Altruism in the Business Pages

Sunday, November 05, 2006

Credit Loren Steffy, the business columnist for The Houston Chronicle, with at least being able to admit, albeit grudgingly, that a business he'd prefer to "stick pins in [sic] my eyes" rather than enter is capable of benefiting its customers.

Let Wal-Mart be Wal-Mart. There are lots of reasons to dislike the world's biggest retailer, but its recent decision to sell generic drugs for $4 a month isn't one of them.
When I first read this column, several things jumped out at me as borderline ridiculous about it. For one thing, its author seems not to understand the difference between (1) a business charging higher prices in response to market conditions and (2) inflation caused by government printing of fiat currency as a means of fleecing creditors: "... Wal-Mart probably did more to keep inflation in check during the past 15 years than former Federal Reserve Chairman Alan Greenspan."

For another, I noticed that Steffy contradicted himself on more than one occasion. For example, he damns Wal-Mart for putting "too many small businesses" out of business and "squeezing employees" even as he praises Wal-Mart for bringing cheap drugs to its customers. Isn't Wal-Mart's legendary ability to cut prices for its customers the very reason it has driven so many inefficient competitors out of business?

Furthermore, mustn't the store achieve low prices for its customers -- a manifestation of its ability to operate efficiently -- through some kind of concrete action? Like cutting its own prices, for example? Is not employee compensation simply the price of labor? If saving customers money on medical expenses is such a good thing, why is Steffy slamming Wal-Mart for doing just what it takes to achieve these savings?

It might be tempting at this point to shrug and conclude that Loren Steffy cannot grasp simple causality and that Houston's only newspaper has hired a complete boob as its business columnist. But it is clear that we cannot do that.
Wal-Mart, though, offers something unusual: market power. It's known for its ability to extract lower prices from suppliers and pass them on to customers. That alone may make Wal-Mart the single biggest influence in reducing the cost of medicine.

Competition already is expanding the scope of Wal-Mart's effort. H-E-B is offering 200 more drugs than Wal-Mart for $1 more.
At least in the isolated case of cutting back on drug prices for the uninsured, Loren Steffy seems perfectly capable, not only of praising Wal-Mart, but of understanding how markets and businesses work.

What gives?

Notice that Steffy's entire normative analysis is based on two essential characteristics. First, whether Wal-Mart directly benefits or harms someone else seems to determine whether Steffy likes or hates whatever it is that Wal-Mart is doing. Second, this moral evaluation has nothing to do with the world as it actually is, or could realistically be. Indeed, there is a distinct contradiction between the moral and the practical in Steffy's ethos. It is this contradiction (and Steffy's tendency to choose the moral over the practical here) that is undercutting his overall analysis of Wal-Mart.

Given that morality is a guide to man's action, it is no surprise that in the act of evaluating the practices of a business, Steffy argues for the moral even when doing so causes him to ignore the practical, even to the point of looking like a complete fool.

And is it any wonder that when Wal-Mart fails to measure up to this arbitrary and other-directed ethos, Steffy tacitly agrees that it is fine to force Wal-Mart to do so? "So for once, let's let Wal-Mart be Wal-Mart." As opposed to what? Forcing them to pay higher wages, give more generous benefits, or not crush competitors? In today's political and regulatory environment, it is hardly a stretch to make this inference.

Ideas matter. Most men, to their great credit, want moral guidance, but tragically believe that morality has no rational basis. As a result, they blindly accept the dominant moral code of our culture, altruism, the notion that no man exists for his own sake. And they are undeterred by facts or respect for individual rights when that moral code directly contradicts the requirements for man's survival (e.g., running a sound business). When the inevitable clash between reality and their moral code occurs, they choose the latter, spreading a righteous misery throughout an otherwise benevolent universe.

It is in self-defense, then, that I point out that morality is not only a science amenable to rational inquiry, but a practical science. Altruism is not only wrong and impractical, it is demonstrably false. Wal-Mart, insofar as this column has described it, has done nothing wrong. In fact, it is doing great things, but appears in danger of being thwarted by an army of blind and misguided altruistic crusaders. What hurts them, hurts me.

-- CAV


Anonymous said...

What you fail to realize is that these drugs were already priced at similar or lower prices. In this situation, Wal-Mart is not lowering the cost of anything. They are simply marketing the cost of these drugs, just as they would market any other product in their store. They are banking on drawing customers into the pharmacy who will then purchase Christmas items, etc.

Unfortunately, most people drawn into the pharmacies are going to find their drugs are not priced for $4. Instead, they'll rack up to debt on Christmas presents, spending money they don't have on "deals that are too good" to pass up. There is no altruism at work here, just another clever marketing ploy to fool consumers.

Gus Van Horn said...

What you fail to realize is that I was not accusing Wal-Mart of altruism, nor do I regard altruism as good.

As to what prices the drugs are being retailed for, why, then, is it big news that they are being sold at such prices? Oh yeah. Because Wal-Mart didn't mark them up and made sure we knew about it. Chalk one up for marketing.

As for the irresponsible spending habits of some consumers, that is a problem of their own making.