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Many say "consumption" drives the US economy. This financial expert says that is completely wrong.
TheBlaze Books ^ | 2015-04-06 | Benjamin Weingarten

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 ...


TOPICS: Books/Literature; Business/Economy
KEYWORDS: consumption; economy; spending
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To: dhs12345

We in production declare that those who leave us and go into marketing have “gone to the dark side”.

Yes, marketing results/opinions can oftentimes be the source of much frustration. Our response is often: “we are not interested in giving the (ignorant) customer what they want, we are giving them what they NEED”. lol


41 posted on 04/16/2015 11:22:21 AM PDT by jonno (Having an opinion is not the same as having the answer...)
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To: E. Pluribus Unum

Creating doesn’t drive the economy. There were touch screen smartphones before the iPhone but nobody consumed them. Really the economy is a circle, it starts where you want to start looking at it. Kind of like the food chain.


42 posted on 04/16/2015 11:26:19 AM PDT by discostu (Bobby, I'm sorry you have a head like a potato.)
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To: jonno

“That is why I made the claim that the relationship is symbiotic.”

Yep. It’s “supply and demand”.

Not “supply or demand”.

However, the problem is when all the stuff we are demanding is supplied from overseas. Like my young kids. They get spending money from birthdays and Christmas. Without actually producing anything, they are pretty limited in their consumption.


43 posted on 04/16/2015 11:28:31 AM PDT by 21twelve (http://www.freerepublic.com/focus/f-news/2185147/posts It is happening again.)
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To: jonno

Yup. I know exactly what you mean.

I have rarely seen anything useful come out of marketing surveys.

It takes a really good technologist (usually an engineer with a really good business sense), that makes the difference.


44 posted on 04/16/2015 11:35:02 AM PDT by dhs12345
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To: rbg81
People who are good citizens and actually SAVE are the enemy. That is one reason why savings have been dis-incentivized.

That is a result of Keynesian economics which is the dominant school across the globe. Unfortunately, it's mostly wrong.

Keynesians insist that consumption drives the economy and that savings is a withdrawal from the spending stream. It's nonsense, of course. Money we save then becomes part of the pool of loanable funds which are then borrowed and spent by someone else.

45 posted on 04/16/2015 11:41:03 AM PDT by BfloGuy ( Even the opponents of Socialism are dominated by socialist ideas.)
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To: fredericbastiat1
Chicken and the egg...production then consumption.

My wife thinks I'm crazy because I study advertising in television and sit there and analyze it to her.
It drives her up the wall.

One observation is that commercials are produced to make you consume.

This whole argument that one is more important than the other seems like a pointless waste of energy ...get out there and produce so you can consume.

46 posted on 04/16/2015 11:46:04 AM PDT by right way right
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To: BfloGuy

The other thing about savings that Liberals hate: it gives you more flexibility and a buffer against hard times. If you have a savings cushion, you’re less likely to need Government assistance. And, it probably means you are a responsible, rationale, disciplined adult; in other words, everything they don’t want you to be. So more savers = fewer clients = less Democratic voters.


47 posted on 04/16/2015 11:51:28 AM PDT by rbg81
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To: 21twelve

The fact that we are huge consumers is probably a good thing. It means that we are higher up on the economic food chain and can afford the non-necessities.

However, you have a very good point — at what point does the whole thing unravel? We take a lot for granted and are very dependent on these “things.” How many of us could forage for food if we really had to. Or how many of us have a big enough backyard to be able to grow food to sustain our families? Very few of us, I bet.


48 posted on 04/16/2015 12:09:58 PM PDT by dhs12345
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To: fredericbastiat1

Yeah, go find an empty plain and see how much one’s need to consume produces.


49 posted on 04/16/2015 12:15:56 PM PDT by RWB Patriot ("My ability is a value that must be earned and I don't recognize anyone's need as a claim on me.")
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To: discostu
Saying that "consumption" drives the economy basically says that you should take money away from the people who earned it if they are savers and give it to people who spend every cent they get their hands on the instant they get their hands on it.

Walmart believes in that model. A large percentage of transfer payments wind up in their account the day the payments are made.

50 posted on 04/16/2015 12:18:23 PM PDT by E. Pluribus Unum (If obama speaks and th<uere is no one the<ire to hear it, is it still a lie?)
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To: E. Pluribus Unum

Walmart provides goods that folks need - at a low price.

