≡ Menu

Production Occurs Only If It Increases Ability to Consume

Here’s a letter to a new correspondent:

Mr. B__:

Thanks for your e-mail.

“Uneasy” with my letter to John Burtka, you tell me that you’ve “reached the conclusion that by privileging consumption ahead of production free trade is philosophically and morally defective.” And you regard the differences that separate you “and other thoughtful conservative critics of free trade” from me “and other libertarians” to be “fundamentally about deep values, and hence not resolvable through appeals to economics.”

I don’t doubt that some people oppose free trade not because they disagree with me and other free-traders about free-trade’s consequences but, instead, because these people have values that differ fundamentally from the values held dear by those of us who espouse free trade. But your wording of your objection to free trade suggests that, in fact, you and I likely don’t (at least on this matter) have fundamentally different values. Instead, your wording suggests that you simply don’t understand what is meant by “consumption” and “production.”

Imagine a society in which all people work diligently from dawn to dusk every day, from birth to death, to build nothing but sandcastles. I trust that you agree that this society would be not only desperately poor, but also one in which no human being is of any service to his or her fellows. No one produces anything of value. Now suppose that one day Mr. Smith speaks up to recommend that the people of this society turn their work effort away from the production of sandcastles and toward the production of goods and services that are actually of use to fellow human beings. Would you applaud or oppose Mr. Smith’s recommendation?

I’m confident that this recommendation would earn your applause. If I’m correct, then you would find yourself in the ranks of those who you accuse of (as you put it) “privileging consumption ahead of production.” You recognize that expending effort, no matter how tirelessly and skillfully, to ‘produce’ things of no or of little use to anyone is not really, in any meaningful manner, to produce. Instead, it is to waste; it is to waste resources, including that very scarce input we call human labor.

When we proponents of free trade follow the path blazed by Adam Smith by insisting that the ultimate purpose of economic activity is consumption, we don’t mean that life’s goal is or ought to be to wallow in frivolous pleasures, or that there’s no dignity in work. Nor do we reveal a blindness to the inescapable reality that everything of value that is consumed must first be produced. And we certainly don’t advocate gobbling seed corn today without any concern for the suffering that such gobbling would bring tomorrow. We mean none of that.

We mean, instead, that genuine production occurs only when the results are outputs that are of use to human beings. It follows that more output is produced only if and when the results of productive efforts are larger amounts of goods and services for consumption.

In short, because – as we can show with theory supported by historical evidence – only with free trade will firms and workers produce the greatest possible amount of value in terms of goods and services for consumption, the economic case for free trade is fairly described as the case for maximizing the value of that which firms and workers produce.

Pronouncing, in effect, ‘I, unlike those free traders, value production over consumption’ might provide a sensation of moral superiority. But in fact such a pronouncement only reveals profound misunderstanding – misunderstanding of the meaning of “production” and of “consumption,” as well as misunderstanding of both the economic and ethical case for free trade.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030