Posted on 04/16/2015 9:57:34 AM PDT by fredericbastiat1
If you listen to the news on the economy or financial markets, you have probably heard statements like “consumption drives the American economy,” or “consumption is 70% of the economy.”
But in a new book out that follows in the footsteps of Henry Hazlitt’s classic “Economics in One Lesson” — though in a much more fun package — titled “Popular Economics: What the Rolling Stones, Downton Abbey, and LeBron James Can Teach You about Economics,” Forbes and RealClearMarkets Editor, and senior economic advisor to Toreador Research and Trading John Tamny challenges this and much other “conventional wisdom” on taxes, regulations, trade and money.
In an in-depth interview with Mr. Tamny, I asked him in particular about the notion that consumption drives economic growth, to which he responded:
(Excerpt) Read more at theblaze.com ...
That's what the Soviets thought. It didn't matter if there was an actual demand for the goods, they would set Five-Year Plans that dictated that x number of good y would be produced.
Sheesh, the economic intelligence of this country is woefully inadequate.
5.56mm
Thousands of years ago people realized they were consuming more food than they could hunt or gather so they turned to farming as a way of producing a supply of food they could consume.
Even before that people that lived in an area with good rocks for making tools traded those rocks with people from another area that had something they wanted or needed.
You’re right.
Consumption is what leads to production which when you put the 2 together equals an economy.
And without consumption, there is no production. If there isn’t a demand for something, then there will be no production (and no product being produced).
For example, toilet paper might not be needed if it weren’t for the toilet. No one needs toilet paper and it is only a recent invention. We did fine without it since the beginning of time. It was because a need was created or maybe realized that it is produced.
How do you consume something that has not been produced?
Demand does not create supply.
Agreed. There is a symbiotic relationship between the producers & the market.
Which is why the US has thrived via the vision, determination, and fortitude of venture capitalists...
I consume air.
Additionally, as anyone working in manufacturing knows there is a little tool called the “marketing survey”:
“Mr. Customer would you be interested in buying product x if it did y & z? And if so, what would you be willing to pay for product x?”
Air exists. It’s been produced. Anti-gravity machines do not exist. I need one. When can I start consuming them?
So if you produce something that nobody buys, how did consumption produce it?
It is not a coincidence that the Iphone looked similar to the ipod. Heck, the ipod and ipad are very similar in form-fit. The iphone/ipad is an ipod/basic ipad with the telephone electronics. That is how Apple markets the product family. Both have wifi, both play all of the apps. The only difference: the telephone electronics.
Plus, I bet that one of the decisions many folks make when buying an iphone is “does it play my thousands of dollars of iTunes music.” The answer is yes and it is no coincidence.
Demand does not create supply.
Actually, it does.
There’s a huge difference however between a “Need” and a “Want”.
Food, shelter and clothing are needs. Once the demand for these basics are met then people shift to wants.
These desires/wants are then compounded upon each other to create new perceived “Needs”.
It is still demand that drives an economy.
Exactly. That is why I made the claim that the relationship is symbiotic.
I wouldn’t manufacture a product unless my research found that there were willing customers. Even then I’m taking a chance (capital risk).
The smart producer - the most successful - is the one who understands the (potential) consumers of his product; what they want, what they need...
Exactly. And often times the marketing survey returns bogus results. It is often that a customer doesn’t know what they want or need. Simply because the product or idea is too new.
An example: if you asked my 10 years ago, if I needed a mobile phone that does everything. I’d probably tell you that my tried and true wired phone works just fine. Timing is everything.
Well, obviously you don’t want to just produce anything, you have to produce something there is a demand for.
Well said!
“Tax the Rich
feed the poor
till there are
rich?.... no..... more?
Wait, how does it go again?
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