2018/10/03: sellers gain exposure to an enormous audience and higher sales. But they lose some of their ability to maintain their profit margins, putting downward pressure on wages and driving less-efficient companies out of business entirely.
In terms of the economics, which is concerned more with aggregate welfare than equity or fairness to certain individuals, that's not necessarily a bad thing. But it causes pain for those on the the losing end — especially brick-and-mortar businesses that can't compete with Amazon's fast online deliveries, hard-to-beat prices and near-infinite variety. And having created a portal through which so much commerce must flow, Amazon enriches itself by charging a toll along the way.
That's the Amazon Effect.
In a way, Amazon is doing the same thing in its search for a location for its new headquarters. It's treating prospective host cities as if they were sellers on Amazon, drawing them into a bidding war. Those cities are offering up tax breaks and subsidies, even if doing so jeopardizes their future tax revenue and drives up the price of housing for everyone else.
Amazon, and e-commerce more generally, is also disrupting the labor market. Brick and mortar retail jobs are quickly falling behind employment growth for the rest of the economy. It's not yet clear whether all the warehouse pickers and delivery drivers Amazon is hiring to support its ever growing shipping commitments will totally close that gap — especially as Amazon perfects fulfillment center robots and delivery drones in order to reduce its personnel needs in the future.
Although Amazon this week announced a new $15 minimum wage for all its employees, some research suggests that consolidating jobs under fewer large employers tends to reduce wages, not raise them.
There are too many large U.S. corporations with outsized political power. But if we enact a progressive corporate income tax on gross income, companies would be able to reduce their tax rates by splitting themselves up.
2010/05/26: Many of my free market friends have been making the case that government action is unnecessary to address the privacy trouble in which Facebook has recently found itself. I agree with them completely. The reason is that I believe that...