Protectionists are Profoundly Confused

by Don Boudreaux on September 29, 2009

in Trade

In a letter appearing in Sunday’s Washington Times, protectionist William Hawkins accuses Adam Smith of being “dreadfully wrong” to insist that the ultimate goal of economic activity is consumption rather than production.

Alas, the dreadfully wrong one is Hawkins.  He confuses means with ends.  Flour, sugar, apples, an oven, and labor are necessary ingredients for baking an apple pie, but these means are valuable in this use only if someone wants to consume the pie.  If no one wants to eat apple pie, then using these ingredients to produce the pie would be wasteful.

Adam Smith correctly understood that the desire to consume is what justifies production, and not vice-versa.  If Mr. Hawkins were correct that the ultimate goal of economic activity is production, then he should be just as pleased to have set before him for dessert a fresh-from-the-oven sawdust-and-earthworm pie as he is to have an apple pie.

Be Sociable, Share!

Comments

comments

25 comments    Share Share    Print    Email

{ 25 comments }

Anonymous September 29, 2009 at 1:16 pm

An example of the kind of thinking that living that close to the Beltway can produce.

Anonymous September 29, 2009 at 4:49 pm

Lots of gasses.

Will Henson September 29, 2009 at 1:36 pm

Hawkins writes: “Production must be the center of policy because it not only provides goods and services but also generates the income for those who work so they can become consumers (and savers). We have before us the ruins of an economy that has for a generation been based on consumption funded by debt rather than on income from production.”

The flaws in this paragraph are numerous, but I would just point out the first: “Production must be the center of policy…” Neither production nor consumption should be the “center of policy” (whatever this means). Individuals should simply determine and act on their own preferences and other individuals should meet those preferences via supplying them with what they desire for an agreed upon price. The only role for “policy”, (and I assume Hawkins means government here) is to protect property rights, maintain the sancity of contract, and invoke appropriate judicial measures when necessary. To purport the need for centrist policy, as Hawkins does, is to only advocate the restriction of liberty and prsoperity.

Juan Carlos Vera September 30, 2009 at 4:12 am

good!!!

Randy September 29, 2009 at 2:02 pm

I’m missing where Hawkins is saying that the ultimate goal of economic activity is production. It seems to me that he is saying that production must be the center of policy. I think he’s on to something, but I don’t think its what he thinks it is. From a political-centrist worldview, production is the only controllable variable. “Policy”, therefore, must be aimed at production. Assuming that the political objective is to maximize the rent collection from controlled territories, policies designed to manipulate production make perfect sense. Consumers would very often choose to live a life of leisure rather than a life of work and tax (rent) paying. Political manipulation of production is the method by which consumer’s are denied the option of leisure.

John Dewey September 29, 2009 at 2:18 pm

Randy:”From a political-centrist worldview, production is the only controllable variable.”

What do you mean by “political-centrist worldview”? Do those with such a view believe that only half of a person’s freedoms should be taken from him?

Randy: “Political manipulation of production is the method by which consumer’s are denied the option of leisure.”

What? I do not understand this at all. I thought that fear of starvation is the “method” by which consumers are denied the option of leisure. Your statement seems to assume a welfare state is somehow available for anyone who chooses it. Is that the assumption behind a “political-centrist worldview’?

Randy September 29, 2009 at 2:42 pm

John Dewey,

Political-Centrist worldview is the perspective of those who specialize in the exploitation of human beings.

Certainly the option of leisure is prohibited by the need for security, threat of hunger, etc., but Hawkin’s idea on the need to control production brings to mind the possibility that the human exploitation specialists play a role as well. Its new. I’m working on it.

Anonymous September 29, 2009 at 3:51 pm

Those with such a view believe that half a person’s freedoms have already been taken from him, and since he doesn’t choose the mix of freedoms taken from him, the mix of freedoms remaining to him serve the interests of the state as much as his own interests. He’s free to run the maze, and the maze offers him many choices, but every path leads ultimately where the statesmen want him to go. I’m not quite as fatalistic in this regard as Randy sometimes seems to be, but I do understand his point.

