(Note: Mackinac Center adjunct scholar Michael J. Hicks is the author of a new book from Cambria Press titled "The Local Economic Impact of Wal-Mart." This Foreword to the book was written by Mackinac Center President Lawrence W. Reed.)
Good economists are seldom popular with the political class. This is not a shortcoming unique to democratic systems. Dictators like good economists even less.
Why is this?
As a rule, politics doesn’t educate. It obfuscates, pontificates and prevaricates. It often seeks to advance the interests of the few at the expense of the many. It is a playground for the short-sighted and the demagogic. Economics, on the other hand, tells us a great deal about how material life can be improved through the operation of entrepreneurship and markets. It informs us that there are laws beyond those that legislatures pass, and consequences for ignoring them.
The good economist is the one who takes the discussion of economic matters to the lofty level it deserves. When others spout clever sound bites, unsubstantiated charges and snake-oil remedies, it’s the good economist who raises his hand and calmly declares, "Wait a minute! Let’s look at the facts. Let’s separate the wheat (truth, logic and evidence) from the chaff (nonsense, false assumptions and panaceas)."
Perhaps it was inevitable that the one company virtually all of us have patronized, Wal-Mart, would become a political football. Any firm that makes its way to the top spot on the Fortune 500 list, as Wal-Mart did for the first time in 2002, is bound to attract attention and indeed, praise and admiration from some and envy and hostility from others. More than a few people have come to assume that bigness in business automatically implies a woeful trail of victims; some of those folks then make a nice career out of convincing the victims that they need their help. All too often, emotion drives the debate at least as much as information.
Michael Hicks, however, is interested in facts. He asks the right questions and provides the answers that thorough research suggests. He surveys the weight of evidence and analysis in the existing literature, and adds some informed insights of his own. This is what good economists are supposed to do. There are no wild claims or hidden agendas here. This book is a triumph of empiricism over mysticism.
As an occasional patron of big box retail stores like Wal-Mart, I could never quite relate to many of the routine attacks on them. With each visit, I park in an ample parking lot. I’m greeted by employees who smile, say hello, ask to help if I seem to need assistance, and thank me as I walk out the door. If I’m unhappy with price or service (I can’t remember the last time I was), I know I can get a quick refund and shop elsewhere. My search costs as a consumer are usually lowered by buying there and it seems my wallet benefits as well — no doubt because competition makes big box retailers pass on their natural economies of scale in the form of lower prices. The sheer volume of Wal-Mart’s trade alone suggests that the number of people who vote for Wal-Mart with their dollars is far greater than the number of those who vote for president and the Congress.
Even as an economist myself, I still learned much from this book that I didn’t know. For instance, Wal-Mart’s influence on labor markets is surely less than most would expect, in part because it employs less than 1 percent of the U.S. workforce. The company receives comparatively little in the way of subsidies in spite of the misguided generosity of state and local governments who try to pick winners and losers in the marketplace. The anti-Wal-Mart campaigns of today are eerily reminiscent of the Luddite crusades against chain stores seven decades ago — proof of the old adage that the more things change, the more they remain the same. The 1975 law against resale price maintenance agreements probably gave a huge, unintended boost to big box retailers at the same time it hurt smaller, more traditional stores. And it’s quite likely that other big box retailers have more to fear from an efficient, aggressively competitive Wal-Mart than do locally-owned mom-and-pop shops.
But as Michael Hicks himself explains, economics — and indeed, this book — is less about a particular firm than it is about the markets in which it operates and the market forces which both propel and discipline the behavior of all firms. A lay reader will assuredly find the text challenging while professional economists will appreciate the extensive references to the often technical findings of their peers. Friends as well as critics of Wal-Mart will find things they like and things that they don’t. No one will argue that Hicks doesn’t take command of the subject.
Corporate mortality in free (or relatively free) markets is markedly high. The average person lives longer than most companies do. Competition, after all, is a dynamic, ongoing, leap frog process whereby today’s leader can become tomorrow’s follower, or even disappear altogether. Bigness is hardly a guarantee of permanence. Indeed, the vast majority of the firms on the Fortune 500 list 40 years ago are no longer with us. It should be sobering to even Wal-Mart’s most severe critics that not even their behemoth nemesis can safely behave as though markets don’t matter.
Nothing clarifies and informs quite like facts — backed up with solid evidence and sound reasoning. Accordingly, the literature of good economics has another worthy addition with this volume by Michael Hicks.
----Lawrence W. Reed
Mackinac Center for Public Policy
October 16, 2006
The publisher’s Web site for the Hicks book can be found at http://www.cambriapress.com/cambriapress.cfm?template=4&bid=55
Additional writings by Michael J. Hicks about Wal-Mart can be found at http://econpapers.repec.org/RAS/phi52.htm
Mackinac Center adjunct scholar Richard Vedder, of Ohio University, is co-author with Wendell Cox of another new book on Wal-Mart titled "The Wal-Mart Revolution: How Big Box Stores Benefit Consumers, Workers, and the Economy." It is available on Amazon via this link: http://www.amazon.com/Wal-Mart-Revolution-Benefit-Consumers-Workers/ dp/0844742449