A Defense of Bidding As the Path to Optimal Economic Outcomes
A Defense of Bidding As the Path to Optimal Economic Outcomes
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What is bidding? This is an act of trying to buy something. Waitasec. How can bidding be unacceptable when we all continually attempt to purchase goods and services? We do so not only every day, but practically every hour.

Let me count some of the ways.

1. Many Chinese people have purchased homes on the west coast of the United States and on upward into Canada. From San Diego to Los Angeles to San Francisco to Portland, Seattle and Vancouver, British Columbia Canada, wealthy citizens of that country are buying houses. Elsewhere in the U.S. as well. Sometimes they leave these homes empty. Upon occasion they park their teen aged children in these holdings as occupants.

It is not too difficult to see why these people would engage in such commercial interactions. The domestic scene in China is anything but serene, and their citizens want an escape path if and when serious difficulties arise.

What is the reaction of those on the Pacific coast? Sellers are presumably happy. We know that since these sales are voluntary. But buyers? It is no exaggeration to say that they are frothing at the mouth with anger and dismay. They feel hard done by, to put the matter lightly. Properties that were once within their reach before this foreign “onslaught” are no longer available to them. This gives rise to anti-Chinese feelings and hatred for “capitalism” since they hold these people, and the system that allows them to bid for real estate, responsible.

2. When members of the middle and upper class buy homes in poor areas they are accused of gentrification. How dare such folk bid for inner city properties! They have no respect. They are intruders! They are ruining the weltanschauung of the neighborhood. Often they have different culinary tastes than those they displace, which creates even further dislocations, as extant restaurants and groceries disappear. Newer ones take their places, and these do not cater to those who have long lived there. True, landlords and homeowners are in a better position than tenants. Those who rent are the first to be booted out of the neighborhood by the gentrifiers, despite the fact that their roots in the areas may stretch back for decades. But the lives even of property owners are disrupted, as they must seek greener pastures when they are bought out. No, gentrifiers have a bad press due to a lack of appreciation for the bidding process.

3. University sports teams do not exactly appreciate bidding either. They have arranged matters such that they are not allowed to compete for start athletes against one another, at least not through the intermediation of the cash nexus. Oh, they have “good” reasons for this state of affairs: amateurism, good; professionalism, bad. However, for some reason unbeknownst to anyone, this does not at all apply to the coaches of these sports teams; they get paid, and paid well. Further, professionalism enters the warp and woof of the entire economy. It encompasses doctors, lawyers, teachers, athletes; somehow, civilization has not collapsed as a result of people earning money based on their contributions to the economy.

Why is bidding so important? Why should we defend this institutional arrangement against its multitudinous detractors?

For one thing, with bidding, goods and services tend to flow to those who need them the most. This is only a rough and ready approximation, since interpersonal comparisons of utility cannot be calculated. But these Chinese buyers seem to be pretty desperate.

For another, allowing untrammeled bidding rewards productivity. Other things equal, successful bidders have more money than other folk. In the free enterprise system, there is only one way to become rich: by serving our fellow man. Bill Gates became wealthy not by stealing anything from anyone. If we do not allow the affluent to outbid others, then to that extent we reduce the incentive of all of us to create prosperity.

Third, there is that little matter of justice. If Jones cannot bid against Smith for something they both want, then the rights of the former are subordinated to the power of the latter. But what did Smith ever do so as to be justly free of the bidding of Jones? Nothing whatsoever.

Walter Block holds the Harold E. Wirth Eminent Scholar Endowed Chair in Economics at the J. A. Butt School of Business at Loyola University New Orleans, and is a senior fellow of the Ludwig von Mises Institute.

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