The perennial desire to “eliminate the middleman” is perennially thwarted by economic reality. The range of… — Thomas Sowell
The perennial desire to “eliminate the middleman” is perennially thwarted by economic reality. The range of human knowledge and expertise is limited for any given person or for any manageably-sized collection of administrators. Only a certain number of links in the great chain of production and distribution can be mastered and operated efficiently by the same set of people. Beyond some point, there are other people with different skills and experience who can perform the next step in the sequence more cheaply or more effectively— and, therefore, at that point it pays a firm to sell its output to some other businesses that can carry on the next part of the operation more efficiently. That is because, as we have noted in earlier chapters, goods tend to flow to their most valued uses in a free market, and goods are more valuable to those who can handle them more efficiently at a given stage.
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Highly specific knowledge of particular groups of people can prove to be just as economically decisive as knowledge of particular places.
Unfortunately, little of the knowledge and understanding within the economics profession has reached the average citizen and voter, leaving politicians free to do things that would never be tolerated if most people understood economics as well as Alfred Marshall understood it a century ago or David Ricardo two centuries ago.
Some of the economic policies which have led to counterproductive or even catastrophic consequences in various countries and in various periods of history might suggest that there was unbelievable stupidity on the part of those making these decisions—which, in democratic countries, might also imply unbelievable stupidity on the part of those who voted for them. But this is not necessarily so. While the economic analysis required to understand these issues may not be particularly difficult to grasp, one must first stop and think about the issues in an economic framework. When people do not stop and think through the issues, it does not matter whether those people are geniuses or morons, because the quality of the thinking that they would have done is a moot point.
