No one makes you shop at Wal-Mart

In increasing order of seriousness.

As noted, the heart of the book is a well-written primer on let’s call it new economics.  As such, this book would make a good supplement to an advanced undergraduate class.  But the activism and attacks on MarketThink are occasionally distracting.  Chapter 1, for example, opens with a
denunciation of inequality.  Nothing wrong with that but Slee doesn’t even attempt to show that there is any
connection between rising inequality and the failure of MarketThink theories.  He just lumps things he doesn’t like into one pile. If there were no asymmetric information, no
herding, no coordination problems and so forth I guarantee that there would
still be plenty of inequality.

For the most part, Slee illustrates the new economics with insightful, interesting and often new examples.  But there are clunkers.  I almost threw the book at the wall when he started talking about QWERTY.  Surely, Slee knows that this worn-out example is a joke?  The supposed superiority of the DVORAK keyboard was shown in studies conducted by … Dvorak.  See here.  It’s especially annoying that Slee did not reference, Winners, Losers & Microsoft.

As primer, it’s fine to illustrate with examples and move on but as an attack on markets one expects a balanced consideration of opposing theories.  For example, Slee looks at beer micro-breweries vs. mass brewers arguing that we are currently stuck in the bad mass-equilibrium because micro-breweries rely on word-of-mouth but the institutions which sustain the word-of-mouth equilibrium only work when there are already lots of micro-breweries about which one can talk.  Nice, but here is an alternative theory.  Economies of scale made mass produced beer cheaper and when push came to shove consumers chose the cheaper good product over the more expensive but slightly better product (I don’t eat at 5 star restaurants every night).  New technologies, however, have made micro-brewing more economic and as they have done so we are moving to the mass-customization world that Slee prefers.  Consumers have gotten the best of all worlds – given scarcity – in both time frames.  The beer activists in England that Slee likes moved the process along but in the direction that it was already going.

There is no comparative analysis in the book at all.  No discussion, for example, of how free riding, asymmetric information, herding etc. distorts government choice.  Also, no appreciation that what some of us MarketThink people really advocate is civil society which includes non-profits and voluntary collective action of all kinds.  And, no we are not all corporate shills (p. 106). 

It’s true that outcomes do not always illustrate preferences but often they do.   Maybe people really do not want to walk to school.  It’s subtle but Tom seems all too eager to call in the government to force us into the better equilibrium.  I worry when people start talking about how government can help us to express our true preferences.  Isn’t this what dictators always say?  True freedom is oppression. 

The chapter on power is terrible, I did throw the book against the wall.  Perhaps in order to prepare us to welcome government as the deliverer of our true preferences, Slee wants to diminish the distinction between liberty and coercion.  But a true liberal should never write things like this:

…the formal structure of democracy and free markets is not enough to rule out exploitation and plunder – characteristics usually associated with repressive regimes.

If Tom visits GMU (I happen to know he reads MR) he should watch out because I shall kick him in the shins stating, "I refute you thus."

More seriously, repressive governments around the world threaten, rob, torture and murder with impunity.  Courageous individuals have died trying to escape such regimes while others have died fighting for their rights.  No matter how great are differences in wealth, it is morally wrong to equate what goes on in repressive regimes with capitalist acts between consenting adults.    


Thanks for this excellent review.

I think the bit about breweries is a bit skewed:
"Economies of scale made mass produced beer cheaper and when push came to shove consumers chose the cheaper good product over the more expensive but slightly better product"

Prior to *prohibition* the U.S. had a great diversity of breweries iirc. When prohibition was the law of the land, only the giant brewers had the resources to survive. Smaller breweries either sold out or shut down.

It seems to me that it wasn't consumer preference that drove a preference for mass produced beer, but big-G government interference in legislating morality and squashing a market.

I second the thank-you for the fine review.

Slee's example about multiple equilibria re children walking being an application of the Prisoners Dilemma is confused and wrong. In the Prisoners Dilemma, there's only one equilibrium, involving dominant strategies. There's an outcome in dominated strategies that's better for the participants, but that's often super hard to sustain due to the attraction of the dominant strategy. (That's why some smart folks several thousand years ago came up with stuff like "morals" and rules like "Thou shalt not steal"). What he's talking about in the example is a coordination game with multiple equilibria, not a Prisoners Dilemma at all. Unless you mischaracterize his example, I would regard this as a serious error and a fundamental misunderstanding of the very theories he's attempting to use to attack markets.

