Monday, November 28

Winnipeg's ticket gouging ban makes matters worse

In Manitoba, it's against the law (specifically, section 60 of the Amusements Act) to sell tickets for more than what you paid for them, punishable with a fine up to $5,000. There are good intentions behind the law — it's a nice ideal to have a society where no one gouges you on ticket re-sales. But in reality, this law exacerbates the precise problem it is supposed to solve.

A great case study is the Atlanta-Thrashers-turned-Winnipeg-Jets' first-ever regular season NHL game. While the face value of Winnipeg Jets tickets range from $49 to $200, tickets were selling for more than $3,000 on the resale market.

Ticket resellers are clearly flouting the Amusements Act. And despite the act's name, police appear to be anything but amused, with busts being made against scalpers. So it's not one of these strange, antiquated laws — it's a law that's being enforced.

Clearly, the potential $5,000 penalty is not strong enough to deter scalping. But does the penalty make matters better or worse?

Sure, the law probably deters some people from scalping. But the threat of getting busted by the police makes reselling tickets more risky. To compensate for the potential of paying a $5,000 fine, ticket sellers will have to charge more.

This is basic concept in the "economics of crime" discipline — whether it's scalped tickets, prostitution or drugs, enforcement raises prices and creates bigger profits for the sellers who don't get caught. On top of that, society has to pay for the police to go out and catch the bad guys. These concepts are summed up well in a paper by one of my favourite economists, Nobel Prize-winner Gary Becker,.

A better suggestion, according to Becker,  is to tax crime. Make ticket resellers pay a big tax on sales. Then you don't have to spend money on police to enforce crime, and you'll eat into some of the scalpers' profits.

But before Manitoba rushes in with a ticket tax, they should really question whether they should deter scalping in the first place. Unlike with drugs or prostitution, where it's not hard to pinpoint negative consequences to society (break and enters to generate funds for drug habits, dirty needles and condoms discared in the streets, unwanted babies, etc.), it's pretty hard to identify any harm created by scalped tickets.

The scalper gets rich, and someone else gets to see a hockey game. The assertion by Winnipeg police Const. Jason Michalyshen that buyers are getting "victimized"simply isn't true — the buyers are choosing to buy the tickets out of their own free will (if anything, it's the ticket holders who aren't scalping their tickets for $3,000 who need help).