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Irrationally Pessimistic about Corporations

Here’s a letter to a DC-area radio station, WTOP:

During today’s 1:00pm hour you played a clip of a listener who is “livid that Americans aren’t up in arms against the devastation that corporations inflict” on us.  This gentleman’s anger was sparked by the BP oil spill.

I have little sympathy for BP, it being a firm that has often feasted at government troughs.  But some perspective is now very much needed on the costs and benefits of corporations.

Consider that the latest estimated cost of the BP spill is $33 billion.  That’s a lot of money, to be sure.  But this sum pales in comparison to the amount of money that Wal-Mart’s retailing efficiencies are estimated to save consumers each year: $200 billion.*

Oil spills are compellingly photographable – and, hence, attention-getting and emotion-stirring.  In contrast, lower prices for – which, by the way, mean fewer resources used to bring to market – clothing, children’s toys, digital cameras, camping equipment, kitchen appliances, groceries, and other goods that we routinely enjoy are not photographable in any compelling way.  The result is that the social benefits of corporate innovations and competition are easily overlooked, ignored, taken for granted, forgotten.  But these benefits are enormous.  And any assessment of the worthiness of corporations in modern life had best take them into accurate account lest we adopt policies that make us all poor and miserable.

Donald J. Boudreaux

* See Matt Ridley’s splendid new book, The Rational Optimist (New York: HarperCollins, 2010), p. 113.  A few pages earlier (p. 110), Matt observes

Yet for all the liberating effects of commerce, most modern commentators see a far greater threat to human freedom from the power of corporations that free markets inevitably throw up.  The fashionable cultural critic sees himself or herself as David slinging stones at vast, corrupt and dehumanizing Goliath-like corporations that punish, pollute and profiteer with impunity.