Wednesday, October 22, 2014

Marc Andreessen Destroys Paul Krugman's Attack on Amazon

Julie Bort at Business Insider sets the scene:
Paul Krugman thinks Amazon is bad for America. He came out swinging in a recent column over Amazon's war with book publisher Hachette.

Super investor Marc Andreessen has jumped in with a little sarcasm aimed at Krugman...

Krugman is siding with book publisher Hachette in its battle with Amazon. The story goes: When Amazon wanted Hachette to give it a bigger percentage on the Hachette books Amazon sold, Hachette balked. So Amazon began doing things like delaying the delivery of Hachette titles, raising prices, and steering customers to other publishers.

Krugman says Amazon is acting like a robber baron and suggests it must be stopped, just like the Standard Oil-era robber barons were stopped.
Here's part of the Andreessen attack:

Krugman: ... in case you’re wondering, yes, I have Amazon Prime and use it a lot. But again, so what?
Andreessen: Amazon is hurting America, but not enough for Paul Krugman to take on a little inconvenience by using other ecommerce sites. Principles!
Krugman: You might be tempted to say that this is just business — no different from Standard Oil, back in the days before it was broken up, refusing to ship oil via railroads that refused to grant it special discounts.
Andreessen: Classic Krugman rhetorical maneuver. “Just business” is not the same as “no different than Standard Oil”. Businesses of every shape size and description negotiate with their suppliers every day without in any way meriting a comparison to Standard Oil.
Krugman: So far Amazon has not tried to exploit consumers. In fact, it has systematically kept prices low, to reinforce its dominance.
Andreessen: Another classic Krugman rhetorical maneuver. According to Paul, keeping prices low is a sign of monopoly power, but of course he’d also say that keeping prices high would also be a sign of monopoly power.
Andreessen goes on to blast Krugman for a few other things.  The whole annotated argument is a pretty entertaining read.


  1. I can't help but page Walter Block on this on and his anti-trust joke:

    Three Soviet prisoners are sitting around comparing stories. Eventually the subject turns to what crimes they committed to end up in their predicament.

    The first prisoner says, "I came to work late and they accused me of cheating the State out of my labor services.

    The second prisoner says, "I came to work early and they accused me of brown nosing."

    The third prisoner says, "I came to work exactly on time every day without fail, and they accused me of owning a Western wristwatch."

  2. One thing I got out of my debate on IP the other day was stumbling across this notion that a voluntary monopoly can be a great thing.

    I was so conditioned over the connotations of the word "monopoly" that I never stopped to consider that there are times under which a voluntary monopoly might be a good thing.

    It's the involuntary(like gov't) monopoly that's bad. Andreessen is right that low prices don't mean "monopoly" per se, but I'm starting to see that there are times when even a monopoly(if voluntary) can be a good thing.

    1. "Natural monopoly" is good. It means that the firm figured out how to provide great service or products at nice price which nobody else can match.

      Real monopoly is enforced by government or other mafia - by either direct intimidation or through the so-called laws and regulations. Real monopolies are impossible without armed thugs.

  3. Actually, the larger companies, banks, etc., in the late 1800s-early 1900s era of U.S. regulation and trust busting feigned they did not want govt. regulation, but in many cases behind the scenes sought it. Reason, prior to use of govt. they had tried large combinations (ex. U.S. Steel) but found they could not beat out smaller, more nimble competitors, so they sought regulatory body formation or legislation to create hurdles to competition. Examples include the meat packing industry, steel industry, oil industry, among others. A good read on all of this is The Triumph of Conservatism: A Reinterpretation of American History, 1900-1916 published in 1963 by Gabriel Kolko. Kolko with more Progressive leanings argues Teddy Roosevelt the supposed Progressive trust buster, was anything but, in fact carrying water for the big boys under the guise of enabling more competition. Oh, and the same playbook was used to get the Federal Reserve Act of 1913 passed, namely they made it appear the big banks were very against it, when in fact they wanted It, of which it would seem 101 years later it has served them well.

  4. There's a lot of people out there who believe that a large company with a large market share and low prices is a monopoly. It's not.