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Quotation of the Day…

… is from page 166 of Leland Yeager’s and David Tuerck’s superb and still-relevant 1966 volume, Trade Policy and the Price System:

unknown-2A fall in the incomes of some narrowly defined factors signals people to switch their efforts into other, more productive, lines and in that way to share in the higher national income made possible by free trade.

DBx: Such flexibility of productive inputs – including labor – is essential to a market economy.  Without such flexibility, markets do not work and widespread prosperity is impossible.

Politicians, pundits, and pedestrians are fond of praising people who “play by the rules.”  Such praise is justified.  And one of the cardinal rules of a market economy – one of the indispensable rules of any economy in which ordinary men and women are to have any hope of enjoying material prosperity – is that, because production activities are justified only insofar as they serve to achieve consumption goals, individuals in their roles as producers must adjust to the demands of consumers (and not that consumers must adjust to the demands of producers).

Indeed, someone is productive only if his or her activities result in outputs that are valued by consumers.  To the extent that someone generates output that is not valued by consumers, that person is unproductive.  A chef who labors long to roast pieces of plywood – a carpenter who toils diligently to build houses out of pork loins – a tailor who spends long hours making trousers that are ninety-feet long – none of these people, no matter how intrepidly they work, is productive.  None of us has any obligation to buy their wares.  The rule of a market economy is that they, if they wish to earn incomes in the market, must change what they do in order to better satisfy consumers.  Anyone who uses force to get consumers’ incomes against consumers’ voluntarily expressed wishes is someone who breaks the rules of a market society.