Washington Monthly: The Truth About Big Business

"...In Big Is Beautiful, Robert D. Atkinson and Michael Lind have delivered a book designed to put our minds at ease. We should welcome the demise of small businesses, they argue, because “the facts are eminently clear that on virtually every measure, big business is superior to small.” At a time when there’s growing concern that large corporations have achieved their dominance by bending markets and government policy to their own advantage, Atkinson and Lind offer a different explanation. They contend that the chief driver of rising concentration is the inherent efficiency of bigness, abetted by technological progress, which naturally favors bigger corporations..

...Throughout the book, Atkinson and Lind present straw man versions of today’s anti-monopoly thinkers. In this magazine, Barry Lynn of the Open Markets Institute has offered nuanced ideas about how competition policy could best approach the scale dynamics of different sectors of the economy, from public interest regulation of networked industries, to insisting on at least a few competing firms and strong unions in industrial sectors that necessitate scale, to favoring decentralization in areas like banking, retail, and farming, where localization has significant upsides. Yet the Lynn that appears in the pages of Big Is Beautiful belongs to a group of thinkers who apparently have nothing to offer but a future in which we all return to being farmers and shopkeepers. (I should note that Atkinson and Lind count me in this “cult of small business,” and some of my own work, on North Dakota’s pharmacy ownership law, comes in for this straw man treatment.)

Big Is Beautiful’s subtitle styles this as a work of myth busting, but Atkinson and Lind trade in plenty of stereotypes and unexamined assumptions about the inherent inferiority of small businesses. Scale matters, and not always in the way we assume. Locally owned pharmacies provide better care and lower prices, according to a variety of sources, including Consumer Reports. Independent retailers, by virtue of their own diversity, enable a broader range of products to find a market; shoppers at a local bookstore are three times as likely to discover a new book they’d like to read than those browsing on Amazon, according to the Codex Group. Community banks successfully make a wider variety of loans than big banks do, because their localness enables them to access a rich trove of soft information about borrowers and markets.

As small businesses disappear, we’re losing these distinct market benefits, and something much more valuable, too: a diverse economy that keeps concentrated power in check and ensures that citizens and communities have the ability to chart their own course. Atkinson and Lind are right that we need to take a fresh look at long-held assumptions about scale. They’re just wrong about which ones."

Read the full article here.