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Retailing Nonsense

Here’s a letter to the New York Times:


In his critical analysis of Kathryn Judge’s skeptical assessment of middlemen – by which she seems to mostly mean “retailers” – Peter Coy is, well, too coy (“Are Middlemen Really Profit-Making Parasites?” July 15).

For example, when he reports that Prof. Judge “worries that middlemen can make outsize profits by taking advantage of their indispensable position in transactions,” Mr. Coy should have noted that, because in nearly all cases consumers are free to offer to buy directly from producers, it’s simply untrue that any retailer’s position in transactions is “indispensable.” Apart from the relatively few cases in which government regulations restrict consumers’ abilities to circumvent retailers, each retailer’s position exists only because, and insofar as, consumers find it less costly or more convenient to purchase through retailers than to spend time, effort, and money traveling about to purchase directly from producers or wholesalers.

It happens that Prof. Judge’s book, Direct, is selling reasonably well at Amazon.com despite the (in this case easy) ability of buyers to purchase it directly from its publisher. Clearly, Amazon’s position as a book retailer isn’t “indispensable.” The same is true for Amazon’s – and Home Depot’s, and Ikea’s, and Target’s, and Kroger’s, and PetSmart’s, and other retailers’ – sales of home appliances, clothing, furniture, groceries, and almost all of the countless other goods that consumers eagerly buy from retailers.

A more-accurate description of Prof. Judge’s position is that she “worries that middlemen can make profits by so significantly reducing consumers’ costs of obtaining goods that consumers almost never even think of not using retailers’ services.”

Prof. Judge as a book author – and she and the rest of us as consumers – should be grateful that retailers have made themselves so “indispensable.”

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

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