Amazon.com: Christmas Savior or Grinch

LvMIC:

One of the key lessons in economics is recognizing the difference between what is good for the producer and what is good for the consumer.  Those who decry “unfair” business practices often do so in order to gain special privileges over competitors.  To illustrate this point, see Bastiat’s great satire piece “Candlemakers’ Petition” which is a mock lobbying attempt on behalf of candlemakers to have the French Government block out the sun due to its superiority in the marketplace of providing light.

So as we are in the midst of the holiday season, it looks like fine art of demonizing business for being “too competitive” has again become vogue.  Via The Guardian:

An Amazon.com promotion, which offered customers a discount if they let Amazon know the prices of items for sale in traditional shops, has provoked widespread anger, drawing a rebuke from a senator and seeing it compared to Dr Seuss‘s Christmas-stealing Grinch.

The deal, which ran on Saturday, gave customers a 5% discount (up to $5) off Amazon.com’s price on up to three products if they used the retailer’s price check app while shopping in physical stores. Although books were not included – the eligible categories were DVDs, electronics, toys, music and sporting goods – the promotion prompted a furious response from beleaguered independent bookshops and from the American Booksellers Association, as well as from senator Olympia Snowe, who called it “an attack on Main Street businesses [and] anti-competitive behaviour that could shutter the doors of America’s small businesses”.

Chalk up another politician who can’t see past her next reelection to recognize why price competition, the pith of free market competition, is so beneficial for consumers.  What some may call predatory pricing is the kind of “feet to the fire” practice that incentivizes increased production through the cutting of input costs or technological improvements.  Consumers are the beneficiaries as not only are they offered consumables at a cheaper price, they see an increase in discretionary income.  This is what Gary North (my personal favorite writer on political economy) calls “Adapt or Die.”  In reference to an email where someone accuses Amazon of “robbing” small businesses, North replies:

Here is the cry of despair from a seller who is about to be displaced. He sees what is coming. He will not be able to compete. He identifies Amazon’s offer as “robbing small business of valuable customers.”

Excuse me? Robbing? This language implies that small businesses OWN their customers. Does he really mean that making them better offers is a form of theft? This is the implication of what he says…

The seller sees his customers as his birthright. For example, the seller of labor sees his job as his birthright. He can quit his job at any time, but he wants the state to prohibit his employer from firing him for any reason. Trade unions have always called on the state to prohibit employers from hiring replacements when the union goes on strike. What is the logic of this position? This: members of the union OWN these jobs. Replacements are STEALING these jobs. So, the unions call on the federal government to stop this theft. This is what the National Labor Relations Board was set up to do in the New Deal (1933-45). It has done this ever since.

Believing that you “own” a job or market is fantastical.  Jobs and markets are products of individuals specializing their labor to fulfill demand at a profit.  There is no ownership outside of what would constitute slavery of forcing employers or customers to purchase your labor.

Amazon’s new marketing tactic is ingenious because it utilizes a device many people carry at all times to engage in pricing research.  Instead of hiring workers, it turns consumers into employees by offering them discounts.  At the same time, it avoids potential private property restrictions since most businesses won’t ban potential customers for the sheer fact that they own a smartphone.

Amazon gains valuable market information, competitors are kept on guard, and consumers win in the end.  In an age where Leviathan has its hands on everything economical, at least one aspect of capitalism still remains popular: the never-quenched yearning for a bargain.