A timeless 1990s Tom Hanks/Meg Ryan love story, You’ve Got Mail is also a treasure trove of applied economic principles. The budding online romance between the two characters, Joe Fox (Hanks) and Kathleen Kelly (Ryan), is complicated by their marketplace rivalry in the New York City book business. Kelly’s small and unassuming children’s bookstore, The Shop Around the Corner, is threatened by the anticipated grand opening of discount chain store Fox Books.
It’s the classic tale of a mom-and-pop store versus big business. Fox Books is able to provide discounted books, wider varieties, and even an in-house coffee shop. Though the adorable Shop Around the Corner is well-established in the neighborhood, it suffers immediately because of the increased competition.
A Hard-Fought Fight
Kathleen works diligently to increase press coverage for her Shop Around the Corner – and against what she refers to as the “big, impersonal” Fox Books. Many loyal customers rally around her, even holding demonstrations in front of Fox Books chanting “1, 2, 3, 4, we don’t want your superstore”.
Moreover, Kathleen insists that Fox Books is unable to provide the level of customer service that her tiny, intimate shop is able to deliver. What it perhaps lacks in customer service, Fox Books makes up in space, volume, and, most importantly, discount books.
Notwithstanding Kelly’s efforts, You’ve Got Mail portrays New Yorkers who, not surprisingly, value the low prices that Fox Books provides. In search of a good deal, they show overwhelming support for Fox Books – clearly content with the potential sacrifice of a higher level of customer service.
A few short months after its opening, Fox Books has put The Shop Around the Corner out of business. The less economical, independent bookstore cedes its market share to the larger store.
Economist Joseph Schumpeter appropriately, albeit ironically, dubbed this phenomenon “creative destruction” and explained it as “… the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in”.
Though devastating to existing industry employees, this destruction can be called “creative” because it incentivizes the innovative re-allocation of resources to where they are better suited.
Kathleen, with her years of trusted experience in children’s books, receives multiple job offers after her store closes – including to edit children’s books or write one of her own. Additionally, one of her employees, George, accepts a position at the dreaded Fox Books and “revolutionizes” his department.
The characters’ concentrated efforts in these newly-found areas could potentially better suit the NYC book industry, and encourage their personal creativity.
Evolution Of Markets
Ultimately, the evolution of New York City’s book market in You’ve Got Mail is a representation of Schumpeter’s point that capitalism “… is by nature a form or method of economic change and not only never is but never can be stationary”. His argument for the benefits of creative destruction hinges on the principle that the free economy is ever-changing – and for the better.
Though the economic players differ, competition is a game that stays the same. Today, chain store Barnes and Noble fights to maintain share in a market where Amazon dominates – catalyzed by a global movement towards online shopping and instant downloads.
Free markets are ever-evolving. Producers compete to innovate better and faster than the rest of their industry. Consequently, consumers are one of the ultimate beneficiaries of a market economy that inherently encourages efficiency, lower prices, and goods that are more easily accessible.
You’ve Got Mail is a timeless way to learn the upside of creative destruction – with a little bit of romantic comedy in the mix.