I could to choose to buy many of the exact same items at different retailers - but at a higher cost.

Those who are on a limited budget find their dollars purchase more goods when shopping a Walmart.

If you want to keep arguing the concept of consumption, fine. But as has been stated earlier “need” & “want” are the precursors of consumption.

I NEED food, therefore my demand is high. I WANT my food at the lowest reasonable cost. To fill this demand of mine, producers will jockey for position. Some will fill the low cost niche, others will try to satisfy the best quality niche, and the “best value” producers try to supply the middle-ground cost.

If in an impoverished neighborhood, I try to open a Whole Foods market next to a Walmart, I will most likely fail. Why? Don’t I have an excellent product? Yes, but I will fail because the DEMAND for low-priced items is HIGH in that neighborhood. Walmart will thrive in that neighborhood - not because they have stuff to sell, but because they meet the DEMAND for low-cost stuff...


51 posted on 04/16/2015 12:39:27 PM PDT by jonno (Having an opinion is not the same as having the answer...)
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To: fredericbastiat1
Savings and capital formation drive the economy. They create production and consumption.

Government destroys wealth and causes distortions and malinvestment when it attempts to create or stimulate aggregate demand, even in hard times.

h/t Henry Hazlitt, Ludwig von Mises

52 posted on 04/16/2015 12:59:49 PM PDT by Praxeologue ( ')
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To: E. Pluribus Unum
Air exists.

Define 'exists'.

53 posted on 04/16/2015 1:02:41 PM PDT by Lazamataz (The FCC takeover of the internet will quickly become a means to censorship of dissent.)
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To: E. Pluribus Unum

Not necessarily. It’s simply pointing out that if nobody is buying stuff the economy will be bad. There’s nothing wrong with savers in that instance, because savers put money in the bank, who lend it to people who will spend it.


54 posted on 04/16/2015 1:03:46 PM PDT by discostu (Bobby, I'm sorry you have a head like a potato.)
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To: dhs12345

I’ll have to take your word for all that since I don’t own any of those products but it is still true that need has never created anything. PERCEIVED need may inspire all kinds of creativity in people but NEED NEVER creates anything.


55 posted on 04/16/2015 1:25:41 PM PDT by RipSawyer (Racism is racism, regardless of the race of the racist.)
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To: RipSawyer
NEED NEVER creates anything

Or one could argue that - by definition - true need always DRIVES creation.

56 posted on 04/16/2015 1:35:56 PM PDT by jonno (Having an opinion is not the same as having the answer...)
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To: RipSawyer

Need creates one very important thing: an exploitable market.


57 posted on 04/16/2015 1:39:04 PM PDT by discostu (Bobby, I'm sorry you have a head like a potato.)
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To: fredericbastiat1

Sure. But if the production is done abroad and the money to pay for it is borrowed it complicates things. Just repeating a few old truisms won’t clear things up or convince anybody.


58 posted on 04/16/2015 1:42:49 PM PDT by x
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To: discostu
When Obola talks about a consumer-driven economy, he wants to punish anyone who has money in the bank because they have "more than they need."

You're on the same side as Obola.

59 posted on 04/16/2015 2:17:27 PM PDT by E. Pluribus Unum (If obama speaks and th<uere is no one the<ire to hear it, is it still a lie?)
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To: E. Pluribus Unum

When obie talks about a consumer driven economy he’s misusing words and ideas he’s not smart enough to understand. As properly used and understood all a consumer driven economy is saying is that if people aren’t buying stuff the economy will suffer. An economy is built on exchanging goods, services, and money. If one of those becomes seriously lacking the economy shrinks. Nobody who actually understands the terms wants to punish anybody. For one thing we all understand that all the methods of saving that don’t involve your mattress get money in the hands of spenders, that in fact in the long view saving IS consuming, a saver is “spending” their money for interest or ownership stake instead of goods or services.

So if you want to buy into Obie’s gross misunderstanding of the concept that’s on you. But that puts you much more on his side (since you’re buying his poor definitions) than I am.


60 posted on 04/16/2015 2:26:09 PM PDT by discostu (Bobby, I'm sorry you have a head like a potato.)
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