[christianwright]

Well, sadly, Wal-Mart doesn't think the demand's going to let up. They've been removing otherwise profitable (I presume) service franchises from their stores and have been replacing them with pay day loan centers. http://www.economist.com/blogs/freeexchange/2010/03/payday_l... A friend in Nevada was using a mail center inside a Super Wal-Mart to get his mail (he travels a lot) and was told by the manager that it was being shut down even though it was profitable because corporate told them to put in the pay day loan center. Kinda depressing really.

[Cushman]

This might actually be a place where Wal-Mart using its clout to drive profit margins down is an unequivocal good. Weird.

Well, apart from the whole shutting down other profitable services thing :P

[matwood]

WM isn't all bad. In their effort to drive down prices they actually provide the least expensive option for fresh fruit, veggies, and other healthy foods that lower income people typically forgo because of the cost. Studies have found that when given less expensive options for healthy food people will pick it over the junk.

[Tuna-Fish]

> This might actually be a place where Wal-Mart using its clout to drive profit margins down is an unequivocal good.

Walmart using it's clout to drive profit margins down is always an unequivocal good. The sole reason a free market is better than the alternatives is that given enough time, margins trend as low as they can possibly go.

[Cushman]

That's precisely the point— when one company is deciding which products they want to sell, and that single company's business makes up 30% of your market, more than your profit margin, and they're telling you that you need to lower your prices by two cents this year or they're going to start buying from someone else and you'll have to fire seven hundred people or else go out of business...

How is that a free market?

The whole problem is that Wal-Mart is big enough to drive margins below what is sustainable. Forced reduction in margins leads to lower quality products, layoffs, and eventually the outsourcing of entire manufacturing sectors— and what good is a socket set for 15¢ less than the competition when the socket set company that used to pay you $35,000 a year moves to Indonesia and now pays you $0?

I would call that "good" quite equivocal.

[pwk]

How is that a free market?

A free market doesn't guarantee that you get to stay in business.

what good is a socket set for 15¢ less than the competition when the socket set company that used to pay you $35,000 a year moves to Indonesia and now pays you $0?

Over the long term and looking at the bigger picture, we'll hopefully wind up with a good number of people in Indonesia who are better off.

[pwk]

Sideways reply due to stack depth, sorry...

What's the practical difference between a government saying "You must sell your product for this price or we won't allow you to do business in this industry" and Wal-Mart saying the same thing?

You're right that there might not be much of a practical difference for the company making the socket sets, but they aren't the only factor in the equation. Your question addresses only the seller, and markets are made of both sellers and buyers.

If the government sets price limits, that means the company can't do business even if there's a willing buyer. You're removing the right of free choice.

When it's Wallmart setting a price that they're willing to pay, and it's lower than the price the company is able to sell for, that just means there isn't a willing buyer. Wallmart is in some sense acting as a proxy for the people who shop there, who are clearly saying that price is what's important to them.

To paint an exaggerated picture: if I'm trying to sell my socket sets for $1000 each, and no-one wants to buy them, that doesn't mean the market isn't free, it just means that there isn't a match in the buyer side of the market for my product.

[Cushman]

That doesn't answer my question. What's free about it?

What's the practical difference between a government saying "You must sell your product for this price or we won't allow you to do business in this industry" and Wal-Mart saying the same thing?