A Capitalism for the People, Amazon, and Culture

Luigi Zingales, in his book A Capitalism for the People, brings back a traditional American concern about “bigness” in government and markets.  Libgressives seem to worry only about that latter, libertarians/conservatives only the former.  Zingales isn’t so much worried about the economic problems associated with monopoly* as the danger of large corporations throwing their weight around in the political arena.  This is indeed a worry and Zingales’ work is an important contribution.  But we might also want to think about how “bigness” can impact the cultural realm as well, and not always for the good.

Big and extensive businesses like Taco Bell and Amazon can make certain products and experiences more available to people outside of urban centers.  I, for one, was happy to have Taco Bell give me my first taste of “Mexican” food in the ethnic food desert I grew up in and went to college in.  Sure, it wasn’t the best food but it was consistent and cheap – and induced me to seek out better and higher quality variants in the future.   Likewise, Amazon allows us of us to have almost all books – popular and esoteric – delivered to our doorstep in a few days no matter where we live in the US.

But now Amazon’s dominant market position may make things pricier – at least in the short-term – for book lovers to get their fix.  Here is a New York Times article on this, which notes:

It is difficult to comprehensively track the movement of prices on Amazon, so the evidence is anecdotal and fragmentary. But books are one of the few consumer items that still have a price printed on them. Any Amazon customer who uses the retailer’s “Saved for Later” basket has noticed its prices have all the permanence of plane fares. No explanation is ever given for why a price has changed.

I’m less worried about this problem (in the long-run) given that barriers to entry in book selling are very low, especially with the internet here to stay.  But Ted Striphas of Indiana University makes a good point in that article:

“Amazon is doing something vitally important for book culture by making books readily available in places they might not otherwise exist,” said Ted Striphas, an associate professor at Indiana University Bloomington. “But culture is best when it is robust and decentralized, not when there is a single authority that controls the bulk of every transaction.” (emphasis added)

So even if the New York Times isn’t picking up on a trend and prices remain low at Amazon, there is also a potential cost to all of us in having such a large and powerful force as a gatekeeper of sorts in the cultural diffusion process.  It isn’t that Amazon will prevent us from getting any book we want.  It is that its pricing policies and marketing strategy can hugely impact what types of thing Americans are incentivized, so to speak, to read.  So that concerns me.**  Furthermore, in an age in which corporations are induced or threatened by government pressure to do their bidding, it makes me even more concerned.  No, I’m not saying Amazon is trying to sell ObamaCare or anything else by pushing low prices on liberal defenses of such things – but we have seen the government try to get the NFL to sell its policies and TV networks did pitch the drug war to unsuspecting consumers.  Moreover, libraries around the country will now be used by the Feds to pitch ObamaCare to the masses.  So it isn’t out of the realm of possibility.  And a private company should have every right to do so if it wants to support a political cause in this way (assuming no government pressure).

But I think Striphas is right to suggest that society is healthier when we have a great deal of decentralization in cultural production and transmission.  Fortunately, many factors – not least markets in general (including the internet and cable tv parts of it) – do more than enough to alleviate much concern about cultural monopoly.  But that doesn’t mean we have to be entirely sanguine about bigness in this particular book selling part of the market.  Long live Amazon but may its competitors stay alive too!

* See Stigler for why this isn’t that much of a problem.

** Even though I reject the notion popular with my students and many Americans that marketeers rule the world and can induce demand for anything and manipulate our preferences.

3 thoughts on “A Capitalism for the People, Amazon, and Culture

  1. The other Internet company that made things available outside urban centers was eBay. I started selling when I found I could get about 2/3 of retail for collectibles rather than the 20% or so a dealer pays. I noticed many sales to rural areas, in one case I guessed the buyer might have had a 300 mile drive to find a store.

    The dilemma with large firms like eBay and Amazon is that part of their advantage is their size. Many web sites have tried to provide online auctions. Only eBay has had the traffic volume to make it work. If I want to get the maximum exposure when selling at auction, eBay is the place to do it.

    Similarly, more than books, Amazon provides one stop shopping. Why drive to a store or hunt through smaller company web sites when most products are sold through Amazon and a fairly large percentage provide free 2 day shipping using Amazon Prime?

    The rise of both online markets is another step in the evolution of retailing. Over 100 years ago Sears and Montgomery Ward were the “Amazon” of the day, providing rural customers with a large selection of products that local stores didn’t carry. Large mail order catalogs lost out as larger retail stores spread outside the larger cities and as the automobile made rural residents more mobile. Since then we’ve seen a switch from “sell everything” department stores to discount stores and specialized “big box” stores. Retailing and commerce evolves as technology and preferences evolve.

    Amazon’s current dominance in online retailing certainly allows it to control the books (or other products) being sold by adjusting prices or stocking more of a preferred product. Yet this control will only survive so long as Amazon satisfies demand. But as the history of the last hundred odd years shows, nothing is permanent in retailing.

    1. Yes, as I noted in my ** footnote, I generally agree with you. You provide some nice points, so thanks for the comment. But I think the point about the value of decentralism is still important.

  2. I totally buy your argument about the value of decentralization but what, if anything, we should do about big companies is another question. No principle of economics says prices can’t or shouldn’t sometimes go up. And history offers many examples of companies that got successful and big–and then weakened and faltered. (The card companies, IBM, Polaroid, Microsoft, etc.) It’s all part of the churn. And what’s Amazon’s strength? It’s really efficient at letting anyone (any vendor or product, that is) get through the gate to consumers. Some gatekeeper!

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