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Populism Returns

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Here’s a letter to someone who works for a most ironically named outfit.

Ms. Robyn Shapiro
American Economic Liberties Project

Ms. Shapiro:

I received today your mass e-mail detailing the many harms that Amazon allegedly inflicts on the American economy. With respect, the economic theory that motivates your colleagues’ findings was all the rage in the 1950s, but has since been thoroughly debunked – a debunking about which your colleagues are apparently unaware.

Before they write again about such matters, I recommend that they consult the research of (among other scholars) Armen Alchian [2], Dominick Armentano [3], George Bittlingmayer [4], Yale Brozen [5], the Nobel laureate Ronald Coase [6], Harold Demsetz [7], Donald Dewey [8], Frank Easterbrook [9], Robert Ekelund [10], Kenneth Elzinga [11], Israel Kirzner [12], Jim Liebeler [13], John McGee [14], the Nobel laureate Vernon Smith [15], Lester Telser [16], Robert Tollison [17], and the Nobel laureate Oliver Williamson [18]. That none of these influential scholars is as much as mentioned in your accompanying document strikes me as being akin to asserting the incontestability of creationism as if nothing had ever been written by the likes of Charles Darwin, Richard Dawkins, Daniel Dennett, Matt Ridley, John Maynard Smith, and Robert Trivers. The exercise simply doesn’t work.

Of course, debating the relative merits of different theories takes time and intellectual energy. So I have a different proposal: If your colleagues are correct that Amazon is reaping huge monopoly profits (while, by the way, simultaneously charging prices predatorily low – quite a trick, but let’s not pick nits), then they can prove to the world the truth of their insight by going into competition with Amazon.

Retailing is an industry famously free of legal barriers to entry. Let them take their case to venture investors and other mad-for-profit capitalists. If your colleagues are correct, financing will gush their way and they’ll make a fortune while creating a competitive firm that eliminates the market power that they are so certain Amazon now possesses. But if they refuse to put their money where their mouths are, there is no reason why we should trust their assessment of market conditions.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

P.S. I agree with your scholars that Amazon sometimes receives illegitimate tax breaks from state and local governments. But these handouts are hardly key to Amazon’s success.