BY JAMES WERNICKE
Los Alamos High School student Ella Olsen recently published an article discussing the importance of small businesses in the national and local economies.
Ella uses statistics from the US Small Business Administration to illustrate the vital role small businesses play in employing the nation. Ella argues that monopolies and oligopolies are a detriment to consumers and other local businesses because they slow innovation, distort the distribution of income, give opportunities for collusion, restrict production, and raise prices. I couldn’t agree more with Ella.
Ella also states that local businesses hinder competition by not selling unused buildings. I understand where Ella is coming from. It is frustrating to see vacant space when everybody wants more dining, shopping, and entertainment. Before judging property owners harshly, I would like Ella to consider two points.
First, civilized commerce is based on the principle of voluntary exchange. In other words, a person can sell (or not) their property at whatever price they want. Another person can buy it, negotiate a better price, or innovate a cheaper alternative. When the value is set through voluntary exchange, it perfectly accounts for the multitude of factors that define supply and demand at that exact time at that exact location for the parties involved. The corollary is that it is immoral to force somebody into an exchange. Are there exceptions to the rule of voluntary exchange? For example, is it moral to force a hospital to treat someone who cannot pay? Is it moral to force people to buy electricity instead of natural gas? Is it moral to force property owners to lease their vacant property to small businesses?
Second, consider that a monopoly exists as Ella describes. It lowers availability and raises prices of commercial property by controlling who is allowed to build it and how they must do it. It creates opportunities for collusion by operating opaquely. It distorts the distribution of wealth by expropriating it from some people and giving it to others. Furthermore, it is the sole provider of certain services and requires everyone to subscribe to those services at non-negotiable rates. Like other large enterprises, it is typically directed by oligarchs insulated from negative consequences. Unlike other large enterprises, it purports to act altruistically. Are there exceptions to the rule of monopoly then? Under which conditions does such a monopoly create better value than voluntary exchange? Under which conditions is it detrimental?
Small businesses are counting on students like Ella to evaluate critically what is happening around them and why. As we enter a period of unprecedented economic uncertainty, we need fresh perspectives on economic policy to lead the way.