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Bonus Quotation of the Day…

… is from pages 674-675 of the 1950 Augustus M. Kelley reprint of Philip Wicksteed’s magnificent 1910 work, The Common Sense of Political Economy:

The central truth is this. If we can separate out persons who are consumers only from consumers who are producers also, we can imagine the interests of the former being neglected without prejudice to the latter. But, if we are considering those who are both producers and consumers, our ultimate consideration must always be for them as consumers. They produce only in order to consume. If you injure them as consumers, you stultify them as producers. Sectionally, you may benefit one man as consumer by giving him an advantage as producer at the expense of others. Collectively, you cannot. And to speak collectively of benefiting the producer at the expense of the consumer would be to speak of strengthening the means by balking the ends.

DBx: To claim that economic policy – and, in particular, trade policy – must do more to protect individuals in their capacity as producers and less in their capacity as consumers sounds profound and mature. ‘Only frivolous individuals or clueless economists care only about consumption,’ assert people such as Oren Cass and Robert Lighthizer. ‘Serious, practical, adult people understand that of equal importance – indeed, of greater importance – is production. We must use tariffs to protect workers in their role as producers!

Well. Despite its superficial air of profundity, such a claim is profound only in its misunderstanding of both economics and of the economy.

No economist or free trader has ever denied the importance of production or insisted that people should pursue maximum-possible consumption and disregard the need to produce. What economists and free traders do insist upon is a correct understanding of production’s relationship to consumption. Production and consumption do not bear to each other the same relationship that, say, pizza and burgers bear to each other. Pizza and burgers are alternatives to each other. And it would be the odd person indeed who wanted for the rest of his or her life to eat nothing but one or the other of these foods.

Production and consumption are not two alternative means of meeting human needs or of satisfying human desires. Nor are production and consumption two alternative ultimate goals of human existence. “Consumption” is the name we give to the act of satisfying the ultimate economic ends that humans have; “production” is the name we give to the act of using the means that we use to satisfy these ends. Consumption is the end; production is the means.

Of course, consumption can consist exclusively of what mature people rightly judge to be frivolous or even self-destructive amusements: lounging lazily in bed all day and never working, overeating, getting drunk, gambling, having casual sex. But consumption can also – and for mature people does – consist not only of satisfying physical needs, such as eating and wearing clothes, but also of pursuing ‘higher’ satisfactions, such as leisure well spent, quality time with family, friends, and neighbors, and even choosing to work in a lower-paying job that offers desired non-pecuniary amenities.

As economists understand these concepts, production and consumption can no more be sensibly traded-off against each other than lawn-mowers can be traded-off against mowed lawns, or than wheat fields can be traded-off against loaves of bread. The former are means to the attainment of the latter, which are ends. Production occurs only insofar as it contributes to the satisfaction of consumption desires.

It’s true that we can today reduce the amount of time and resources we devote to the mowing of lawns in order to increase today our production of lawn mowers. But such a move makes sense only if we want to be able tomorrow to mow even more lawns. More generally, we can – and (thankfully) many of us do – today reduce our consumption in order to invest. This move, however, is done only to increase our or our families’ ability tomorrow to consume. This trade-off of ends for means differs categorically from trading-off against each other two ‘ends,’ say, pizza against burgers, or employment in high-stress and high-paying jobs against employment in lower-stress and lower-paying jobs.

I don’t know if people such as Cass and Lighthizer do or don’t understand what economists mean by “consumption” and “production” and choose to ignore this meaning in order to press their case for protectionism. I suspect that they don’t understand this distinction. They read economics carelessly or tendentiously, and thus cheaply obtain ammunition that they then use to argue against the economic case for free trade. Their ammunition, being cheap, sounds and looks effective only to uninformed people; to informed people it’s seen as the cheap ammunition that it is.


By the way, the argument above applies also to those persons, such as Lina Khan and other “neoBrandeisians,” who reject the consumer welfare standard as the sole guide for antitrust policy.

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