Economics is a funny academic discipline. It has the unfortunate tendency to seldom work out in reality as cleanly as it does on paper.
Economic theory states that competition should keep prices low by giving buyers choice and providing financial incentives for suppliers to find cheaper sources of the goods they sell. But that same economic theory says that the fittest competitor in that marketplace could well drive its competition out of business or force consolidation — precisely the kind of monopolistic tendency that ultimately harms consumers. It is possible to have a nearly infinite range of customer choices under one corporate umbrella.
There are myriad examples of this conundrum today, and Kathryn Judge, a law professor at Columbia University (and, full disclosure, frequent guest on my podcast “
Walk into any Walmart and the customer is greeted with seemingly endless choices. Amazon’s selection is even greater, and comes with added convenience. Choice is good for the consumer, but if all your choices are housed in one place, that gives that place immense sway over suppliers, employees — and, ultimately, customers.
Another especially pertinent example she cites is the way the
The counterpoint to this prevailing state of affairs that Judge wants the reader to embrace is the notion of having consumers voluntarily acquire the things they want more directly from the source of their production.
One example she gives is Community Supported Agriculture, where subscribers pay a farm upfront for a portion of the produce it grows. The farmers decide what they want to grow, and the customer gets some every week. So if you didn’t want rutabagas this week, tough cookies — the farmer harvested rutabagas and it’s your job to get your kids to eat them.
Judge makes the case that the surrender of choice is actually liberating, and opens the buyer to new experiences, flavors, smells and communities that they may not have known were out there or ever thought to wonder about.
“One reason for the growth of the middleman economy is that it provides consumers choice, control, and convenience. We have become so accustomed to enjoying all three, we may not even notice how abundant each is,” Judge writes. “The decision to go directly to the source will often entail compromising along at least one, and sometimes all three, of these dimensions. Without a middleman bridging the gap between maker and consumer, the parties at each end must expend more of their own efforts to form that bridge, and they may have to compromise relative to what they thought they wanted. But as the growth inspired by CSAs makes clear, sometimes getting out of our comfort zones and investing that extra effort can be a benefit in disguise.”
This sentiment speaks to me. This spring I visited a locally owned hardware store in Moorefield, W.Va., and found jars of ramp mustard, bottled by the store itself. I can’t explain in purely economic terms why I purchased this product when I had maybe four other jars of mustard in my fridge already. But I did, and not only were my sandwiches a little tastier, but something about buying a product from the hands that made it gave me a pleasure that I can’t quantify.
If that hardware store were to mass-produce ramp mustard and sell it everywhere, I wouldn’t feel the same way — I would be as indifferent to it as I am to Grey Poupon. And, importantly, the shopkeepers would see me as another faceless customer. This flattening of people into consumers and producers into products is the work of middlemen who sacrifice the finer contours of transacting in the name of mere efficiency.
As much as I empathize with this sentiment, there’s a limit to how comprehensively one can wrap oneself in direct commerce. If my car breaks down, it doesn’t make sense for me to go to an artisanal spark-plug maker to get it fixed. In the case of the financial industry, there are benefits to scale that direct consumption will never be able to overtake.
Judge acknowledges this, and argues instead for consumers to regain some of their humanity by seeking out opportunities to go to the source — and, where possible, facilitate the creation of new ones. Vendors who sell their wares directly to consumers through their own websites and mailing lists cut out middlemen and frequently pass those savings to their customers. But there are dangers here as well — some companies that claim to be environmentally friendly or supportive of their workers have murkier supply chains than they would have one believe.
Thus, Judge argues, the onus lies not just with the consumer but with policymakers to expand the number of credibly direct options for the consumer to choose. Here she argues that the government can allow food subsidies to be spent at farmers markets, or for states and municipalities to expand the number and accessibility of those markets. The federal government can also further support the postal service, which can help producers get their products to buyers, and can crack down on anticompetitive activity by the most powerful middlemen.
As I said before, economics is a funny discipline. It describes the way people make the choices they do, but also ignores the idiosyncratic reasons people make the choices they do. If we were robots, it would be a far more accurate discipline.
But we are feeling, thinking people who are capable of enjoying things for reasons other than quantifiable value and convenience. Perhaps to regain that sense of humanity, we should make policies that emphasize experience over efficiency.
