Questioning The Idea That Large Corporations Are Evil, And That We Should Only Support Mom-N-Pop Shops To Restore Economomic Prosperity In America

The current, popular economic myth goes something like this: In order to thwart large corporations such as Wal-Mart, consumers should band together and go out of their way to purchase goods and services from small local businesses rather than larger business such as Wal-Mart for example.  The idea is that large corporations are somehow degrading America and that consumers making local purchases with Mom-N-Pop stores will starve the beast by the act taking their business to small businesses.
 
The problem with this belief is really very simple.  In most cases Mom-N-Pop stores cannot compete with the lower prices of the larger, more efficient corporations offer.  If Mom-N-Pop are able to offer the exact same product at the same price level (or lower) than Wal-Mart, then by all means it makes sense to support them. 


This usually isnt the case however.  Take note: In this example we need to assume that the customer service and politeness of both the staff at Wal-Mart and the staff the local Mom-N-Pop shop are identical.  If this is the case, and identical widgets are being purchased, there is no logical reason throw charity at an inefficient business.  Here is why...


When a consumer goes out of his or her way to purhcase goods from the more expensive Mom-N-Pop option, it means that the consumer's wallet will be emptied faster.  Money saved at Wal-Mart can be spent ELSEWHERE in the economy.  It could also be saved and put to use by a person with an idea who needs credit.  The point is that when everyone receives the highest quality widget for the least amount of money in exchange, the economy has been optimized. 


The topic we are discussing is a classic example of what Henry Hazlitt would call "Broken Window Fallacy".  To break it down, "Broken Window Fallacy" implies that its best advised to destroy something intentionally because the person who repairs the damage will benefit.  This type of behavior is not capitalism.  Its a form of protectionism.  Other examples of "Broken Window Fallacy" are as follows:


-Bombing a foreign country, then using war spending reconstruction efforts to stimulate GDP numbers


-Enacting tariffs on imported goods to protect domestic manufacturing at the expense of the domestic consumers


-Burning crops during the Great Depression to keep certain groups of farmers in business at the expense of every person who needs to eat


Common sense says that these above examples are an overall loss for the human race yet we
hear examples very similar to these items on the nightly news as if they were unquestionable economic miracle cures for depression.  These strategies always fail in the long term because in a "Broken Window Fallacy", the massses always suffer at the expense of the few who are protected.