The title of this posting is something that’s appearing on
bumper stickers lately. Or it could have
been around for a while. We tend to
concentrate on the traffic and other things than bumpers when we’re
driving. That staring eyeball from
President Obama’s campaign didn’t help any.
It’s kind of creepy. Anyway —
The bumper sticker just kind of set us off. It is a perfect statement of the Keynesian status quo. It assumes as a given that
the only way someone can consume is if one has a job producing something a
machine could make better, faster, and cheaper, or obtains charity or welfare.
Every additional mouth thus means one additional claim on resources, and one
less job to go around.
The solution is, oddly enough, in Adam Smith, the economist everybody seems to love to hate. As he put it in The Wealth of Nations (1776), “Consumption is the sole end and purpose of all production.”
The solution is, oddly enough, in Adam Smith, the economist everybody seems to love to hate. As he put it in The Wealth of Nations (1776), “Consumption is the sole end and purpose of all production.”
Jean-Baptiste Say elaborated on this with his “Law of
Markets.” No one can consume anything that has not been produced. If you do not
produce, obviously you cannot consume (Even the Bible says this: “He who does not
work, neither shall he eat.”). You either produce for your own consumption, or
to trade for something someone else has produced so you can consume it.
The logical response to some people not having enough to consume is not to redistribute existing wealth that belongs to other people — although that may be necessary in the short term. Rather, the solution to people not having enough to meet their consumption needs is to make them productive. In this way, they either produce themselves what they consume, or trade what they produce for what others produce.
The logical response to some people not having enough to consume is not to redistribute existing wealth that belongs to other people — although that may be necessary in the short term. Rather, the solution to people not having enough to meet their consumption needs is to make them productive. In this way, they either produce themselves what they consume, or trade what they produce for what others produce.
The key to understanding Say’s Law of Markets is that if
someone cannot produce by means of his or her labor, he or she must produce by
means of his or her capital. We include
land under capital, as a non-human factor of production. Capital being inherently self-liquidating, as Louis Kelso pointed out, there are no insurmountable barriers to anyone owning capital and becoming a net producer of wealth with labor, capital, or both.
Thus, every new person is not simply a potential consumer, but a potential producer, and the social order must be restructured so that, as Leo XIII put it, “We have seen that this great labor question cannot be solved save by assuming as a principle that private ownership must be held sacred and inviolable. The law, therefore, should favor ownership, and its policy should be to induce as many as possible of the people to become owners.” (Rerum Novarum, § 46.)
Thus, every new person is not simply a potential consumer, but a potential producer, and the social order must be restructured so that, as Leo XIII put it, “We have seen that this great labor question cannot be solved save by assuming as a principle that private ownership must be held sacred and inviolable. The law, therefore, should favor ownership, and its policy should be to induce as many as possible of the people to become owners.” (Rerum Novarum, § 46.)
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