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Creative Destruction and the Independent Bookstore

Dec 26, 2011 • Businesses, Demand, Supply, and Markets, Economic Thinkers, Innovation, Macroeconomic Measurement, Thinking Economically • 174 Views    No Comments

The buggy whip, the typewriter, and now, maybe the independent bookstore?

In a NY Times Op-Ed, author Richard Russo criticized Amazon for business tactics that would harm independent bookstores.  He cited friends who said, “They don’t win unless they destroy their competition…” and called their price check app “invasive and unfair.” He quoted one author who said “…losing independent bookstores would be ‘akin to editing…a critical part of our culture out of American life.’” Or, as a bookstore owner explained, “If you like seeing the people in your community employed, if you think your city needs a tax base, if you want to buy books from a person who reads, don’t use Amazon.” And finally Russo said that Amazon had become “too big to care.”

Responding in a Slate column, journalist Farhad Manjoo focused on the benefits of paying less. Authors sell more books, consumers have extra money to spend locally and the economy enjoys more efficiency. Rather than doing harm, Amazon’s e-publishing and e-reader innovations have expanded the publishing world.

Does the “inefficient” local bookstore deserve preservation?

The Economic Lesson

Joseph Schumpeter (1883-1950) best explained the march of new ideas as creative destruction. Overcoming resistance from the people and firms who become obsolete, economies grow as innovation replaces existing goods and services.

An economic question: Using the independent bookstore as an example, cite examples of the cost and benefit of “creative destruction.”

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