The Law, Amazon, and Monopsony…

Recently, the Nobel Prize-winning economist Paul Krugman published a column critical of Amazon, further fanning the flames over Amazon’s tactics in dealing with its suppliers, including the furor over the current Hachette-Amazon conflict.

Amazon’s actions, however, don’t appear to be confined to just the United States. More than 1,000 authors from Germany, Austria and Switzerland have signed a similar open letter to Amazon which accuses Amazon of improper tactics in setting e‐book prices with Bonnier AB, a German publishing trade group. Last June, Bonnier filed a complaint with German authorities stating Amazon delayed delivery of its books to force Bonnier to accept lower prices for ebooks.

The issue of buyer control of suppliers, i.e., monopsony, isn’t all that new, although the height of the controversy is and there are legal texts on the subject dating back more than twenty years. In a more recent 2008 article in the Utah Law Review [“Predatory Buying and the Antitrust Laws”], Roger D. Blair and John E. Lopatka summarized the issue just raised again by Amazon’s efforts to force Hachette to lower ebook prices below ten dollars:

“The fact that an increase in monopsony power may have little impact on consumers does not mitigate the antitrust concern, because the negative impact on sellers by itself warrants equal antitrust concern, a point oddly unacknowledged by the Supreme Court in its Weyerhauser decision. Just as monopsony and monopoly are economically symmetrical, predatory buying and predatory pricing are legally symmetrical…”

Or as several other legal scholars have pointed out, an illegally obtained monopsony might well violate U.S. antitrust law, but, to date, no U.S. court has ever found a single company guilty of an illegal monopsony. Or put more bluntly, so far, the U.S. legal system and the Department of Justice seem to believe that any action resulting in lower prices for consumers is socially beneficial, regardless of how those prices are obtained, and what economic damage is wreaked on the suppliers and producers.

The problem with the “lower prices are always better” argument is that it focuses solely on one aspect of economic social good. Both Walmart and Amazon exert monopsony power, and both arguably keep total compensation for employees low, while also forcing supplier prices lower. Both do so in markets where profit margins are narrow. This requires cuts in expenses by suppliers, and that means, in turn, that the suppliers can pay their employees and suppliers less.

Overall, despite stories of individual writers and suppliers who benefit from Amazon and/or Walmart, the emphasis on low prices regardless of the consequences translates into lower incomes for millions of people, ranging from minimum wage workers through struggling writers all the way to best-selling authors. Best-selling authors can obviously take a hit in earnings, even if they don’t much care for it, but for every best-selling author there are tens of thousands if not hundreds of thousands of lower-compensated individuals whose earnings are reduced by this sort of illegal market manipulation. And monopsonies that depress supplier earnings below a free-market level are in fact illegal under U.S. law.

So… what’s the ethical difference between Amazon and Walmart, who use monopoly/monopsony market power to keep prices down, and thus wages and payments to suppliers artificially low, and all those companies who outsource manufacturing to low-paid workers in third world countries?

After all, aren’t low prices and high profits the great American dream?

A Culture of Incompetence…?

I guess I’m old-fashioned, or perhaps, an old fogey… or worse, because, when I pay for a good or service, I expect the good to be without defects and the service to be accomplished correctly and in time frame agreed upon.

Last month I had to buy new hoses for my washing machine. I had to take back the first set, and they were the most expensive set, because they leaked… right out of the packaging. Last week, I bought a 13 gallon plastic storage bin, and when I brought it home and set it down, empty, on the floor, the seam split.

We live in a small town with two furniture stores, and when we wanted to replace some furniture that we’d had for more than twenty years, we couldn’t find anything at either store… or in their catalogues… that remotely resembled anything we wanted. Everything was overlarge, overstuffed, and oppressively dark. So, on a business trip to North Carolina, the heartland of American furniture making and outlets, my wife found what we wanted, and the company agreed to ship it, at our expense, of course. The company stated that it would take three to five weeks to arrive. It still hasn’t arrived, and it’s seven weeks and counting. I’ve been talking to the company almost daily, and I finally pried out that the furniture hasn’t even left North Carolina, and the latest estimate is another three weeks before it gets here, and no other freight forwarder can do it in less than three to six weeks. Further investigation revealed that the freight company didn’t even pick up the furniture until two weeks after the date I was told it had shipped. Whether all this is incompetence or indifference, or some combination of both, I really don’t care. What I do care about is that I’ve been lied to and that no one seems able or willing to do anything about it, except say that, in effect, that’s the way it is.

