You have people making offers to buy and people making offers to sell. You're free to take someone else's offer or make your own. The biggest difference is probably that there are many many transactions for the same item occuring. When people are overpaying for auctions, it's because there is only one auction so only the highest bidder gets it. With Bitcoin (or stocks, or gold, or oil, or corn), people that didn't want to pay a particular price can wait for someone else to make a better offer and buy it later.
To take his jar of coins analogy, you would first have to create many jars with the same number/value of coins inside. Since no central entity creates Bitcoins, lets say the jars are distributed among a few hundred different people. When someone wants to sell one, he doesn't get the luxury of asking everyone else to make a bid - he has to compete with everyone else who wants to sell their jars. The buyers will line up in order of the price they are willing to pay, and the sellers in order of the price they are willing to take. Where they meet will be the price the market has discovered. There is no reason to believe that price would tend to be higher (or lower) than the real value of the jar based on auction theory.
Auctions are not limited to a single item, radio frequencies and bus routes are just few of the examples that are sold in multiple item auctions. There is nothing special about the number one in auction rather than a single item is limited in supply, but in most cases two items can be of limited supply as well and even millions. Good example for that can be engineers. Even though there are many of them, their supply according to many is still limited, which causes their salaries to rise.
No, because then I could say "exchanges are the same as auctions in the sense that the person that is selling the item is the one who is willing to offer the cheapest price". This would imply exchanges tend to produce a price lower than the actual value of the item. Of course that isn't the case because unlike auctions, exchanges are balanced.
It's not just that it is only one item, it's that in your examples there is only one seller. In exchanges, there are many sellers selling identical items.
Do you really think Bitcoins are sold more like radio frequencies and bus routes than oil/gold/corn/stocks?
I'm sure there is truth to an argument that people with 'intense' opinions are over represented in trading activity, leading to increased volatility then there would be otherwise... but this is far from unique to Bitcoin.