Prohibition had some historical importance, but the barriers to entry to microbrewing are not so high that you would expect a policy that was repealed in the '30s to have much effect.

I will at least agree that it's upsetting that so many people use the "No one makes you shop at Wal-mart" defense. But then, many less-refined Wal-mart critics' claims in fact reduce to a claim that people are too stupid to know what's best for them.

A serious discussion of the issue would recognize that e.g. if some law heavily favors big-box stores, it may not be forcing you to shop at Wal-mart, but it is artificially skewing your incentives to the winner in the big-box store race, which is probably Wal-mart. But this is hard for me to agree with since, if anything, Wal-mart has bigger hurdles to face than smaller stores.

Buzzcut cuts to the heart of the matter: so how do we determine what our "true" preferences are if we are not actually choosing them for ourselves? In the "New Economics", the answer always seems to be "government bureaucrats" who are going to determine, through their greater enlightenment, what is actually best for us poor fools. Even with purely democratic governmental action, I challenge anyone to demonstrate that the outcomes in total will ever be as or more reflective of true preferences than those demonstrated by the sum of individual, voluntary transactions.

Indeed, the examples that Tabarrok highlights from Klee's book seem to be very, very weak cases to me:

In the case of beer, I have yet to find a single place in the United States where one cannot get beer from microbrewaries, if that is what one wishes to choose.

In the case highlighted by the ironic title of the book (doubly ironic, in my opinion), I have yet to see any Walmart location, and I have seen over a hundred, that did not also include the entire gamut of retail-store types, including the mom-pop types that are so beloved by the new economists and others on the Left. So, yes, it is enough to state that "no one makes you shop at Walmart" since Walmart is not a monopoly.

The case of children walking/not walking to school needs a more in-depth examination. Let us grant that some parents would have their children walk to school if some critical mass of other parents also choose this option. However, if not enough parents choose the option, then no one does; so, what is lost? Nothing prevents like-minded parents from aggregating their children into groups that are safe enough to walk to school, and, if they are unable to gather this critical mass, the only other option is to coerce the choice on others. Indeed, in this example where there is no critical mass for safety, it is still a choice not to cooperate to make the option "available". Extending this to the argument that developers then start producing housing divisions lacking sidewalks, again, I say, so what is lost? There is still housing being produced with sidewalks, and it is a choice people make to live in one type or the other.

In summary, if the the review is any indication of the content, I would have to pass on this book. Almost every similar argument against the free market I have read basically reduces to a desire to prevent free transactions of certain types that the new economists don't like- like shopping at Walmart, eating Big Macs, forgoing health insurance, or working for sub-minimum wages.

On an unrelated note, does anyone know what happened to Megan McArdle's weblog? I keep getting an "Account Suspended" notice.

Alex, thanks for the clarification. I've been thinking some more about Slee's argument for the potential existence of multiple equilibria embodied in the example of children walking to school (or not). I think what bothers me most is the absence of empirical support for his assertion. One would think that if coordination is possible on either equilibrium, there would be some communities that coordinate on the "walking" equilibrium, just as Great Britain and Japan coordinate on the driving-on-the-left equilibrium. Moreover, if this equilibrium is preferred, folks will reveal this preference by voting with their feet (there's those darn markets again) and moving into such communities. Evidence for this is thin on the ground. And so Slee is left to argue that markets don't allow people to express their true preferences, because people's true preferences are what Slee says they are. In short, the position of the tyrant.

Anyone who disagrees with him

I suppose some options are the following:

1) A bunch of more-or-less isolated individuals "suck it up" and make otherwise suboptimal choices on the hope that, with enough like-minded people, the situation will eventually change.

2) A bunch of passionate people start an organization devoted to coordinated action in pursuit of the new optimum. Social camaraderie, the pleasant feeling of improving the world, and some estimate of the expected gain from achieving the new world all factor into motivation.

3) Individuals band together without a formal organizational structure, and make coordinated decisions in pursuit of the new optimum. Again, social camaraderie and the hope of improving the world are part of the motivation.

