Why is a $15 toy selling for $5,000?

This New York Times headline that caught my eye: “How the Bot Stole Christmas: Toys Like Fingerlings Are Snapped Up and Resold.”

I had no idea what a Fingerling was or why I should care. Then I learned that fingerlings are “colorful chirping monkeys (and sloths and unicorns) that wrap around your finger.” They have become one of the most sought-after toys on Christmas lists.

Here’s why they are in the news: the fifteen-dollar creatures are sold out online nearly everywhere. You can’t find them at Toys “R” Us, Walmart, or Target. But you can buy them on eBay and Amazon for double, triple, and quadruple their original price. One Fingerling on eBay is advertised for $5,000.

Here’s why: popular items are being purchased by software programs as soon as they are offered for sale. These computer “bots” buy the products at a speed that humans can’t match. They also subscribe to online sales and use multiple email addresses to bypass the purchasing limits set by retailers.

Good Morning America also reported on this story, noting that a Barbie Hello Dream House which retails for $299.99 is being sold on eBay for nearly $1,700. A Nintendo video game that normally sells for $79.99 is being resold for $13,000.

Lawmakers are calling on retailers to “block the bots.” The National Retail Federation is working to “take away the tools being used against innocent customers.” But eBay explains: “As an open marketplace, eBay is a global indicator of trends in which supply and demand dictate the pricing of items. As long as the item is legal to sell and complies with our policies, it can be sold on eBay.”

And therein lies the problem.

The “invisible hand” of greed

In The Wealth of Nations, Scottish economist Adam Smith (1723-1790) spoke of the “invisible hand” of the market. He argued that an economy functions best in a free market scenario where everyone works for his or her own interest. If people are allowed to trade freely, self-interested traders will compete with…