Everyone’s favorite Keynesian economist Paul Krugman is out with a column arguing Amazon is a hazard to the United States and it will eventually hurt the country. Krugman, like many other times, is completely off the mark in his digressions that it’s cause for concern why anyone really listens to his opinions anymore.
Anyway, Krugman likened the online retail juggernaut to robber barons, though Amazon isn’t comprised of robbers and its founders aren’t barons. He conceded that Amazon has not exploited customers (yet) and has lowered prices, but accused the website of squeezing out certain publishers from the market, while hurting authors and readers.
In the end, Krugman presented the case that Amazon has too much power and is abusing it.
Well, Amazon is the big bad wolf who is hurting the nation, but Krugman does seem to still enjoy using the goods and services provided by the company since he admitted to having an Amazon Prime membership. Here’s a question: if you think a company is evil and abusing its power why would you still be using its services?
Krugman’s premise stems from a spring dispute between Amazon and Hachette. Ostensibly, Amazon wanted a bigger share of sales and lower prices, but Hachette refused. In response, Amazon delayed shipments, raised prices and pushed customers onto other books and products.
In other words, a company has a dispute with its suppliers, something that happens on a regular basis in the business world. Businesses react in a variety of ways to dilemmas with suppliers. This is part of the negotiation process.
When it comes to the world of book publishing, the industry is evolving. It wasn’t too long ago that authors and publishers complained about massmarket paperback books that cost a quarter to consumers. The idea behind the opposition was that it would hurt the quality of the writing. Fast forward to present day, books are still written pretty much the same way they did 50 years ago.
Arguments pertaining to the future of the book industry will take place regularly now.
Of course, other people are flabbergasted over Krugman’s piece. Marc Andreesen, a venture capitalist, took Krugman to task on the website Genius. Here are a few of things Andreesen wrote:
Krugman: You might be tempted to say that this is just business — no different from Standard Oil, back in the days before it was broken up, refusing to ship oil via railroads that refused to grant it special discounts.
Andreessen: Classic Krugman rhetorical maneuver. “Just business” is not the same as “no different than Standard Oil”. Businesses of every shape size and description negotiate with their suppliers every day without in any way meriting a comparison to Standard Oil.
Krugman: So far Amazon has not tried to exploit consumers. In fact, it has systematically kept prices low, to reinforce its dominance.
Andreessen: Another classic Krugman rhetorical maneuver. According to Paul, keeping prices low is a sign of monopoly power, but of course he’d also say that keeping prices high would also be a sign of monopoly power.
