Everyone always wants to eliminate the middleman but they can’t because of economic
reality.
Beyond some point, there are “middlemen” in the channel of getting your goods to the
end customer who can perform the next step in the sequence more efficiently and more
effectively than you can. At that point, it pays a firm to sell what it has produced to some
other channel that can carry on the next part of the operation more efficiently.
Oil companies discovered they can make more money by selling gasoline to local filling
station operators. When they did, they no longer had the burden of getting their product
to the public. It was out of their hands and not their problem.
When a product becomes more valuable in the hands of somebody else, that somebody
else will bid more for the product than it is worth to its current owner.
Go back to the oil companies. The filling station operators see the product to be more
valuable to them than it does to the oil companies because the oil companies are in the
business of producing oil. The operators are in the business of dispensing it. The owner
then sells, not for the sake of the economy, but for his own sake. However, the end result
is a more efficient economy, where goods move to those who value them most.
Middlemen continue to exist because they can do their phase of the operation more
efficiently than others. It should hardly be surprising that people who specialize in one
phase can do that phase better than others.
Whatever the merits or demerits of various political proposal, what must be kept in mind when evaluating them is that the good fortunes and misfortunes of different sectors of the economy may be closely related as cause and effect - and that preventing bad effects may prevent good effects. It was not accidental that Smith Corona was losing millions of dollars on its typewriters while Dell was making millions on its computers. It was not accidental that Safeway surged to the top of the grocery business while A&P fell from its peak to virtual oblivion. The efficient allocation of scarce resources, which have alternative uses, means that some must lose their ability to use those resources in order that others can gain the ability to use them Typewriters were no longer what the public wanted after they had the option to achieve the same end result and more with computers. Scarcity implies that resources must be taken from some places, in order to go to other places.
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