No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Six: Applications in Markets 140 at multiple cameras at the same time, for example, and consider the various features at the same time. Often the merchant will put the most important features on a prominent display to ease your comparison. Another benefit is that we expect Best Buy or other merchants to do some of the research for us; if the camera is truly a piece of junk and Best Buy sells it, it will reduce their image as a provider of quality electronics. So it’s in their interest to search out the best deals for you; in effect you are paying them for the gains from specialization in the area of consumer electronics research. Similarly, although not enough to satisfy critics, Walmart finds it in its interest to independently test product safety (independent from the original manufacturer, not necessarily independent of Walmart). Consumers spend less time researching the safety of a given product knowing that the middleman has done some of that testing for them, and much more efficiently than they could have done themselves. THE MOST IMPORTANT MIDDLEMAN EVER? (GENESIS 41:41–56) v. 41: “Pharaoh said to Joseph, ‘See, I have set you over all the land of Egypt.’” v. 47-49: “During the seven years of plenty the land brought forth abundantly. So he gathered all the food of these seven years which occurred in the land of Egypt and placed the food in the cities; he placed in every city the food from its own surrounding fields. Thus Joseph stored up grain in great abundance like the sand of the sea, until he stopped measuring it, for it was beyond measure.” vv. 53-56: “When the seven years of plenty which had been in the land of Egypt came to an end, and the seven years of famine began to come, just as Joseph had said, then there was famine in all the lands, but in all the land of Egypt there was bread. So when all the land of Egypt was famished, the people cried out to Pharaoh for bread; and Pharaoh said to all the Egyptians, ‘Go to Joseph; whatever he says to you, you shall do.’ When the famine was spread over all the face of the earth, then Joseph opened all the storehouses, and sold to the Egyptians; and the famine was severe in the land of Egypt.” Joseph was not a producer of grain, but he showed excellent (actually divine!) foresight to be able to anticipate customer demand. If not for this middleman, Egypt and Israel would have starved. No one can doubt the value of Joseph to the people of that era. Pharaoh certainly didn’t, since he told the people to “Go see Joseph!” And Joseph was...a middleman . SPECULATION “Speculators driving up oil prices, Senate panel told,” reads the headline. Speculators are blamed for all sorts of evil, especially when prices spike wildly. Indeed, when there are wild price swings you can bet that there are speculators trying to profit from the price changes. But are the speculators a stabilizing or destabilizing force? Do the speculators tend to drive prices in line with economic fundamentals? Our supply and demand analysis can help us find an answer to these questions. Consider an oil market with an equilibrium price of $70 per barrel. Let’s say that a speculator believes the price will rise in the future; whether demand will increase or