To Larks and Shminux - I am twisting the idea of arbitrage, to be more like 'economic profit' or 'being sure to beat the market rate of return on investment/altruism'. Maybe I should stop using the term arbitrage.

"Isn't your point basically just that consumer surplus can be unusually high for individuals with unusual demand functions because the supply (of chances to do good) is fixed so lower demand => lower price?"

Yes, though the supply surve just slopes upwards - it isn't vertical.

I could re-write the principle as 'when supply curves slope upwards the purchases that offer the highest consumer surplus to you will mostly be things that you value but others don't.' On financial markets that isn't so important as most investors have very similar values, but in other areas it matters more.

I like your point about feedback loops in finance, but shouldn't proven effective philanthropists attract more donations if people cared about efficacy?