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The Case Against Oren Cass’s Case Against the Centrality of Consumption

In my most-recent column for AIER, I challenge Oren Cass’s mistaken notions both about economists’ understanding of the connection between consumption and production, and about the case for a policy of unilateral free trade. This essay isn’t the first that I’ve written on Cass’s misunderstanding of economics and of trade, and it almost certainly will not be my last. A slice:

When economists argue (as Adam Smith did, forcefully) that consumption is the sole end of production – and therefore that production should be guided by the demands of consumers and not by those of people in their roles as producers – they’re often misunderstood as asserting that consumption is more important than production. (Cass operates with this misunderstanding.) But in fact they assert no such thing.

What economists mean when they insist that consumption is the sole end of production is that there is no economically meaningful production if the materials or activities that are the outcome of the exertion of human time and toil satisfy no human desire. That is, to produce is to generate some output that satisfies a human want or wants. Merely toiling to transform physical materials from arrangement X into arrangement Y is not productive unless arrangement Y contributes to the satisfaction of some consumption desire.

To use my favorite example, if I work hard to bake a sawdust-and-maggot pie, the result of my work is not really production. I’ve produced something when reckoned in a purely physical dimension: a concoction featuring wood shavings and fly larvae. But economically I’ve produced nothing. Indeed, economically I’ve wasted time and resources that could instead have been used to produce something that does satisfy human desires. Economically I’ve reduced production from what it could have easily been.