tag:blogger.com,1999:blog-11906042.post2557060770674452913..comments2024-03-18T17:17:00.423+13:00Comments on Not PC: Economics and History by essentialsPeter Cresswellhttp://www.blogger.com/profile/10699845031503699181noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-11906042.post-15521454822101611052008-04-02T16:19:00.000+13:002008-04-02T16:19:00.000+13:00"PC: you're right, I'm not trying to say Reisman i..."<I>PC: you're right, I'm not trying to say Reisman is a mercantilist, far from it</I>." Indeed not, especially in light of Nobel Prize winner James Buchanan's praise for Reisman's book:, "Reisman's exposure of modern mercantilist fallacies takes its place alongside that of Adam Smith."<BR/><BR/>:-)Peter Cresswellhttps://www.blogger.com/profile/10699845031503699181noreply@blogger.comtag:blogger.com,1999:blog-11906042.post-14138048986323949642008-04-02T16:16:00.000+13:002008-04-02T16:16:00.000+13:00Yes, we produce because we want to consume; but co...Yes, we produce because we want to consume; but consumption we can take for granted -- to produce we have to do something other than simply sit their with a spoon trying to catch rain from the sky.<BR/><BR/>The fundamental problem of economic life is not how to consume, but how to produce. There's nothing in that statement that argues for production without consumption however -- it simply recognises the fundamental principle that in order to consume, one must have first produced something to <I>be</I>consumed. In other words, you cannot talk about consumption without first talking about production, and what it requires.<BR/><BR/>As he says in his 1964 essay '<A HREF="http://capitalism.net/articles/Production_v_Consumption.html" REL="nofollow">Production versus Consumption</A>':<BR/><BR/>"<I>In the nineteenth century, economists identified the fundamental problem of economic life as how to expand production. Implicitly or explicitly, they perceived the base both of economic activity and economic theory in the fact that man’s life and well-being depend on the production of wealth. Man’s nature makes him need wealth; his most elementary judgments make him desire it; the problem, they held, is to produce it. Economic theory, therefore, could take for granted the desire to consume, and focus on the ways and means by which production might be increased.<BR/><BR/>In the twentieth century, economists have returned to the directly opposite view. Instead of the problem being understood as how continuously to expand production in the face of a limitless desire for wealth resulting from the limitless possibilities of improvement in the satisfaction of man’s needs, the problem is erroneously believed to be how to expand the desire to consume so that consumption may be adequate to production. Economic theory in the twentieth century takes production for granted and focuses on the ways and means by which consumption may be increased. It proceeds as though the problem of economic life were not the production of wealth, but the production of consumption.<BR/><BR/>These two diametrically opposed and mutually exclusive basic premises concerning the fundamental problem of economic life play the same role in economic theory as do conflicting metaphysics in philosophy. Point for point, they result either in opposite conclusions or in the advancement of opposite reasons for the same conclusion. So thoroughly and fundamentally do they determine economic theory that they give rise to two completely different systems of economic thought.</I>"Peter Cresswellhttps://www.blogger.com/profile/10699845031503699181noreply@blogger.comtag:blogger.com,1999:blog-11906042.post-74389426819475659702008-04-02T13:16:00.000+13:002008-04-02T13:16:00.000+13:00PC: you're right, I'm not trying to say Reisman is...PC: you're right, I'm not trying to say Reisman is a mercantilist, far from it. He clearly is no such thing. But production without consumption is pointless and it is consumption that gives us utility, that is what provides welfare. We produce because we want to consume. We trade also because we want to consume. Trade is pointless in and of itself. We trade because we wish to consume a different bundle of goods than those we produce. My point was just that thinking in terms of the producer can lead to bad outcomes. Which, I think, was Smith's point. He opposed mercantitlism because it lowered national welfare. Mercatilists thought of welfare, mostly, in terms of the producer's welfare.Paul Walkerhttps://www.blogger.com/profile/13731003529546075700noreply@blogger.comtag:blogger.com,1999:blog-11906042.post-11958678604881824032008-04-02T12:41:00.000+13:002008-04-02T12:41:00.000+13:00Without consumption what is the point of productio...Without consumption what is the point of production? It is consumption that provides utility. That is the real point. We do not produce just for the fun of producing but we do consume just for the fun of it.It is true that without production you have nothing to consume but the point of production <B>is</B> consumption. "I consume therefore I am."Paul Walkerhttps://www.blogger.com/profile/13731003529546075700noreply@blogger.comtag:blogger.com,1999:blog-11906042.post-36142850768973101582008-04-02T12:17:00.000+13:002008-04-02T12:17:00.000+13:00I think Sean makes the relevant point.Put simply, ...I think Sean makes the relevant point.<BR/><BR/>Put simply, the Mercantilists favoured producers to the exclusion of consumers.<BR/><BR/>The Keynesians and neo-Keynesians favour the consumer to the exclusion of producers.<BR/><BR/>But as Sean says, what Reisman argues is that production necessarily precedes consumption -- indeed, somewhat similar to Say's Law, he points out that in order even to <I>be</I> a consumer one must first be a producer.<BR/><BR/>I'm not sure one would characterise that as any variant of Mercantilism, except by non-essentials?Peter Cresswellhttps://www.blogger.com/profile/10699845031503699181noreply@blogger.comtag:blogger.com,1999:blog-11906042.post-16101002302182538092008-04-02T11:04:00.000+13:002008-04-02T11:04:00.000+13:00That should be;"Discussion of consumer welfare is ...That should be;<BR/><BR/>"Discussion of consumer welfare is meaningless withOUT production."Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11906042.post-92145884064147712772008-04-02T11:02:00.000+13:002008-04-02T11:02:00.000+13:00Paul,Of course you correctly identify some bad eco...Paul,<BR/><BR/>Of course you correctly identify some bad economic policies. But concern for the consumer can lead to as many if not more. Concern for the consumer leads to price controls, to red tape and a myraid regulation. <BR/><BR/>What Reisman has identified, correctly, is that before one consumes one must produce. Before one can eat, one must work. Discussion of consumer welfare is meaningless with production. Indeed to be a consumer one must be a producer (or relative etc of one). <BR/><BR/>Consider a desert island economy. To talk of Cursoue's consumer welfare ansent of his ability to gather/fish/hunt (produce) is to talk of nothing. Here your objection completly collapses. Crusoe the producer is hardly going to pursue policies detrimental to Crusoe the consumer. That would be a logical nonsense.<BR/><BR/>Sean.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11906042.post-34324603320897731212008-04-01T20:13:00.000+13:002008-04-01T20:13:00.000+13:00I would argue that Adam Smith moved away from seei...I would argue that Adam Smith moved away from seeing the producer as the centre of economics to seeing it as the consumer for good reason. Having the producer as centre of the economic process is what leads to mercantilism, the very thing that Smith wrote "The Wealth of Nations" to fight. Smith rightly argued that the consumer was the important player in the economy since it is the consumer's welfare that matters. Having the producer as the heart of the economy leads to the protection of the producer. It leads to monopoly and to guilds and to trade barriers etc. These things protect producers but do even more harm to consumers.Paul Walkerhttps://www.blogger.com/profile/13731003529546075700noreply@blogger.com