4) Individuals or organizations lobby the government to create the conditions favorable for the new optimum. This has the advantage of tapping into a large pool of tax revenue, as well as the power to coerce, if the lobbying is successful.

One irony that Alex does not quite make explicit is that libertarians like him support a substantially different society too-- and have their own vision of the global optimum, which may be hard to achieve because it is fairly far away from the status quo. There are all sorts of coordination games (lobbying, government largesse) supporting the current welfare state.

As Alex and others have said, the real question is not whether suboptimal situations arise, but rather how we decide which situations are "more optimal", and how to pursue those different optimums.

There is no excuse for a serious person not to know about the fallacious QWERTY story, since Liebowitz and Margolis have all their work available at this site.

My beef with this, I suppose, is that I'm not particularly interested in him shoving a "better" equilibrium down my throat, nor in anybody else doing so, for that matter. My choices do reveal preferences, preferences that are naturally conditioned on everybody else's preferences and the effects they have on my environment. That, in and of itself, says nothing remarkable. My choices/preferences are also conditioned on the fact that I live in an industrial society, need oxygen to breathe, have two arms and live on a rocky world in the Sun's liquid water zone. What of it? What makes his vision (or anybody else's) of what the "better" equilibrium might be any better than my own? He can't even fall back on democracy as an answer given his other statements, not that I'd accept it in any case.

mk asked:

Why can't people just decide, without the government, that something special must be done?

The answer, which I suspect you already know, is that doing it via government allows coercion to prevent others from fulfilling their preferences.

No one makes mom and pop enterprises try to compete with WalMart instead of supplying things WalMart doesn't supply.

omg omg omg omg Tom Slee mentioned me in his post:

In the comments section of a recent Marginal Revolution post about the Cato Institute Minimum Wage article I said "My employer requires that I follow instructions from my manager or I can be fired. Is that also coercive? Yes." and another commenter responded "No, refusing to buy future labor from you is not coercive."

That was me! :-)

But then the follow up is disappointing.

I can see what he or she means, but you can also see the false dichotomy here - the law is coercive, everything else is a matter of choice. Tell that to (among many many examples) workers locked-in overnight at Wal-Mart stores.

Er, what? I don't see how I was making that dichotomy there. I was refuting Tom's claim that firing (ceasing future labor purchases) is coercive, since that was one case that I absolutely could not see as being coercive. What does that have to do with locking people in a store?

Was slavery coercion? Yes, and it would surely be a stretch to see slavery as a problem rooted in the state.

I disagree. Free market proponents have long argued that slavery's immorality is reflected in its economic inefficiency, and free markets best reveal this inefficiency to self-interested actors. For an exposition see e.g. Robert P. Murphy's recent interview on

'Some guy commenting on amazon has a good point:'

Not in any of the three paragraphs you quote, he doesn't.

Fun topic. I think the bottom line is that unless the author can show that government coercion can actually produce a better outcome (it can't be a Pareto improvement unless you believe 100% of people want the coerced outcome and yet are unable to self-organize for it) then the fact that there may be coordination problems which lead to lesser efficiency in market selection of revealed preferences is moot. Its also important to remember that the market can discover fill various preferences including niche ones, whereas government is better at forcing a single preference on everyone with its monopoly power.

As for beer, micro-brewed beer is nice, but its not an every day beer for a lot of people. Budweiser is easy to drink and makes more sense for a couple six packs on the beach or for your Sunday football game. Just because elite types prefer a nice micro-brew when they condescend to drink beer doesn't mean its all around "better" for all purposes. Too much heavy micro-brew makes one sick. A nice light "sex in a boat" American beer is sometimes what you want!

I think that Slee's point is simply that the market alters the context for preferencess, and that fundamentally people have ideal preferences that current market configurations keep them from realizing. On that note, government configurations also keep people from realizing ideal preferences.

Charitable reading of Slee: Since both market and government keep people from realizing ideal preferences, better that it be the government, in which collective decision-making about social good is possible.

Uncharitable reading of Slee: Both market and government keep people from realizing ideal preferences, but the government does it less.

No matter how great are differences in wealth, it is morally wrong to equate what goes on in repressive regimes with capitalist acts between consenting adults.

Well said.

'If I remember correctly, Dvorak gives something like a 5-7% boost to efficiency; it's better...'

