The National Pulse

Low Prices Are Good, Right? The Government Doesn’t Think So…

This article is part of series focusing on Lens of Liberty, a project of the Vernon K. Krieble Foundation.

In a Liberty Minute entitled “No Government Wining,” Helen Krieble tells listeners the story of a small online business which the government tried to shut down because it was too successful at lowering prices for the consumer:

The owner of a small liquor store in Albany began selling wine over the internet and developed a new kind of warehouse, eliminating frills in favor of lower prices. But a powerful state regulatory agency decided he was selling his wine too cheaply and demanded that he close his business.

Instead, he looked through the lens of liberty, saw government price-fixing for the benefit of some companies and prohibiting fair competition. He fought back and won. He took them to court and he got the legislature to reduce the agency’s power. He not only got them to quit harassing his business; he removed their power to harass others too. Government agencies are only as powerful as we the people allow them to be.

It is a basic economic principle that prices should be determined by the free market, not by the government. If one company can produce an item cheaper than another, let it do so, even if it means running the less efficient company out of business. Indeed, that is what competition is and competition is what economies thrive on.

As more and more brick-and-mortar retail stores close their doors, many people are rushing to the conclusion that such developments are bad for the economy. After all, a Wall Street bank recently predicted that 25 percent of all shopping malls will most likely close within the next five years. At first glance, that does sound concerning from an economic standpoint.

In reality, though, consumers are just finding cheaper prices elsewhere, often on the internet through online retailers such as Amazon. Lower prices, better selection, and the convenience of having purchases delivered to one’s doorstep are enticing Americans to increasingly turn to e-commerce.

If the government truly wants to help the economy grow, it should not try to hamper this natural transition from physical retail stores to online stores, bail out failing businesses, or shut down companies for selling their products at a price bureaucrats determine is too low. Whether it be Amazon or the small online liquor store Krieble refers to, these businesses should not be punished for their efficiency and competitiveness. Rather, they should be left alone to fulfill their customers’ needs at the best price possible.

Terry Schilling

Terry Schilling is executive director of the American Principles Project.