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Where Labor Goes

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My old friend John Egger sent the following observation to me in an e-mail prompted by this recent post [2]:

Another way of expressing your point is that capitalists decide where their capital goes in the same sense, and for the same reason, in which laborers decide where their labor goes.

Exactly!  (And cleverly put.)  Insofar as an economy is market-oriented, the ultimate determinant of “where money goes” – that is, of where resources, including labor, go; where the course of productive activity goes; where financing goes – is the detail in the pattern of consumer spending (including consumers’ decisions on how much, how long, and in which specific forms, to save).  Consumers’ decisions ultimately determine where capital and labor ‘go’ and what their values are in alternative uses.

Let me repeat this last sentence, with appropriate emphasis: Consumers’ decisions ultimately determine where capital and labor ‘go’ and what their values are in alternative uses.  If you’re skeptical and are in search of some evidence in support of this claim, consider that protectionism in nearly all of its forms and guises is a direct attempt to change the way that consumers spend their money (in order, be aware, to give owners of capital a say that such owners would not otherwise have in determining the course of productive activities).

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