I have a friend who’s a contractor, and a very good one. He has a small team of employees who can do many of the tasks, such as framing, finish carpentry, moderate earth-moving, tiling, etc., and anything his team can do is done well and on time. Anything that he has to subcontract is another story – and about half the subcontractors in the area he won’t use, because they’re even worse. He also admits he’s racist at times, because the only reliable and truly professional drywall firm is Latino, and the best painters are also.

Along those lines, we decided that a pull-down ladder was a better way of getting into the storage space above the garage than standing on a step-ladder. The company sent three wrong ladders with the incorrect dimensions before finally sending the correct size.

After twenty years, we bought a new refrigerator. The new refrigerator arrived right out of the packaging – unpackaged in our kitchen – with a noticeable dent in the front door. The warranty/service covered this, and just this past Wednesday, a month after the refrigerator was first delivered, a new door arrived – except when it came out of the four layers of packaging, it had a bigger dent than the door it was supposed to replace.

I am not making up any of this, and I could have given several more examples, as well. That’s why I’m more than a little concerned about the future of the United States. I certainly don’t recall as much incompetence in as many areas as I’m seeing now, and I don’t think it’s entirely that I’ve become more of a perfectionist as I’ve aged… or a prematurely aged old fogey.

Absolute Rights Revisited

Anita Sarkeesian was scheduled to speak at Utah State University last Wednesday. Then USU received an email that threatened “the deadliest school shooting in American history” if the school did not cancel the lecture by the feminist writer and video game critic. The email, which contained graphic descriptions of what would happen with what types of weapons, was also sent to quite a number of USU and local officials as well.

While Sarkeesian has shown up for speaking engagements despite terror threats before, she did request firearms screening of those attending the lecture. University officials declined her request, citing a 2004 Utah law that expressly allows the carriage of weapons, including concealed weapons, in all public spaces at state universities. Sarkeesian, who created and maintains a feminist video blog and a video series on misogyny in video games, then canceled her appearance. Following that, USU officials went on to claim that freedom of speech was alive and well at USU.

There has been some controversy in Utah over the incident, but one letter to the Salt Lake Tribune made an “interesting” point with the claim that the second amendment should trump the first amendment, and more than a few comments followed that line.

As I’ve said before, I don’t believe in “absolute rights” under all conditions, and the U.S. Supreme Court has affirmed on far more than one occasion that the rights under the Constitution are not absolute under all conditions. So far as I’m aware, the constitutionality of the Utah law to carry weapons, concealed or otherwise, into any “public area” has not been litigated, but I truly don’t see how “rights” under the second amendment would be infringed by allowing one woman to speak about video game violence against women in a university auditorium that banned guns for those attending. No one is being compelled to attend a voluntary lecture, and no one’s rights to carry a weapon elsewhere are being threatened.

If this precedent of allowing guns everywhere under all conditions is extended elsewhere, then free speech becomes imperiled, and I admit that I don’t think someone speaking in public should have to worry about being shot for speaking about a controversial subject. As for “free speech” getting out of hand, the Supreme Court has ruled, again, on more than a few occasions, that not all “free speech” is protected.

In my book, neither the first nor the second amendment should be absolute… but it’s pretty clear that those who love guns more than any other freedom don’t see it that way… or perhaps they feel that they need the security of a gun to say what they want… and to keep others from saying that with which they disagree.

