jersey where scalping is legal. Let competition work its wonders. To be sure, critics cry “shame” on those who baldly cater to the well-to-do or who don’t make the theater more available to those of lesser means. Well, for the latter there are other alternatives, such as movie houses and even “free” TV.

Besides, what’s wrong with being or striving to be well-to-do? Isn’t that an economic incentive, a part of human nature, a way of the free market too?

Contributing editor William Peterson is an adjunct scholar with the Heritage Foundation.

  • William H. Peterson (1921-2012) was an economist, businessman and author who wrote extensively on Austrian Economics. He completed his PhD at New York University in 1952 under the supervision of Ludwig von Mises.