Freedom and Consumer Greed Are The Keys to Wal-Mart's Success
There was some lively discussion on this recent CD post (featuring the chart above showing a positive relationship between Wal-Mart stores and small businesses) about Cato's Wal-Mart study. Cato's study showed that overall, there was no stasticially significant relationship between the number of Wal-Mart stores per 100,000 residents in a state and the number of small businesses per 100,000 residents. Some of the discussion focused on the statistics of the study and the graph above, the issues of outliers, linear vs. non-linear methods of estimation, etc.
Long-time CD reader Bob Wright offers the following insightful comment:
Statistics is a red herring. Freedom is the issue, not math. Wal-Mart should be free to conduct its business just as mom and pop proprietors are free to conduct their business.
One more thought. The anti-Wal-Mart crowd seem to be arguing that it is acceptable for a mom and pop business to charge high prices - but not the cable company and the oil company. Exactly how small does a business have to be in order to price gouge? I want to keep my business just under this limit. Is there a small business exception to windfall profits?
MP: As Bob points out, freedom is the real issue. Wal-Mart should be free to open stores, and free to compete with other retailers, both large and small. Consumers should be free to shop at retailers of their choice. Small businesses should be free to compete with big box retailers.
If consumers overwhelmingly prefer the low prices of Wal-Mart on the outskirts of small towns to the high prices of mom-and-pop stores downtown and the mom-and-pops go out of business, it's the consumers who ultimately make that decision, not Wal-Mart. Wal-Mart can't force anybody to shop at its stores, it can only open stores and offer consumers a low-priced alternative to the high-priced downtown merchants. "Greedy" consumers do the rest.