Rules

In all of my fantasy books, the magic systems are logical, and, if you will, as some readers have put it, “have rules.” And I think it’s fair to say that I was among the first of U.S. fantasy writers to develop and carry out such an approach through an entire series, as well as three different series that followed. But I didn’t do it just because it was a “neat” or nifty idea. I did it because, simply put, anything in nature, science, technology, and civilized human societies that works has rules or, if you will, underlying frameworks.

“Laws of nature” tend to be rather inflexible. If one jumps or falls off a cliff here on earth [excluding those in the ocean depths], the result is always going to be a rapid descent, the results of which will range from painful to fatal. Likewise, all human technological progress has resulted from gaining understanding of how the universe works and actively applying that understanding in an organized fashion. If magic were “real,” as I postulate in my fantasy series, any real advancement in its use would come from disciplined study of magic and application of that study.

The problem with human-made laws, as well as with the commandments reputedly handed down from various deities, is that breaking them often affords the rule-breaker an advantage or momentary gratification of some sort, again often an advantage or gratification that costs others, which is why all societies have penalties for rule-breakers. Problems with societal rules usually happen under several circumstances. The most obvious is when someone with great power does so and gets away with it because of that wealth and power, but those transgressions are usually comparatively infrequent – until you get a society such as U.S. society today, where there are over 400 billionaires. The second problem, common to almost all societies, is when society, government, and/or religion mandates or forbids certain behaviors and practices more because those particular rules are more to maintain power – political, religious, or both – than to enhance law and order. Denying women, minorities, or those of other faiths civil rights extended normally to the majority is far more about control and power than anything else. This problem is compounded when the “rules” don’t make sense to a significant segment of society or conflict with the “rules” of as different set of believers.

The “believer-believer” conflict was one reason why the Founding Fathers wanted to separate church and state. It’s also one of the best reasons for a nation’s laws to be based on those basic principles on which all “believers” and non-believers agree, and not to attempt to use laws to impose religious practices.

There have certainly been working societies with no formal “laws,” but they have tended to be either very tightly socially controlled or the equivalent of absolute rule by the most powerful. And all that brings me back to the point that to presume that an organized society exists without rules and that magic has no structure is a fantasy too unrealistic for me.

Single Factor Fallacy

I happened to glance at a recent issue of Forbes [yes, I read both Forbes and The New York Times, not to mention The Economist, New Scientist, Scientific American, and even occasionally those left wing publications like Sierra and Mother Jones] and ran across a poll that asked fifty billionaires to what factor(s) they most attributed their success. While a number mentioned more than one factor, the leading factor given was “discipline and hard work” (cited by 35), followed by “willingness to take risks” (24); education and intelligence (20), and, oh, yes, “luck” (14).

The funny thing is that I know and have known quite a few people who are intelligent, educated, disciplined, and work hard, and out of several hundred I’ve met well enough to make some personal observations, only two of them are multi-millionaires. And in fact, the idea that all it takes to become a multimillionaire, let alone a billionaire, is intelligence, drive, and persistence is in fact an American myth, and a rather damaging one at that. Now, I don’t deny that the overwhelming majority of multi-millionaires are reasonably intelligent, work hard, and persist in a disciplined fashion. They’d have to have those characteristics to succeed, but what I strenuously doubt is that any single factor, or even one or two, can make someone that successful. It takes a whole constellation of factors, including but not limited to having good ideas, being in the right place at the right time, having or making the right contacts, being able to raise the necessary investment, and a certain amount of luck. And a great number of those factors are environmental, and so obvious that they’re taken for granted, such as a stable home life and decent schools while growing up. A single factor just doesn’t cut it.

The same principle applies to other situations as well. Most industrial accidents, especially major ones, aren’t the result of a single factor going wrong, but a combination of at least two, if not more, problems. The same thing is definitely true in aviation accidents, and even though the NSTB often cites pilot error, it’s almost always a mechanical or weather problem, or something else, combined with pilot error. Most automobile accidents involve two factors, if not more.

So why do we persist as a society in trying to identify the single factor, or the “key” factor, when life is so much more like a jigsaw puzzle, where every piece plays a part? Are we trying to make things too simple? Or is it just intellectual laziness?