From Mark Perry.
"In his 1944 book “Bureaucracy,” legendary economist Ludwig Von Mises explained the important and supreme role of the ruthless consumer in the market economy (emphasis added):
The real bosses, in the capitalist system of market economy, are the consumers.
They, by their buying and by their abstention from buying, decide who
should own the capital and run the plants. They determine what should be
produced and in what quantity and quality. Their attitudes result
either in profit or in loss for the enterpriser. They make poor men rich and rich men poor.
The consumers are merciless.
They never buy in order to benefit a less efficient producer and to
protect him against the consequences of his failure to manage better.
They want to be served as well as possible. And the working of the capitalist system forces the entrepreneur to obey the orders issued by the consumers.
The
consumers are no easy bosses. They are full of whims and fancies,
changeable and unpredictable. They do not care a whit for past merit. As
soon as something is offered to them that they like better or that is
cheaper, they desert their old purveyors. With them nothing counts more than their own satisfaction.
They bother neither about the vested interests of capitalists nor about
the fate of the workers who lose their jobs if as consumers they no
longer buy what they used to buy.
Here’s how I explained the role of ruthless consumers and the concept of “consumer greed” in a 2002 article for the Mackinac Center:
Here’s
a dirty little secret about capitalism: consumers, not corporations,
run the show. If you find something about the marketplace objectionable,
it would be more appropriate to blame those who actually call the
shots: the ruthless, cutthroat, and disloyal American consumers.
Consumers
are the kings and queens of the market economy, and ultimately they
reign supreme over corporations and their employees. When corporations
make mistakes and introduce products that consumers don’t want, which
happens frequently, you can count on consumers voicing their opinions
forcefully and immediately by their lack of spending.
In a
market economy, it is consumers, not businesses, who ultimately make all
of the decisions. When they vote in the marketplace with their dollars,
consumers decide which products, businesses, and industries survive—and
which ones fail. It is therefore consumers who indirectly but
ultimately make the hiring and firing decisions, not corporations. After
all, corporations can make no money, hire no people, and pay no taxes
unless somebody, sooner or later, buys their products.
What
consumer sovereignty in a free marketplace translates into is each
person husbanding his resources for the greatest benefit to himself and
his family, which in turn translates into the greatest efficiency in the
consumption of the world’s scarce resources. If you don’t like the
message of the marketplace, don’t assume that corporations and greed are
to blame while consumer behavior and consumer greed play no role in the
outcome. We should be thankful, in fact, that the marketplace puts
consumers on such a powerful pedestal.
Bottom Line:
Consumers ultimately run the market economy, and for that we should be
thankful. Because what’s the alternative? The alternative is allow
producers to run the economy, inevitably with the assistance of their
government enablers who help erect barriers to entry and restrict
competition for producers in the form of occupational licensing,
protectionist trade barriers, artificial limits on the number of firms
allowed to operate (e.g. taxi cartels), etc. In other words, the
alternative to consumers running a capitalist market economy, is to have
producers running an economy based on the corrupt, anti-consumer
principles of “crony capitalism.”
Further, we
typically assume that “greedy” behavior is practiced exclusively by
business owners and corporate executives, and never by consumers. But
consumers, especially when spending their own money on goods and
services for themselves and their families, are frequently the very
epitome and apotheosis of greed. As Mises observed, “With them
[consumers] nothing counts more than their own satisfaction,” and for
that we should be thankful. Because in a market economy, the ruthless
consumers provide the discipline that guarantees that producers will
operate efficiently and offer the best products and services at the
lowest prices."
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