… is from page 243 of my Mercatus Center colleague Dan Griswold’s excellent Cato Journal review of Oren Cass’s 2018 book, The Once and Future Worker:
Ultimately, the book’s emphasis on production over consumption reflects a common mistake that can easily warp public policy. Of course, production is a prerequisite of consumption, but consumption is the ultimate aim of production. Production detached from consumption is a form of servitude. If goods and services become more expensive because of restrictions on trade and competition, real wages will be reduced for tens of millions of American households. To favor the producer over the consumer is a recipe for cartels, cronyism, inefficiencies, and exploitation.
DBx: Yes. Dan’s point is vital.
And even more fundamentally: consumption, while subsequent to production temporally, is prior to production economically. The core reason is that production occurs only when inputs – including human labor – are converted into outputs that are more valuable than is the mix of inputs used to produce the outputs. And the value of any output is ultimately determined by how much that output contributes to human well-being.
To put the point simply, working hard to produce something that no one wants, or that is worth less than something else that might otherwise have been produced, is not to produce. Such activity, although it might appear to the naked eye to be production, is actually consumption: resources are consumed in an activity that yields less value to humanity than the value of the resources used.
If a person voluntarily chooses to exert such effort – effort, say, to produce a sawdust-and-maggot pie – then that person chooses to consume the time and resources necessary to get whatever satisfaction he or she gets from undertaking this effort. If that person pays for this activity, this activity is no less legitimate than, say, paying to go to a movie or to eat a pizza. But this activity is, like going to a movie and eating a pizza, consumption.
What people such as Oren Cass really call for when they plea for tariffs and other government policies that artificially keep people in certain jobs is for some Americans to subsidize other Americans’ consumption. The call is for government to force some Americans to pay to keep other Americans in jobs that those other Americans themselves ‘want,’ but don’t want badly enough to themselves pay to keep – themselves pay to keep, by accepting wage cuts sufficient to make their continued employment in those jobs attractive to employers.
So while Oren Cass appears to economically uninformed eyes – which include his own – to be making a case for government to ‘favor’ production over consumption, he in fact is doing no such thing. He is, instead, pleading for government to subsidize consumption (and, thus, cause consumption to be excessive). In issuing these pleas, he inadvertently presses government both to reduce and to make a mockery of genuine production.