Too 'Complex'?: Part III
By Thomas Sowell
May 15, 2008
In one of those typical San Francisco decisions that makes San Francisco a poster child for the liberal left, the city's Board of Supervisors is moving to block a paint store from renting a vacant building once used by a video rental shop.
That paint store is part of a chain, and chain stores are not liked by a vocal segment of the local population. Chain stores are already banned from some parts of San Francisco, and at least one member of the Board of Supervisors plans to introduce bans on chain stores in other areas.
Chain stores have been disliked for decades, at both local and national levels. Taking advantage of economies of scale that lower their costs of doing business, chain stores are able to charge lower prices than smaller independent stores, and therefore attract customers away from their higher-cost competitors.
The economics of this is certainly not too "complex" to understand. However, politics is not economics, so politicians tend to respond to people's emotional reactions-- and if economic realities stand in the way, then so much the worse for economics.
All sorts of laws and court decisions, going back as far as the 1930s, have tried to prevent the economies of scale that lower costs from being reflected in lower prices that drive high-cost competitors out of business.
Economists may say that benefits always have costs, that there is no free lunch-- but how many votes do economists have?
There was a time when courts would have stopped politicians from interfering with people's property rights by banning chain stores. After all, if whoever owns the vacant video rental store in San Francisco wants to rent it to the paint company, and the paint company is willing to pay the rent, why should politicians be involved in the first place?
However, once the notion of "a living Constitution" became fashionable, the Constitution's protection of property rights has been "interpreted" virtually out of existence by judges.
The biggest losers are not people who own property but people who have to pay higher prices because politicians make it harder for businesses that charge lower prices to come into the community.
Despite the political myth that government is protecting us from big businesses charging monopoly prices, the cold fact is that far more government actions have been taken against businesses that charge low prices than against businesses that charge high prices.
The biggest antitrust cases of a century ago were against the Great Northern Railroad and the Standard Oil Company, both of which charged lower prices than their competitors.
The Robinson-Patman Act of 1936 was called "the anti-Sears, Roebuck law" because it was directed again this and other chains that charged lower prices than smaller retailers could match.
For a long time, there were so-called Fair Trade Laws designed to keep low-cost businesses in general from charging low prices that drive high-cost businesses out of business.
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