C98 emails with regard to the post, Trump's Shady Trade "Deal" With China Exposed:
Hello Robert!
I appreciate EPJ and all your hard work that goes into educating the economically challenged masses! Would you please help me understand the quote from Rothbard below in the context of my vocation?
"Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.… But in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce."
As a farmer (producer) I grow high quality organic food for discerning and selective consumers who pay me a premium for it. I then take that "bullion", save as much as possible for the inevitable "rainy day" and invest the rest of it back into my farming operation with the overall goal to be as self-sufficient as possible in the essentials of life; food, shelter, energy and health. This serves to greatly insulate me from the vagaries of the markets, weather and AGWs. My consumer sales (consumption) are an outgrowth of my "industry" and hard work (production) but not the impetus or even the sole end, if I understand these concepts properly. Thank you!!
RW response:
Consumption is always the end goal of work, of production, unless you are doing something just for the pleasure of it which makes it a hobby.
But note what you say you do with the proceeds of your own product sales. You "save as much as possible for the inevitable 'rainy day.'"
This is nothing but building up reserves for later consumption.
And as far as "invest[ing] the rest of it back into my farming operation with the overall goal to be as self-sufficient as possible in the essentials of life."
It sounds to me like you are doing two things here, investing money back into the business to grow it (so you have more incoming funds) and you are consuming some funds in terms of goods that will make you self-sufficient.
It is misleading to think of consumption as spending only on clothes, vacations or wild parties. In whatever manner you spend money that is not a direct investment in your business or is not an investment where you are expecting a monetary return, you are most likely making some type of consumption-related spending, even if it is only for power generators, blankets, candles and dried food.
As to your point:
As to your point:
My consumer sales (consumption) are an outgrowth of my "industry" and hard work (production) but not the impetus or even the sole end, if I understand these concepts properly.Your sales of product you produced is not consumption from your perspective, they are the sale of goods for cash. And, again, unless it is a hobby, you are producing the product for cash. Presumably, so that your revenue is greater than your expenses so that you have money to spend.
RW - great answer. Especially the last paragraph. Perspective can make all the difference.
ReplyDeleteOne small addition: leisure activity is consumption too.
ReplyDeleteLeisure is necessary for maintaining long-term productivity, and in this sense it can be considered an input to production:)
DeleteThe economics profession seem to have real trouble distinguishing production from consumption, and I'd venture to guess that's because it tries to exclude natural life from the artificially bounded realm of "economic" activity. Everything going to sustain and improve life is deemed "consumption" when it reality it's often a prerequisite for future production (i.e. food is clearly a product for consumption; but w/o food any economic production will soon cease completely).
ReplyDeleteA more useful definition of "consumption" vs "production" would be thermodynamic: the second law states that in a closed system entropy always increases, but there's a workaround: greater increase in entropy outside of a non-closed system could be used to _reduce_ entropy inside. That's what the life is: the self-perpetuating eddy of negative entropy existing in a flow created by dissipation of low-entropy phenomena (such as the Sun) into the high-entropy void.
Simply replicating the same doesn't decrease the entropy much; the diversity (the real one, not the fake "diversity" of adherence to leftist dogma of the day) is what defines healthy ecosystem - or a healthy economy. The real split between production and consumption isn't movement of goods through artificial boundary between "man-made" and "natural", but rather split between positive and negative contribution to the negative entropy of the society and life.
This perspective on dichotomy between production and consumption also illustrates why mass production (beyond size needed to gain economy of scale) and cultural homogenization are evil - they are increasing the entropy within the human "system"
which is completely opposite of what life is about: maintaining and growing the island of negative entropy in the otherwise dead universe.