≡ Menu

Production Occurs Only When Satisfying As Many As Possible Desires of Consumers

Here’s a letter to my long-time, antagonistic correspondent:

Mr. McKinney:

You think that Veronique de Rugy’s recent Corner post, to which I favorably link, is “asinine.” Specifically, you fault Vero for suggesting that producing more steel as a consequence of higher tariffs “is the same as baking cupcakes made of anchovies and marshmallows.” You continue: “Any additional steel we produce by protecting our firms from cheap imports are things people actually use.  No one wants a cupcake with anchovies.”

Alas, Vero is correct and you’re not. She used the extreme example of inedible cupcakes to show that waste rather than genuine production occurs when people use resources to ‘produce’ things that consumers value less than the market value of the resources used in such ‘production.’

Using (say) $100 worth of resources to produce a bar of steel that consumers could have purchased abroad for $75 is every bit as wasteful as using $25 worth of resources to bake a dozen anchovy-and-marshmallow cupcakes that consumers value at $0. In both cases, the act of ‘production’ is actually an act of destruction – here, destruction of $25 worth of value.

There’s no way around it, Mr. McKinney: We can only be sure that genuine production occurs if it is guided by market signals generated by the choices of consumers and investors spending their own money as they see fit, unmolested by government.

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

Next post:

Previous post: