Thursday, April 14, 2005

Petition vs. Competition

Yeah, I’m supposed to be on blog vacation, but this topic was eating at me.

Today I ate lunch at My Hero. My Hero is a local sandwich shop that has operated at the same location for about 30 years. My order was taken by Rosie, the owner of the shop. Rosie is a real American success story – a Puerto Rican immigrant and mother who took a low-wage job at My Hero about 25 years ago and eventually bought out the original owner, with whom she had become good friends. (I know all this from reading a local newspaper article about a year ago.) Rosie is also a very sweet and friendly person.

While waiting for my change, I glanced down and saw a petition sitting on the counter. Signers were expressing their opposition to the opening of a new Wal-Mart in Northridge. Noticing me reading the petition, Rosie said, “You should sign that. It’s to stop a Wal-Mart from opening.” I couldn’t help myself; I asked, “Uh, why?” And she replied, “Because it will hurt all the little guys.”

I should have said, “Oh. Well, no thanks!” But I felt a strange compulsion to justify myself. So I said something like, “Well, you know, small businesses have to able to compete. I mean, you guys are great, but competition is necessary.” She was about to say something back, but we were both rescued by the arrival of the next customer.

I went off to my seat, and I thought to myself, “I bet she thinks I’m an asshole.” And despite my strong conviction about my own position – I would never have signed that petition – I still felt a tiny pang of guilt. There I was, talking with this incredibly nice and hard-working woman, standing there in her place of business, and refusing to make the simple and nearly effortless gesture of signing her petition.

And I had to wonder: How many people sign petitions for just that reason? Not because they agree with the cause, but because signing is easier than looking like a jerk? If my convictions on the matter had been just a little weaker, I might have been tempted to sign. And if I were indifferent on the issue, I almost certainly would have signed. If other people are anything like me, it illustrates a problem with petitions. Unlike a poll or survey, a petition does not claim to be a representative sample of the population – but it does claim to show some depth of support for a particular position. But if people are signing them simply to avoid social awkwardness, then the number of names on petitions doesn’t show anything of sort.

And by the way, where can I sign the petition in support of Wal-Mart? Therein lies another problem. In the case of a new Wal-Mart, the beneficiaries (everyone who will benefit from Wal-Mart’s low prices and convenience) constitute a large and diffuse class of people with relatively small per-capita benefits. The losers (mostly business owners who will face stiff competition) constitute a small and concentrated group with relatively large per-capita losses. Obviously, the latter group is much more likely than the former to raise a ruckus and circulate petitions, regardless of whether the Wal-Mart will produce net benefits. Thus, petitioning is subject to the same familiar incentive problem that affects public decision-making more generally. The result is that, even if we compare the results of competing petitions, we still have no reason to think the results tell us anything meaningful about the real costs and benefits – of Wal-Mart or anything else that’s the subject of a petition.

(Addendum: Whatever you think of Wal-Mart, I can't believe it would have any detrimental impact on My Hero. Wal-Mart is hardly known for its sandwiches, and in any case, the new store would be located miles away, while My Hero is walking distance from its main customer base, CSUN students and faculty. I can only assume Rosie supported the petition out of solidarity with other small business owners.)


Anonymous said...

hmmm...i once ate there and asked rosie herself about her business (i'm not sure why). that's when she mentioned that she used to work there and eventually bought it from the owner. i asked her if her business is highly dependent on csun students and she said that she has a pretty loyal customer base from being in business forever not just from csun. from looking at the team pictures on the wall, i assume lots of sports teams are her patrons as well.

but yeah, i think i would have just said, "let me think about the petition and sign later, instead of giving her a rebuttal."

i would think no real harm done though.

Glen said...

One year I went around with petitions trying to get libertarians on the ballot, and I was surprised to encounter people who were perfectly willing to change their party affiliation in order to sign my petition. Not because they were libertarians or even knew anything about them, they just liked signing petitions and which party they were registered with was a matter of indifference.

Anonymous said...

No wonder it is gnawing at you, Glen. I don't think you can have it both ways. Either you support the Rosies out there or you support the mega corporations like wal-mart. Glen, your My Hero, so it troubles me that you are so conflicted. The Rosies of world are history. So, get over it! My stockbroker predicts Wal-Mart stock will double in the next five years. Not Bad. Not bad at all.
Capitalism without rules or morality is wonderful. Btw, after Bush signs the new laws tightening backruptcy, it might be worth considering some bank stocks like Chase, Capital One etc. that do big credit card business. They're popping the corks on champagne tonight!

Ben said...

As a (not classical) liberal with capitalist tendencies, I was wondering how you justify mega corporations as economically advantageous phenomenon. I do think that just by their sheer size they have an unfair advantage and are able to bend natural market forces in their favour. While it is true that they could simply be more efficient (in which case I wouldn’t be concerned), it is also possible that they gain an unfair advantage by using their great influence on the industry to crush their competition. Recently here in Canada when employees of a newly opening Wal-Mart tried to start a union, that Wall-Mart just closed its doors, under the pretext that they had miscalculated and there wasn’t a market for a Wal-Mart in that region. (McDonald also did the same things a few years ago) Now a smaller company would have to conform to Union laws because they probably don’t have the capital to build stores and never open them. Morever, the fact that megacorps concentrate so much money and power makes them prone to corruption. In fact, on a certain level, just with their huge amount of power and influence, I find they tend to exhibit flaws similar to a large controlling government (And the crisis going on in our government is a prime example that power creates corruption. The government at least as the offsetting quality that its mission is to help people. Wallmart’s mission is simply to gain more money and power. I think there is a lot less incentives for Wal-Mart management to stay honest and not turn a blind eye to internal corruption so that we can expect more corruption.

Anonymous said...

when you talk about the "good" that walmart does, are you thinking only from a purely capitalist standpoint? do you consider the ways that walmart demands it's low wholesale prices from 3rd world countries to be positive? ( insert disclaimer: if you do, that is totally valid, i just wasn't aware of it from this post )

i guess what walmart represents to me, is a destruction of the values that we hold to be true for Americans. by supporting walmart, you are supporting a type of business that doesn't value the "value" that people like rosie bring to the table, imo. of course, i also agree that rosie should recognize that she brings value ( if she does ) beyond that which walmart brings. the whole situation prods me as extremely negative and detrimental to all involved.

Anonymous said...

in response to ben:

what else do you expect of them? they are large corporations, following the guidelines of such. there isn't a lot of leeway for public companies in the U.S., and if they are "caught" acting for the public good instead of shareholder value, they will be punished and financially penalized. i'm not familiar enough with Canadian law, but in the U.S., you can't blame the company for acting as a company, only the people who shop at/support it.

Anonymous said...

You are funniest Glen when you aren't trying to be. You, the PhD, were close to giving Rosie, the sandwich shop owner, a lecture on the virtues of competition. Ha ha! You really are cute. As a practical matter, what steps should rosie take to spruce up here business? Take a few marketing classes at CSUN perhaps? Wouldn't she be better off hiring some scantily clad young sandwich preparers with firm mounds (of tuna) to give us horndogs something to salivate over, and I'm not referring to the ham sandwiches. Sex sells. Perhaps Rosie should convert her hoagie shop into a raunchy strip joint. I'll be her first customer. Petition this Rosie: the sandwich to stripper conversion proposition. I think public funds should be made available to assist you. Even Glen would sign that petition, I bet!

Lucas Wiman said...

OK, I like certain local businesses in my area, but to be honest I don't care enough about any of them to worry about whether they go out of business or not. In my experience, local business owners are jerks to their employees, and incompetent businessmen who can hardly make a profit in a relatively noncompetitive environment. They also pay minimum wage, usually with no benefits, just like WalMart. And unions? Outside of guild-type businesses like plumbing, forget about it. They don't have enough nonreplacible employees for unionization to even be a credible threat. This presumably isn't universally true, but it's always been true in my experience.

Since I work for one of these wonderful local-businesses for very little money, I find that WalMart and Sam's Club greatly improve my life by allowing me to have some spending money and eat better food. I can't imagine a small business which could improve my life as much as this large one.

Anonymous said...

I wonder if Rosie put the petition in her store in the first place because someone asked her to and she didn't want to look like a jerk.

Anonymous said...

Typhoid Rosie, you're toast.

Gil said...

Glen makes a great point about problems with petitions.

But, it's these anti-Walmart posts that really get to me.

Walmart is great at satisfying people's preferences. People work there because they want to. People shop there because they want to.

If you like small businesses then support them with your patronage and recommendations to others. The good ones will probably continue to thrive because they have qualities (that you and others will recognize) that Walmart can't match. The bad ones that don't offer offsetting benefits to their customers will fail; as they should! There's nothing sacred about smallness for its own sake.

But, supporting legal restrictions against Walmart means supporting the use of force to violate lots of people's choices to impose your vision of how things should be upon them.


Steven Horwitz said...

Lucas and Gil are right on here. Wal-Mart has made life immensely better for the poorest among us, and elsewhere in the world. The jobs and lower prices that WM has brought to my county, the poorest in NY state, are appreciated by those same poor folks, even when the wealthier people here (esp. those associated with the universities) look down their nose at WM, and implicitly their clientel. I do love competition, but I actually love Wal-Mart too. Not just tolerate, but LOVE it for what it brings.