Anonymous September 29, 2009 at 4:49 pm

Martin, that’s why I don’t wrap up my happiness in consumerism or materialism. My spirituality is one thing the state can’t take away from me.

Anonymous September 29, 2009 at 5:01 pm

Amen.

matt September 29, 2009 at 8:33 pm

Why do all of your posts have the word “statesmen” somewhere? Boring! Oh wait, there’s one below that doesn’t. Sorry.

Anonymous September 29, 2009 at 11:16 pm

“Statesmen” usually has this noble air about it. I’m making a concerted effort to use it more derisively, like “politician” or “pig”, to try to change this air.

Rick Weber September 29, 2009 at 3:50 pm

I agree completely.

Others will often say that the ultimate goal of the economy should not be consumption, but something like providing jobs (e.g. “The Story of Stuff”). To them I would respond: A process that is an end in itself is nothing more than a hobby (i.e. consumption).

Jeff September 29, 2009 at 3:55 pm

Don’s right.

Do guys like Hawkins examine how primacy-of-production economies have performed? This isn’t a hard one to see.

Anonymous September 29, 2009 at 4:07 pm

The production versus consumption argument is similar to the (supplier) push versus (consumer) pull argument that you see in the world of entrepreneurship (and business in general). In general, pull-driven innovations are more successful faster, sooner, and cheaper than push-driven innovations (aka a solution in search of a problem). Generally, push-driven innovations (the Metric system) need significant government involvement for them to be “successful”.

Andrew_M_Garland September 29, 2009 at 5:07 pm

Most of the U.S. economic crisis comes from William Hawkins’s confusion. Barney Frank and friends thought that it didn’t matter if houses were built for people who could not pay for them. Houses were objects of value. How could one have too many of them? Production was valuable in itself. A Marxian theory of value: it takes much labor to build a house, so it must be valuable, no matter what.I don’t have the reference to this story about Russian planned production in the 1970′s. Russian furniture production was of course state-run, and they carefully measured production in tons shipped. The factories met their quotas by building large, heavy furniture. This didn’t work out well in a country with tiny, walk-up apartments.There are a million ways to go wrong. Only a free market of self-interested, independent agents is going to find the few ways of doing things right.

EasyOpinions

The Other Bob Smith September 29, 2009 at 11:08 pm

Andrew,
Over 20 years ago, while in grad school, I had an Econ Professor who while visiting the Soviet Unioin, saw a nail plant manager being awarded the Order of Lenin, due to his high nail production. Mr Hawkins would have been proud…the plant manager achieved his goal by manufacturing thousand pound nails!

Sam Grove September 29, 2009 at 6:41 pm

I think Hawkins misunderstands the question.

The IMMEDIATE goal of economic activity may be to produce goods, but the ULTIMATE goal is to satisfy the need and desire to consume.

Why he would not connect production to consumption is beyond the rational mind.

Name September 30, 2009 at 1:00 am

Hey Don,
I’m sorry for being off topic here but I’m curious If you’ve seen the article “How American Health Care Killed My Father” by David Goldhill.
http://www.theatlantic.com/doc/200909/health-care

Juan Carlos Vera September 30, 2009 at 3:58 am

Mr. Hawkins, in addition to not understanding what Adams Smith said, ignores the nature of the economic problem: to allocate scarce resources among alternative uses to satisfy the “needs” of people. The needs of people are met when the final goods (including services) are consumed or used by consumers. The production of goods for itself, if not meet any need, has no value, which corresponds to zero income. Luxury economic advisers who, like Mr. Hawkins, putting the horse before the cart, suggest allocating scarce resources in the economy to develop useless industries which impoverish the people, leading to the war, and then killing them of hunger.

