Editing 1499: Arbitrage

In {{w|economics}} and {{w|finance}}, {{w|arbitrage}} is the practice of buying cheaply on one market whilst immediately selling at a higher price on another market, taking advantage of the price difference to make relatively risk-free profit. In real-world {{w|Market liquidity|liquid financial markets}}, arbitrage helps the market to converge on one price for a product. Arbitrageurs are the individuals performing this act to equalize the prices in those markets and hopefully make a profit.

The place where [[Cueball]] and [[Hairy]] are eating is giving away unlimited free {{w|potato chip|potato}}/{{w|tortilla chip}}s, probably serving the same function as a bread basket, being a cheap but welcome appetizer while patrons wait for their orders. Hairy is acting as an arbitrageur by collecting the chips to later resell them. This is much to the consternation of Cueball, who is (depending on how you interpret the simple art-style) holding his hands up in front of his mouth in shock, covering the lower half of his face in shame, covering his eyes out of denial, sliding his palms down the front of his face in disgust, face palming in exasperation, or eating chips – possibly all in sequence.

Trying this strategy in the real world would not work. Customers leaving the restaurant with bags of chips might well be barred from the establishment. More simply, the restaurant is under no obligation to keep refilling the bowls indefinitely; if a customer's demands for more chips became unreasonable, they could simply refuse to bring any more. In either case, it's highly unlikely that a customer could leave with enough chips to offset the cost of even an inexpensive meal. Additionally, there would likely be a problem of a lack of demand, given the absence of a {{w|secondary market}}. Case in point: would ''you'' buy open bags of perishable, presumably hand-soiled chips? Didn't think so.

In the caption below the comic, [[Randall]] suggests that society only functions because we don't take people like Hairy "out to dinner"; we generally have an aversion to dealing with people with such extreme self-interest, bordering on {{w|Psychopathy#Sociopathy|sociopathic}} behavior. Traditional theories of capitalism are based on the concept that people will act in their own economic self-interest, but in reality this is usually limited by both legal strictures and unspoken social norms. There are many aspects of society that are only possible because we trust most people to keep their self-interested actions within reasonable bounds. We see from Cueball's reaction that he is appalled by what Hairy is doing in believing he can profit from the apparent generosity.

A distinguishing feature of {{w|social animals}}, rather than animals simply sharing a {{w|habitat}}, is that they perform tasks that benefit their group. All such societies rely on some situations where the individual is not working purely on short term self-interest. The payoff for this is generally that co-operation makes things better for the group as a whole. Most people would find Hairy's behavior embarrassing and shameful, and thus would not socialize with people who behave like that. By rejecting such individuals, society protects itself from such people.

The title text mentions the ''{{w|invisible hand}}''. In economics this is a metaphor used by {{w|Adam Smith}} to describe unintended social benefits resulting from the individual actions of self-interested parties. In the context of arbitrage, the ''invisible hand'' compels all of a given fungible substance to be sold for the same price, as a result of the actions of individuals like Hairy (or [[Black Hat]] in [[958: Hotels]]) who are only seeking personal profit. The ''invisible hand'' is a sort of personification of the market; in the title text, the person has become so real that it can be sent a text message, but, despite presumably being able to hold a phone, the Hand doesn't reply (it IS only a hand). It is tempting to wonder why Randall/Cueball is texting it in the first place - not, presumably, to invite it to dinner, since the market would doubtless behave just as Hairy is doing. As it is invisible, though, perhaps it would at least be less embarrassing to sit at a table with.

:[On the bag is written: Chips.]

 

 

 

The same idea was previously used in [[1110: Click and Drag]], where a person takes [http://imgs.xkcd.com/clickdrag/2n2w.png free drinks to resell]. Later, [[1721: Business Idea]] implies a similar plan to extract wealth out of a small market inefficiency that, in reality, would be far too onerous to exploit; in this case, premium gasoline at regular price. See also the ''[[what if? (blog)|what if?]]'' article ''{{what if|22|Cost of Pennies}}'' regarding why it would not be worth trying these kind of ventures out.