And as for the "where's the pro-WM petition" question... WM is planning to open a super-center in the next town over and when they announced they were thinking about it, a pro-WM activist group formed. They HAD a pro-WM petition at a couple of community events, which I signed, and then started a GREAT lawn-sign campaign. There were dozens of green pro-WM lawn signs showing up all over this end of the county, despite the cost/benefit analysis Glen notes.

I also appeared on a community forum panel speaking in favor of WM, with a crowd that was 2:1 in agreement with me. What fun that was!

Anonymous said...

A free suggestion for Rosie:

Copywrite the following names:

"Rosie's Roastbeef (c)"
"Glen's Great Garden Burger (c)"
"Tom's TomTurkey Sandwich (c)"

That'll put Wal-Mart in its place if not out of the sandwich business altogether! You've got to outsmart these big players, Rosie. Two can play at this crush the competition game.

Glen Whitman said...

I knew if I waited long enough, someone would step to Wal-Mart's defense so I wouldn't have to. Thanks Lucas, Gil, and Steve! Here's what I've written previously about Wal-Mart:

And a clarification: Rosie is *not* threatened by Wal-Mart. Her biggest competition is the Quizno's three blocks away, and she seems to be doing just fine (going by the size of the lunch crowd). Notably, the sandwiches at My Hero are *cheaper* than Quizno's. Which just bolsters the main point: the best small businesses *can* survive in a competitive environment.

Ben said...

I still find it hypocritical that the people who support small decentralized power in government support vast centralized power in the corporate world. In my opinion, both lead to the same kind of problems and both end up functioning against and outside the natural market laws. Wall-Mart has no competitor of similar size, which in my mind means it has no competitor at all because companies compete with companies of the same size. If large companies are more efficient than small business than so be it, let the small business die. But don’t let the companies grow so big that there is no place for more than one on the market. Even assuming that there’s no corruption in large corporations and that these large entities don’t exploit people in poor countries with unstable governments (very big assumption), we should never let a company grow so big that there is no place for at least a few separate companies of similar size on the market that create competition.

Ben said...

I just read the previous Wall-Mart posts and I have to say that the teenage girl with a credit card metaphor that blames Welfare for Wall-Marts advantage is quite a stretch. Welfare was never meant to be like a free credit card but was only meant to help those in need. A more appropriate metaphor would be that of a food bank where a few wealthy individual go eat in order to save money. You don’t blame the food bank, for the acts of these individuals. You blame the unscrupulous individuals. I do think it is a valid complaint to blame Wall-Mart for exploiting money that was meant for those in need.

Steven Horwitz said...


You realize that's exactly what people said about ATT before MCI came along, what they said about IBM before Microsoft, etc..

The point is that large firms do NOT only compete against firms the same size. As Glen points out, Rosie is competing quite well with the much larger Quiznos. And studies on WM show that small businesses in the area adjust to WM's presence and find their niches.

Think of it this way: what you're saying is that WM is effectively a monopoly. But the standard theory of a monopoly is that it will raise prices and lower quality. Yet, WM brings lower prices and a greater variety to where it locates. What exactly is BAD about that?

Gil said...

I was about to write a reply to Ben about firm size, but I see that Steve already has.

I'd only add that large firms that remain successful don't behave in the way that anti-monopolists fear. They tend to act as though there is always actual or potential serious competition to compete against. As Steve asks, "What exactly is BAD about that?"

As for the credit card analogy, I think it's silly to expect Wal-Mart to ignore the environment when designing a benefits package. They want to attract competent workers for as little as they can, and workers want the best compensation that they can get. Both sides have to consider what their actual needs are, given the alternatives. If the state provides backup health care benefits, then low wage workers will prefer an employment package with more wages and fewer health benefits from Wal-Mart; and Wal-Mart will oblige them! Why blame Wal-Mart for that?

If you want to complain that the unintended consequences of state-provided health benefits (e.g. corporate welfare, misallocation of resources, risky behavior, unnecessary treatments, waste, fraud, etc.) lead to situations worse than they would otherwise be, then I'll be right with you in urging their abolition! But if you want to argue that companies and workers should pretend that the benefits don't exist and choose to make themselves worse off, I'll just shake my head and wonder what planet you're from.

Anonymous said...

I have always been annoyed that petitions are always one sided; "Please my petition for/against [whatever]." I have always thought petition circulation should have a boxes for/against.

Anyway, I said all that to say this. I just sign them all Jane Doe, 1234 main street and let some activist or bureaucrat sort it out and toss it.

Anonymous said...


