Advancing a Free Society

Traditional Bookstores are Doomed

Monday, January 10, 2011

The traditional bookstore is doomed by e-readers and online sales of hard copy books. I use the word “doomed” in the same sense that online digital sales of movies and music have doomed movie rental stores, movie theatres, and stores that sell albums of music. Doomed does not mean that these stores will quickly, or ever fully, disappear, but that they have received deadly blows from Internet competition.

Joseph Schumpeter, an outstanding economist in the first half of the 20th century, originated the term “creative destruction” to describe new technologies and other forms of new competition that wreak havoc on older and established industries. The process is creative because it provides consumers and producers with more effective ways of satisfying their wants. The process is at the same time destructive because it greatly reduces the value of services and products provided by older industries.

Extreme examples of creative destruction from the 20th century include the complete substitution of cars for horses and buggies, movies with speaking for silent movies, and computers for typewriters. Less extreme are the large reduction in clerical and secretarial staffs caused by the development of computers and the Web, and the sizable reduction in demand for milk and eggs induced by better information on the health value of low cholesterol diets.

Continue reading Gary Becker at The Becker-Posner Blog