Love for income inequality

25 October 2014

Joel Schlosberg and Thomas L. Knapp :
Paul Krugman's titling of his case against Amazon.com ("Amazon's Monopsony Is Not OK," New York Times, October 19) immediately rings alarm bells.
The Nobel laureate economist surely understands that monopsony entails a sole buyer, not merely "a dominant buyer with the power to push prices down" in a particular market. Whatever its other faults, Amazon is no sole buyer, nor even part of an ogliopsony (a small cartel of buyers.)
Publishers can sell books through any number of retailers: Barnes & Noble. Apple. Google. Powell's. Kobo. Countless independent eBook and print-on-demand shops. Authors can even publish on their own websites, selling directly to readers. Amazon is an immensely popular and lucrative option for authors and publishers, but by no means the ONLY option.
Krugman's pretext contra Amazon is its current feud with major publisher Hachette, which denied Amazon an increased cut of the action on its titles. He senses an ominous power play in Amazon's retaliation by "delaying their delivery, raising their prices, and/or steering customers to other publishers".
It ain't pretty, but brick and mortar businesses do the equivalent every day: Shelving the most profitable items at eye level while less lucrative items get bottom-shelf space if they get any at all.
 "It's not just about the money," writes Krugman, always a sign that it is just about the money. Although Hachette is not Krugman's publisher, if it surrenders in the price war, other big boys like Krugman's publisher, W.W. Norton, won't bother to fight. So yes, Krugman's own bottom line is at stake.
But Krugman's ultimate reason for picking Hachette's dog in the fight between two sectors of big business - and his real beef with Amazon - seems to be, of all things, that Amazon reduces the very income inequality Krugman famously specializes in condemning.
Amazon's existence lowers book prices for readers in multifarious ways, from selection competition to electronic editions to its online marketplace for used copies. Yet Amazon has simultaneously diminished the cost for anyone to publish and sell books and earn money. By offering an alternative to the genuine near-monopoly of capital-intensive big publishers, Amazon distributes those lower prices and that new revenue more evenly among readers and authors.
Hachette and Krugman know they can't turn back the clock that produced Amazon's burgeoning marketplaces, preferring to benefit from them, but are convinced Amazon owes them a walled garden, sparing them price competition with the rabble. They want Amazon to preserve their income inequality at the expense of its customers.
Contra Krugman's beloved historical myth that "the robber baron era ended when we as a nation decided that some business tactics were out of line," any potential robber-baron power Amazon wields depends on the very same uniform, artificially large-scale federal transportation and postal shipping infrastructure that locked in the profits of the Gilded Age business cartels. Dismantling those subsidies, not propping up publishing's Hachettes, would be the real way to keep Amazon honest.

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