The rant against Amazon and the rant for Amazon

Wow! It’s unbelievable how hard you are working to deny that monopsony and monopoly type market concentration is causing all all these issues. Do you think it’s easy to compete with Amazon? Think about all the industries amazon just thought about entering and what that did to the share price of incumbents. Do you think Amazon doesn’t use its market clout and brand name to pay people less? Don’t the use the same to extract incentives from politicians? Corporate profits are at record highs as a percent of the economy, how is that maintained? What is your motivation for closing your eyes and denying consolidation? It doesn’t seem that you are being logical.

That is from a Steven Wolf, from the comments.  You might levy some justified complaints about Amazon, but this passage packs a remarkable number of fallacies into a very small space.

First, monopsony and monopoly tend to have contrasting or opposite effects.  To the extent Amazon is a monopsony, that leads to higher output and lower prices.

Second, if Amazon is knocking out incumbents that may very well be good for consumers.  Consumers want to see companies that are hard for others to compete with.  Otherwise, they are just getting more of the same.

Third, if you consider markets product line by product line, there are very few sectors where Amazon would appear to have much market power, or a very large share of the overall market for that good or service.

Fourth, Amazon is relatively strong in the book market.  Yet if a book is $28 in a regular store, you probably can buy it for $17 on Amazon, or for cheaper yet used, through Amazon.

Fifth, Amazon takes market share from many incumbents (nationwide) but it does not in general “knock out” the labor market infrastructure in most regions.  That means Amazon hire labor by paying it more or otherwise offering better working conditions, however much you might wish to complain about them.

Sixth, if you adjust for the nature of intangible capital, and the difference between economic and accounting profit, it is not clear corporate profits have been so remarkably high as of late.

Seventh, if Amazon “extracts” lower taxes and an improved Metro system from the DC area, in return for coming here, that is a net Pareto improvement or in any case at least not obviously objectionable.

Eighth, I did not see the word “ecosystem” in that comment, but Amazon has done a good deal to improve logistics and also cloud computing, to the benefit of many other producers and ultimately consumers.  Book authors will just have to live with the new world Amazon has created for them.

And then there is Rana Foroohar:

“If Amazon can see your bank data and assets, [what is to stop them from] selling you a loan at the maximum price they know you are able to pay?” Professor Omarova asks.

How about the fact that you are able to borrow the money somewhere else?

Addendum: A more interesting criticism of Amazon, which you hardly ever hear, is the notion that they are sufficiently dominant in cloud computing that a collapse/sabotage of their presence in that market could be a national security issue.  Still, it is not clear what other arrangement could be safer.


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