You may be an asshole for championing Wal-Mart over the little guys, but you are not an asshole for failing to sign someone's petition. It would have been the height of insincerity and people pleasing to sign it just to make Rosie happy. You may be naive about how the real business world works and how ruthless and unscrupulous it can be, but you are not a fake or plastic person, thank heavens! If you are an asshole, then you are of the fun and quaint type. I don't think Rosie would judge you harshly for wanting to see her shut down in favor of a Wal-Mart. She would just be perplexed and hurt. The market forces are at work will be your justification. Are they the only forces at work or is there something more sinister going on here?

Ben said...

Dr. Horwitz,

First just to see where you stand I would like to know if you agree that there is such a thing as a company that has grown too much? I believe the debate of weather Wall-Mart is in that state or not deals with so many nuances and immeasurable assumptions about the behaviour of humans when under the influence of money and power that we may never agree.

I believe the size of companies like ATT,MCI,IBM and MS have also been too great in their peak, but it didn’t worry me like Wall-Mart because of the fast pace change there is in the hi-tech industry. The problems solve themselves through evolving technology and new intellectual property. These companies may use their overly vast power to temporarily stay on top of things longer that they should but eventually they end up losing the fight on new technology. If you ask me MS is a company going downwards.

If Quiznos manages to kill Rosies (hopefully not using underhanded techniques) than fine, I won’t be worried either because there is still Subway, McDonald and Burger King.

Finally, lower prices and greater variety can be BAD when it is reached through underhanded techniques. (Techniques which I argued are more easily accessible when you’re that big). I mean you could always get better prices buying stolen goods. Fortunately there is government control here (they made stealing illegal.)

Ben said...


I was never saying Wall-Mart should ignore its environment. We can’t expect that. But, the government knowing that it has subsidized wall mart through welfare could adjust the taxes upwards to level the field. I do realize this solution might be impractical and the parameters of this model too hard to adjust but theoretically I can see it. It ends up simply being just another argument for taxing the super rich. It is my belief that most super rich didn’t create all the value they acquired; they often over-exploited the government and the human/natural resources around them. It is impossible to really know which individual really created all the wealth and which one was exploiting resources to the detriments of others. Hence as a second best solution we just tax all the super rich more just because on balance of probabilities, there is a correlation between vast wealth and over-exploitation.

Steven Horwitz said...


I do not think it's possible for a firm to grow "too big" on the market. I don't even know how one could define "too big." What exactly would that mean? Who should have the power to render such a judgment? How would it be enforced? Size is not the issue - the issue is whether or not the firm got to where it is by genuinely serving consumers.

And yes, MS is going downward. Just like K-Mart and Macy's and others went downward as Wal-Mart grew. Even 10 years ago, WM wasn't what it is today. The pace of change in retail is pretty quick too and even WM faces competition from BJ's and other non-Sam's price club stores (although they tend to be shopped at by a different demographic profile than WM). Wal-Mart cannot just sit back and watch the profits roll in - they have to continually attempt to change and innovate too.

And yes, if WM gets big and sells at lower prices because they got stolen merchandise, of course that's bad. But that's not what we're talking about if we're talking about *market* power and size.

What I want you to tell me is how you would know whether a firm who did no stealing or engaged in no fraud was "too big."

Anonymous said...

It's certainly nice to hear the rational viewpoints! Gil and Steve obviously think the way I think. I'm completely dumbfounded by the wacky perceptions out there. Although, I gather we're in the minority to advocate in favor of competition. That is, if ever a poll or petition suddenly surfaced...

Ben said...

The stolen part was just a metaphor, I wasn’t trying to imply Wal-Mart sells stolen goods. And I’m not just talking about market power either. I speak of raw power, including political power, the power to receive preferential treatment from manufacturers and importers. I could very well see Wall-Mart influence a manufacturer to give Wall-Mart’s competition a bad deal under the threat they won’t distribute their product. I mean they close stores to avoid unions. When you have just a few executive who control a market they can easily get to know each others, become friends and give themselves preferential treatments, basically form cartels. This is a pretty obvious example but they probably use their political power in all kinds of original ways. You never know what kind of uncompetitive deals are going on behind closed doors. These things are very hard to police.

Anonymous said...


I found a finger in my chile at 'My Hero' the last time I ate at your restaurant. I'm going to sue you for giving me the finger. I counted all mine and all 10 were still in place. So it must be YOUR finger! How dare you! I hope Wal-Mart creates a sandwich department and calls it 'Finger Food' just to remind you of your carelessness when slicing meat. How many fingers can one lose before it becomes impossible to spread the mayo? At least, I didn't find your big toe in my chile. Now that would have been really gross. You'll be hearing from my attorney
Bernie any day now.

-Need 2 B Compensated