Let me answer your question with another question.
If I were to trade you my Bitcoin for your litecoin, how would I be able to resolve a dispute if you had sent me your litecoin directly that I would not be able to do if I was acting as escrow for my alt?
What is the difference? In both cases there is the exact same potential bias
Thank you for proving my point. In a scenario where you secretly "self-escrow", you would have a bias similar to two parties trying to resolve a dispute in a trade without an escrow. As an escrow, hiding this bias from the other party is misleading and disingenuous.
No I am not. As I previously mentioned, there is no reason why someone would request the use of an escrow when trading with me directly if they would trust me with a similar amount as escrow. In both cases I could just run away with the money.
We seem to be discussing different things here. I am not talking about someone trusting an escrow with an amount of money, I am taking about trusting the escrow will be neutral and act with as little bias as possible if a dispute were to occur.
Lets look at two scenarios:
1) Alice and Bob conduct a trade with Charlie acting as escrow. All three parties are different people.
2) Alice and Bob conduct a trade with Daniel acting a escrow. Alice thinks Bob and Daniel are different people, but secretly Bob and Daniel are the same person.
If a dispute were to occur during the trade (for example, an honest misunderstanding), would you rather be Alice in scenario 1 or 2?
You are missing the point. If I trust someone with some amount of money then I will send first to them when trading with them, no escrow necessary. Any dispute would get resolved the exact same way if scenario 2 were to happen.
It is not necessary to use escrow in every trade you participate in assuming that one party is sufficiently trusted.