The Corner

Capital Matters

Hooray for the Middlemen

I would like to direct your attention to an excellent column by Virginia I. Postrel about the crucial role of middlemen — market intermediaries — in making the world work.

By guaranteeing large purchases, the federal government gave manufacturers strong incentives to produce the vaccines. It was a smart move, and it worked. But now we’re experiencing the downside. Buying up the supplies and bestowing a vaccine monopoly on state governments blocked the normal distribution channels connecting producers with vaccinators.

Whether you’re laying fiber optic cable or delivering packages, that last mile is the tricky, labor-intensive, expensive part. To reach individuals, the system has to go from centralized operations to decentralized ones. That’s why we have retailers rather than ordering our toilet paper from Georgia-Pacific, and why they, in turn, often rely on distributors. “Cutting out the middleman” is a catchy slogan, but intermediaries make the system work.

A few years ago, Bernie Sanders inspired a good deal of laughter by insisting, in his exasperated-old-man way, that we have too many different kinds of deodorant for sale. (This is not obvious from the Vermont hippies who keep Senator Sanders in office.) But Sanders was making a very old progressive argument — a fallacious one.

The progressives who believe that a rational central plan can be imposed on society — that the nation can be organized as though it were one big factory — have long recoiled from the complexity, waste, redundancy, etc., that they see in market-driven business operations. But, very often, what seems like waste or inefficiency is the shortest route to a different end: A grocery store assumes that a certain amount of produce will go to waste, but the buyers don’t reduce their orders — the little bit extra is used as a hedge against unpredictable swings in demand, a way to avoid the real costs of running out of something and thereby irritating customers. You don’t buy your cars from Honda or GM, and you don’t buy your milk from a dairy producer. Those extra steps and layers are not inefficiency — they are efficiency that Bernie Sanders doesn’t understand.

We have some relatively well-governed states and some terribly misgoverned ones, but none of them is going to get Americans the COVID-19 vaccines as efficiently as Walmart can bring you a pair of socks from the other side of the planet. That’s because Walmart isn’t Walmart — it is a vast, complex ecosystem of production and distribution involving thousands of firms and millions of workers in dozens of countries.

There are very few simple solutions to complex problems. There are a lot of complex solutions to complex problems.

Recommended

The Latest