Not proven. Most of the tests that have been conducted show no more than 4% faster (and some actually showed it to be slightly slower), which isn't enough to rule out some testing effect.

Given the computer keyboard that you can switch to Dvorak easily, and that few people bother, it's probably not any faster at all.

Popular culture encourages people to conform - it makes them feel safe and accepted. We will never have a world of only microbreweries except if we evolve or if we lack decent communication/interaction. The stronger personalities and the unhealthy social misfits deviate. Sometimes society cannot distinguish between the two and that can discourage innovation and originalism. Rebelling against the Wal-Marts would only lead to society coalescing around another conglomerate or even worse, government regulation.

Preferring beer that isn't "fairly" close to water isn't elitist any more than preferring frshly cooked Burger King burgers to ones from Burger King that were sitting around for a while and thrown into a microwave upon your order. Taste matters, which is presumably why Germans have been drinking batch brewed beer long before we rediscovered it once yet another one size fits all government failure was turned back as others have noted above.

More seriously, repressive governments around the world threaten, rob, torture and murder with impunity.

We have met the enemy and it is us, or, more seriously, a small group of us.

Conflict of interest is a powerful cause of emnity between people and if killing a few people means that my interests get first preference ... how do I subvert the government again?

Two criticisms of your review:

(1) "I worry when people start talking about how government can help us to express our true preferences. Isn't this what dictators always say? True freedom is oppression."

Alex, all in all not a bad review, but the above passage leaves something to be desired. Your worry is not a refutation. The book is significant because it is a counterpoint to exactly this statement!

More significantly, your review presents the book as an academic exercise ("a good supplement to an economics 301 course" but ultimately lacking in academic rigor ("no comparative analysis," "fails to cite," "uses bad sources," "makes overly sweeping comparison). On my reading, the book is meant for a wider audience. It isn't supposed to resolve the question, just to negative an argument in its favor "i'm afraid when the government talks about revealing our true preferences."

The last comment ends with a nice summary of a common meme here:

"The problem I have with those critics is not really that they might be without knowledge about economics about that their point of view on life is repressive, backwards thinking and always on the verge of using force to push their special interest through..."

Here is a quote from Slee's now infamous chapter on power (p. 198):

"...limitations to choice are not on/off switches, but are a gradual restriction as a function of increasing transaction costs. In a similar fashion, as the partners in an exchange move along an axis from equality to inequality, the exchange itself moves from equal bargaining to exploitation, even when no explicit coercion takes place."

If you are a true believer in free markets (which I am) you have to look seriously at this point. General hand-waving, eye-rolling and claims about slippery slopes to totalitarianism is nothing more than confirmation bias. Regardless of your perception of Slee's motivation, what is most important is to find fault with the model or reconcile it with conflicting parts of your world view.

While reading Slee's book I had to come to grips with the fact that I believe some aspects of centralized urban planning work better than free market approaches. Why? How can this be? I too wanted to throw the book against the wall. Tabarrok links to "The Voluntary City" which I'm assuming describes free market solutions as an alternative to urban planning. I am not against the voluntary city but I think I want another community to prove it works before promoting such a solution in my own community. The reason I don't want to "eat my own dog food" is that there is a stable equilibrium in the current system that I am comfortable with and I don't want to deal with the transaction costs or unintended consequences of distrupting this equilibrium.

These are the issues Slee explores. They are important and if it takes the eyes of a skeptic to bring them to our attention so be it.

In the comments section of a recent Marginal Revolution post about the Cato Institute Minimum Wage article I said "My employer requires that I follow instructions from my manager or I can be fired. Is that also coercive? Yes." and another commenter responded "No, refusing to buy future labor from you is not coercive."

That was me! :-)

Yeah, that's been bothering me ever since that post. "Refusing to buy" labor, like a layoff, is not coercive. But threatening to fire someone for not doing what you want is coercive. Like if my cable company doesn't offer a good enough service for their rates, I might refuse to buy cable. But if I call them instead and say, "You better offer me ESPN for the same rate or I'm canceling," then I'm trying to use my market power to coerce them. That's why I'm not one of those guys who calls up every six months and says, "I'm thinking about switching" to get a better rate. It's unethical.

