October 25, 2009

Losers crying monopoly: Booksellers edition

One of the economic themes I try to emphasize is the bogosity of most of our notions about monopolists who fleece consumers. Historically, that has rarely happened, unless the government propped them up. When the business enjoys a high level of control because it won fair and square, there is basically no such thing as a harmful monopoly in reality (theory allows it, of course).

What we think of as harmful monopolies were actually slashing prices for consumers, boosting the level of output, improving the quality of their product, and thereby driving all of their inferior competitors out of business. It is these losers in the struggle who have raised the biggest stink about an industry becoming more and more concentrated in a few companies' hands. Of course, human nature must harbor a fear of a few people controlling so much stuff, or else the failed business interests could never have whipped up popular support for cracking down on railroads, oil industries, Hollywood, software makers, and whoever will be bruised by the government's antitrust bludgeon next year.

Here is the latest installment of this pathetic story: small-scale bookstores want the government to train its antitrust guns on Amazon, Wal-Mart, and Target for slashing their prices on popular books, claiming that this will tend to erode the mom & pop bookstores and give these big guys even greater market share. If you read the WSJ article cited, you'll see that the lower prices are not coming from the retailers paying less to the publishing houses -- instead they're taking greater losses themselves in order to get a leg up on their competitors.

You remember what book-buying was like before Amazon -- hardly any variety, high prices (corrected for inflation), recommendations that reflected whatever weirdos who worked there, and snobby employees who thought that working at a "good bookstore" was going to be their springboard to being crowned Poet Laureate.

I still think bookstores will continue to exist because they allow people to browse through as much of a book as they want before deciding whether or not to buy it. Books really are goods that need to be sampled before someone decides to buy it. That's something that you can't do with any online bookseller. Since bookstores apparently can't compete very well on prices, they'll have to offer a higher-quality browsing experience to stay competitive against online retailers. You've surely noticed how much nicer bookstores have gotten recently, no doubt because of the online threat.

I'm not worried that most people might eventually do their sampling at brick-and-mortar stores and then buy the books they like online. That will wipe out brick-and-mortar stores, but then if they disappeared, so would the online booksellers -- after all, people would have no way to sample books anymore. Only if online retailers can provide a good enough browsing experience will they be able to replace brick-and-mortar stores permanently. As things stand now, though, you can't flip through most books on Amazon. On the plus side, for books that you can browse, you can also search them, which goes far beyond what you can do with a hard copy. Does the book discuss something you're interested in? Just search and find out.


  1. Kindle and the Sony e-book reader might prove to be even bigger threats. Agreed, though, that bookstores have certain advantages that'll probably ensure their survival, though perhaps at a somewhat reduced level.


  2. What about the coffee shop inside the book store. Would that be an example of a book store trying to make its browsing more accessible?

  3. Not that I do much reading but I don't see it as a huge problem unless the quality declines as a result.

    Companies like Walmart sell absolute garbage to the public because that's what the public wants to pay for. They make everything affordable for the unfortunate which has it's merit but they also make everything disposable. If publishers and in turn writers are forced to decrease their bottom line too much they'll end up putting less effort into their books thus eventually leading to what is essentially fluff.

    The other problem with some of these mega-stores is that they only sell whats popular. This is fine for 90% of the public and makes the most business sense but I hate how everything is targeted and pushed for by the dumbest members of society.

  4. Jebby, you clearly don't read much. Every modern book is trash. The best sellers are absolute trash. Case in point: Twilight.

    - Breeze


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