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Primacy of Consumption / Production

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You misunderstand my use of effort I guess, or I misused it. I was originally going to call it a synergy between the two but that didn't fit, so maybe effort isn't the right word.

If you want to be nitpicky, it does take effort to consume anyway. But I know what your point is, so I won't be nitpicky.

What I was trying to stress, is that it is neither the producer alone or the consumer alone (producer and consumer in the context of a trading of values, not of the same person) that creates "demand for a product" or the "willingness to buy(consume)". The producer can not just create a computer and sit back and wait for people to clamor over it, he must convince them, through reason that they can benefit from the computer, and they must accept, through reason that it is a benefit to them. If the consumer does not recognize the benefit, there is no demand, if the producer can not convince them that it is not a benefit (or if it actually isn't) then there is no demand.

Producer's produce a supply, not a demand. The demand is present because of the consumer, demand for a certain product is a the result of the consumer AND the producer. The former is the principle underlying the latter. The principle is that the consumer wants certain things, as Jmegan pointed out, everything passed mere subsistence is "gravy". But there are things they want, because there are things they need, they need certain things because of their nature as living beings. So they need food, to live, they want food, there is a demand for food before food is produced. They can produce it themselves, or trade for it, but the demand stays whether or not the food is ever produced; the demand is a result of their nature, it is a metaphysical fact. This demand can be tranlsated into demand for other things, demand for means of producing food more efficiently, demand for certain products that doesn't exist before those products exist. This is where the "synergy" (lack of better vocabulary) comes into play. The consumer has a need for food, there is a demand for food, a demand for food translates into a demand for a means a producing food, and so on to a means of producing an abundance of food. The underlying principle of demand for food still exists, but the producer, the producer that creates a field of corn, has "created a new deand" for fields of corn. But this demand is still only an expression of the underlying demand for food, the demand they are meeting is the underlying one. The same can be said of computers. The underlying demand is for computational power, this is not the base, but it shows how it goes passed "demand for G5 because Apple makes G5". The term mostly used in economics is the latter form of demand, demand for a certain product, and it is a valid concept, but it is not the fundamental meaning of "demand". All demand is human demand, and all "rational" demand has its base in the objective needs of a living being.

CF:

I understand your "making things clear" points. When I speak of producer and consumer I am not necessarily talking about two different people. I am speaking of producer qua producer and consumer qua consumer, either or, the two are separate.

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Why are they as much work as vacuuming yourself? Are they hard to clean? I've seen that some of the newer ones even find their way back to the wall outlet and plug themselves in to recharge when they're through!

Really? The reviews I read indicated that they were frequently difficult to set up and they don't handle odd spaces very well . . .plus they get stuck on furniture. However, this may have been a couple of generations ago. In any case, most of my house is hardwood floors, so I don't think the expense would be justified for the 10 or 12 carpeted square feet that I hate to vacuum.

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You misunderstand my use of effort I guess, or I misused it.

[...]

I understand your "making things clear" points. When I speak of producer and consumer I am not necessarily talking about two different people. I am speaking of producer qua producer and consumer qua consumer, either or, the two are separate.

All is fine then. I knew you were not a consumptionist! :D

As for the terminology, I think we can settle on "There needs to be both a producer and a consumer for there to be demand." But I don't think this really matters; this has not been a controversial issue in economics. What contemporary economics gets wrong, and therefore what we should focus on correcting, is that the challenge of economic activity--the difficult part, which takes effort to accomplish--is not to consume but to produce.

BTW, it is important to note that marketing is a part of the productive process. Some describe marketing as the "creation of demand," which I think is basically correct, although I prefer the term offered in the Salesmanship thread: "demonstration of value." It's about providing information to prospective buyers, which will allow them to make more educated decisions about what products to use. This is as much a required part of the product as any of the raw materials that goes into it is: "the product" consists of getting the purchaser to have a better mousetrap (or better computer mouse, etc.), and he won't have a better mousetrap until he knows that one exists. So a good advertisement or sales presentation is an act of production--an addition to supply.

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I guess we're ok then. I never meant to imply that consumption was the hard part or the driving force of an economy, I was merely reacting to the statement "Producers create demand" which I thought was wrong.

Anyway, like was pointed out before is that producer and consumer SHOULD be the same person, not necessarily in regards to the same product but that an economy should be made up of a bunch of peaople producing values and then trading them. This happens in Capitalism, where force is prohibited, without force there can be no one who consumes without producing.

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Really? The reviews I read indicated that they were frequently difficult to set up and they don't handle odd spaces very well . . .plus they get stuck on furniture. However, this may have been a couple of generations ago. In any case, most of my house is hardwood floors, so I don't think the expense would be justified for the 10 or 12 carpeted square feet that I hate to vacuum.

Ah, what you need is a Scooba, then. <ahttp://forum.objectivismonline.com/uploads/emoticons/default_sweatingbullets.gif' alt=':worry:'> I've heard these aren't hard to set up.

Edited by Bold Standard
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  • 6 months later...

I am picking up this old thread where there is confusion over two definitions of the economic concept of "demand", and how it relates to Say's Law: "Supply constitutes its own demand."

But are these two definitions for "demand" merely an optional gramatical choice, or do they arise from some type of conflicting premises? The point about Say being inductive and von Mises being a rationalist was interesting, but I'm not sure if that's the source of their different use of this word or not. Maybe it's because von Mises was German-- Felix is German, too. Maybe it's more clear in German that the word which translates to "demand" stands for a "problem in need of solution" rather than a "willingness to purshase a specific product." It seems like economists should have two words for these, because they both seem like legitimate concepts-- but "demand" seems to cover both of them usually, which is confusing.

A "problem in need of a solution" is not the definition of demand. It more closely refers to the economic concept of "wants" or the synonym "desires". Everyone has unlimited wants. That includes wants they are aware of and wants that they become aware of because of advertising, changing preferences, etc.

Demand is a subset of wants. "Demand" is an economic concept that means (roughly) "wants backed up by the ability to pay." For any particular product, the demand is a function of price. At different price levels, the quantity demanded will vary. If the price is high, the consumer demands fewer units; if it is cheap he demands more units.

So, "demand" in the economic sense is a concept that unites the concept "wants", and the concept "price". Also, note that demand is different from quantity demanded. Demand refers to the entire range of quantities demanded at different prices. That is why it is called a demand function. It can actually be mathematically described or charted on a graph.

Now, when demand is understood this way, Say's Law makes more sense. Supply constitutes demand, because one's supply is one's ability to pay for the goods he wants. Since demand must be backed up by the ability to pay, one's demand can be no larger than one's supply.

To make this concrete, if I were a shoemaker, my demand could be no larger than the value in the marketplace of the shoes I have made. My shoes are the supply of goods demanded by other people, and simultaneously, they are the products that allow me to demand goods in the marketplace through trade.

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