EL señor Hawkins, además de no entender lo que dijo Adams Smith, desconoce la naturaleza misma del problema económico: asignar bienes escasos entre usos alternativos, para satisfacer las “necesidades” de las personas. Las necesidades se satisfacen cuando los bienes finales (incluido los servicios) son consumidos o utilizados por los consumidores. La producción de bienes por si misma, si no termina satisfaciendo necesidad alguna, no tiene valor, lo que se corresponde con ingreso igual a cero. Que asesores económicos de lujo quienes como el señor Hawkins, poniendo el caballo delante del carro, sugieren asignar los recursos escasos de la economía para desarrollar industrias inútiles con las cuales empobrecen a las personas, las conducen a la guerra, y finalmente matan de hambre a los sobrevivientes.

D.G. Lesvic September 30, 2009 at 7:29 am

Adam Smith and his critic, William Hawkins are both right, up to a point.

Smith is right in saying that we work so that we may eat, and sell so that we may buy, not the other way around. Since buying is the end, and selling but the means to it, favoring sellers over buyers confuses the means with the end and defeats the purpose of trade.

But Hawkins is right too in saying that you cannot turn that around and sacrifice the sellers for the buyers. 

What it all means is that you can only define the sellers in terms of the buyers, the means in terms of the end.  They are means only so far as they serve the ends, and sellers only so far as they serve the buyers.  So far as they disserve the ends, they are not means but obstacles, and, disserve the buyers, not sellers but extortionists.

But so far as they serve the buyers, as determined by the buyers’ free choices, they must not be interfered with.  

For there is no conflict between buyers and sellers per se.  It is only between some sellers and other sellers and all of the buyers.

Juan Carlos Vera September 30, 2009 at 5:47 pm

In the logic of Mr. Hawkins, his statements are true only if you ignore the preferences of consumers. Why?

Mr. Hawkins says: The desire of consumers is a given and also limitless. This statement is incomplete, therefore useless.

While the desire to consume is given and can be unlimited, finally consumed goods are obtained by using other goods that are by nature limited. The problem involves allocating limited goods to produce “limited” goods. Mr. Hawkins omitted the fact that those needs arising from certain preference of individuals, and those needs are met with limited goods. If a great mapper, called Keynes, choose to install a large industry to allocate all the economy’s limited goods to produce goods that no one demand, then that Keynesian economics have full employment of productive factors that will receive zero compensation. The industry produces goods that are not preferred by people and have no value. For the consumer preferences, the incompleteness of the statement makes it irrelevant to real economic logic.

Mr. Hawkins also says: The production determines whether these desires can be met. This statement is false.

Again, Mr. Hawkins ignores consumer preferences. His statement may be violated in an economy with trade. Who will produce excess of that which is not demanded or sold?. In this sense Adam Smith’s statement is consistent with the preferences: it is important to allocate scarce resources in the production of those goods demanded by consumers.
Q.E.D.

Daniil Gorbatenko September 30, 2009 at 7:48 am

Thanks for that, Prof. Boudreaux. This protectionists’ mistake seems to stem from the same confusion as the Keynesians’ misinterpretation of Say’s law.

Say’s law was not that “supply creates its own demand.” Say’s law was that supply of one good is the demand for other goods.

Anonymous September 30, 2009 at 6:54 pm

Or, supply creates its own demand not because people will later demand what has first been supplied (the misinterpretation), but because production of the supply must involve labor payment which creates demand. So, the created supply and created demand arrive simultaneously as part of the same productive process.

D.G. Lesvic October 1, 2009 at 5:00 am

J.C.

Hawkins misinterpreted Smith. I’m sure that Smith did not meant to say that only consumption mattered and production did not, but that consumption was the end and production the means, and it was a mistake to confuse the means with the end, and treat it as the end goal.

That doesn’t mean that you can disregard production. It is still the essential means to the end.

Hawkins is right in saying that production has been disregarded, but wrong in suggesting that it was disregarded by Smith.

And he is wrong, too, in disregarding consumption.

There is no conflict between production and consumption. The one is the means, the other the end.

The conflict is between some producers and other producers, the ones the consumers prefer to buy from and those they prefer not to buy from, and between the disregarded producers and all of the consumers.

Previous post:

Next post: