Mises Daily Articles
The Economics of American Pickers
As a frequent viewer of The History Channel I have come to appreciate several of its weekly programs, not only for their own sake, but for the many principles of economics demonstrated in each episode. I have written previously of the lessons from the pawn shop, describing a few notable economic concepts one learns from watching Pawn Stars and American Restoration. Another such television show is American Pickers. Here one sees not only classical economic theory in practice, such as comparative advantage and specialization and trade, but other Austrian insights as well.
American Pickers follows the daily business of two pickers, Frank Fritz and Mike Wolfe. They travel the country, stopping at junk yards and visiting collectors of old, obscure Americana, looking for bargains. Viewers learn the history of a few choice items and then the haggling begins. Buyers make their offers and sellers counter, back and forth, until they reach an agreeable price, or they reach an impasse and move to another item. The subjective values of each party are on display, indicating ex ante the expectations of both actors.
The goal of the pickers is to find valuable antiques at a discount, and sell them to retail customers for a profit. This activity is sometimes discredited by critics of the free market who perceive the pickers to be exploiting the owners. They see them negotiate a low price and the anticipated profit each item will bring, and conclude there must be unfair practices involved. The question they never ask is, if the owners were able to sell these goods at higher prices, why haven’t they done so?
The answer is that not everyone has the entrepreneurial judgment to see the future wealth in a pile of junk or an over-crowded garage. Ludwig von Mises, in his treatise Human Action, explains that the entrepreneur “does not let himself be guided by what was and is, but arranges his affairs on the ground of his opinion about the future. He sees the past and the present as other people do; but he judges the future in a different way.” In this way, the pickers are anticipating the future wants of the consumer and acting in such a way as to be ready to meet them.
Looking deeper, we see that not only is there such foresight involved, but an entire structure of production laid out to help them achieve their ends. They must employ capital in such a way as to bring these goods – which in some ways are comparable to higher order goods, in that they are not immediately available for the consumer — to the market.
Retail buyers do not have ready access to the particular items they wish to buy. The pickers undertake extensive labor, driving all over to find pieces that consumers will want at some future time. To this end, the pair must use money to cover such expenses as fuel, hotels, maintenance, shipping, and of course the purchase of inventory. It also takes an expert knowledge of the antiques market to know what items are sought after, and what buyers may be willing to pay in the future. Often the items they select require repairs and restoration to bring the highest return, or even to sell at all. This requires other specialists, more resources, and additional time, thus demonstrating the many roles capital plays, and the added benefits of changing the process of production into more roundabout ways.
This also reveals the risks associated with operating a business. The viewer has an idea of how much profit each item should bring, but it’s not always clear that they will sell for that price. One also sees that some items are harder to sell than originally anticipated, meaning a lower return for the pickers. They must pay their employee, Danielle, who expects regular wages, and cover other costs of the business, whether the inventory moves or not.
Sellers implicitly seem to understand this, which is why they are frequently willing to part with items they may have owned for decades. They do not possess the same production structure that Fritz and Wolfe have accumulated, and are happy to sell their goods to an intermediate buyer, even if it means a lower price than on the retail market. An offer of cash in the present is attractive enough to forego an even greater amount in the future, revealing their time preference. In some cases we find they once bought these pieces for much less than the pickers offer, providing the owner some return on his initial purchase. At other times, we see the owners are surprised that anyone places such a value in their property, in which case they are happy to sell to anyone, because it will benefit them in ways they had not previously understood.
Other potential barriers for the pickers are owners unwilling to sell anything. The two may spend many hours on the road and find it difficult to buy anything sufficient to cover the gas expense, let alone bring in revenue. While this is unfortunate for the pickers, it reveals the rational action of the owners, who see the bids and decide they are better off waiting. While we cannot know precisely why they choose to pass on the opportunity to sell something, we can conclude from praxeology that it is because of a perceived disutility in the transaction. Again, only mutually agreeable transactions take place in these markets.
Through this show we see wealth created before our eyes. What were once idle, all-but-forgotten pieces of antique history are given new life, and provide new wealth to all parties. What we often do not see in the show are the ultimate consumers, who benefit greatly from the work of the pickers, and for whom the latter must be ever mindful.