Margolis & Liebowitz's point is not that QWERTY is the best possible keyboard layout or even the best one that has been invented, but rather that to show a market failure it is not enough to show that another is slightly better - if the difference is small enough the failure to switch need not represent a failure to coordinate (that theoretically could be overcome by an omniscient government dictating keyboard layout by fiat) but rather could just mean that the benefits of switching don't exceed the costs (of replacing everybody's keyboard and rendering obsolete their experience with QWERTY; which costs would remain even if the switch to Dvorak was universal).

The very, very few people whose productivity is closely enough tied to their typing speed that they are better off with Dvorak (with which is unquestionably easier to attain a very high typing speed) can do so already and their documents, typed with Dvorak, can be read by or transferred to the computers of others just the same as if they had been typed in QWERTY.

I'm rather late in this discussion, but here are an excerpt from, and link to a study of some of the subsidies that Wal-Mart receives in the US:

This method, which does not catch subsidy deals that failed to gain press coverage or those reported in papers whose archives are not available, brought to light 91 stores that have received public assistance. In total, these subsidies were worth about $245 million to Wal-Mart and the developers of shopping centers in which a Wal-Mart store served as an anchor. Individual subsidy deals in those 91 stores ranged from less than $1 million to about $12 million, with an average of about $2.8 million.

Yeah, that's been bothering me ever since that post. "Refusing to buy" labor, like a layoff, is not coercive. But threatening to fire someone for not doing what you want is coercive.

Too bad those are the same thing.

But if I call them instead and say, "You better offer me ESPN for the same rate or I'm canceling," then I'm trying to use my market power to coerce them.

So in other words, you don't like it when words have meaning.

So in other words, you don't like it when words have meaning.

I was kind of worried that someone would criticize that sentence as being merely an example of market power in action, not coercion at all. Is that what you mean?

Too bad those are the same thing.

No, I really don't think so. It's like this: you could refuse to continue this conversation with me, or you could tell me to shut up. In the first case, you're ending the relationship by exercising your freedom to act, but in the second case, you're ending it by restricting my freedom, via a show of dominance.

I realize I'm arguing mostly from moral intuitions here. Being hung up on or fired makes you feel abused. Being laid off for business reasons or ending a conversation naturally, doesn't. Maybe you think the difference is an irrational emotional reaction. I think it's a correct intuition from our monkey nature. There are power issues in firing that make a difference between coercion and simply refusing to buy.

And another thing!

Even if you did use the revised price information "threat" above, the cable company is *still* not forced into the corner of having to supply ESPN to you. It could decide to work on the probabilities instead.

As it stands your probability of switching is close to 1. But if the cable company can do another selling job on you it might sow sufficient doubt to halt your decision.

It needs to bring other variables to play other than simply ESPN, such as differences in the quality of service (outages, customer support) or offer something else that might be of similar value to you, but of lower cost to them.

In order for there to be coercion, you need to demonstrate that the cable company is doing something that it cannot rationally defend. I'm struggling to think of any mechanism to do this (kidnapping the MD's daughter, badmouthing them in the press that kind of thing) that isn't illegal or in some way - give or take the transaction costs - actionable.

The only really good counter-example is to change the law: that is to invoke the coercive power of the state.

You: "State Law z says that you have to provide me with ESPN"
Cable: "rats: OK".

As always however, TANSTAAFL.

The state has, coercively, loaded a cost onto the cable provider. This has to come out somewhere - reduced profit, which might cause your provider to go bankrupt in which case you get no service at all whether or not the state demands it, or more likely reduced customer service somewhere else.

Either way, the cable company will NOT thank you for forcing it to do something it did not want to. The money side of the risk equation -the value of your custom to the cable company - now looks worse. Next time you want something, you'll find the cable company will be much more likely to call your bluff.

David Sucher,

So what? There are transaction costs involved in every transaction. In the case at hand, there are two options: (1) Parents who want their children to walk to school bear the costs of self-aggregation themselves, or (2) the parents get government to socialize the costs out to more people than the original group, including those who will never partake of the new benefit.


Ah! A perfect example of the disagreements about what is, and is not, coercion.

In a layoff, how would you describe it if the company came to the workers and said that they would be laid off unless the employees agreed to a wage reduction? Coercion or not coercion?

A man dying of thirst comes upon a man with a gallon of water. The man with the water offers to sell half the water for $100. Coercion or not?

It is very well!

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