There are many scammers. It is quite easy to figure out when someone is trying to scam. If a seller will not setup a deal in a manner where "both" parties are protected, then usually it is a scam.
Yeah, most times. But buyers are also sneaky. One buyer recently wanted to escrow with a site that said (and this is verbatum) "The arbitrators below were not vetted by Bitrated." So you want me to send my coins to who? Some random who could very well be yourself?
The system as it is, is clearly not working.
I think you are exactly correct, the system is not working correctly. Negative trust for a user evidently is not a deterrent. For every risk reduction there is a counter.....for instance if a seller uses escrow they can fix their own escrow holder to steal coins, the same can go for a buyer. Paypal can be used by the scammer buyer or the scammer seller side. Looking at Ebay, the only way they solve the issue is through buyer feedback.....and that requires a bad sale or a rip off to happen in the first place. The immediate and anonomyous nature of bitcoin is the same thing that makes it useful for scams. Open to any ideas......