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One Entrepreneur Is Worth a Million Consumer Advocates


When someone finds fault with absolutely everything you do, you might begin to wonder who’s really got the problem.

The same is true with an economic system. Predictably, the tired old school of carps led by Ralph Nader is condemning the mergers that have been announced recently, including CitiCorp and Travelers, Chrysler and Daimler-Benz, and most recently, the telephone companies SBC Communications and Ameritech. Reading from a tattered script, it predicts higher prices and bad service from the bigger companies that will emerge from the corporate marriages. The call to the Antitrust Division’s 911 line has already been placed.

One might take this criticism more seriously if the same whiners didn’t also kick dirt when conglomerates were broken up. Mergers are bad. Divestitures are bad. And the corporate status quo isn’t too great either. There’s no pleasing some people.

Maybe the pooh-pooh chorale just doesn’t like markets, period. Try to find one activity carried out in the marketplace that won applause from Nader, Michael Moore, and their ilk. You can’t do it.

There’s a simple reason: people like that don’t understand, and therefore are biased against, markets. They stare at commercial hustle and bustle with the apprehension and incomprehension of an imbecile gaping at a screaming vacuum cleaner. To them what goes on in a market is nothing but greed-fired chaos. A few people make lots of money, while everyone else is either thrown out of work or stuck with shoddy products.

Nader, for example, said recently that he can’t see the value of a merger between Chrysler and Daimler-Benz. Excuse me, but are we supposed to be impressed by that? May nothing happen unless consumer advocates see the value of it?

Even if Nader were a great entrepreneur, his thumbs-down on a merger should not be given much weight. Innovators always swim against the current. In the market, you make fabulous profits only by satisfying consumers in ways far removed from what everyone else thinks is feasible.

It’s in the nature of profits. Strictly speaking, profit is what’s left over after all the costs of production — wages, interest, rent – are paid. What then is profit the reward for? It is the entrepreneur’s reward for his alertness to an otherwise unnoticed opportunity to shift resources to more urgent consumer demands. In a world of change and uncertainty, some resources at any moment are being used less efficiently in the service of consumers than they might be. Consumers may not realize this, because they can’t know what may be waiting around any corner. That’s the nature of our world. Serendipity happens. If an entrepreneur correctly forecasts their future druthers, consumers will be delighted and he will profit. If he is wrong, he will suffer a loss.

That is why we need an open marketplace without government guidance or second-guessing. No one can know what the next great idea will be or who will come up with it. “No one” includes the consumer advocates and lawyers at Antitrust and the Federal Trade Commission. Great ideas are not just about specific products. A novel form of business organization or combination of products and services is also the stuff of consumer betterment. A merger can be as imaginative as a redesigned mousetrap.

All improvements in well-being start with an idea. But great ideas are not evenly distributed. The value of the free market is that it permits the peaceful transfer of resources to people with better ideas for pleasing consumers. Those who would block that process are the enemies of us all. Consumers don’t need advocates; they need capitalism.

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    Sheldon Richman is former vice president and editor at The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.