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Consumption

Consumption is the final, not the efficient, cause of production. The efficient cause is savings, which can be said to represent the opposite of consumption: they represent unconsumed goods. Consumption is the end of production, and a dead end, as far as the productive process is concerned. The worker who produces so little that he consumes everything he earns, carries his own weight economically, but contributes nothing to future production. The worker who has a modest savings account, and the millionaire who invests a fortune (and all the men in between), are those who finance the future. The man who consumes without producing is a parasite, whether he is a welfare recipient or a rich playboy.

Trained in college to believe that to look beyond the immediate moment—to look for causes or to foresee consequences—is impossible, modern men have developed context-dropping as their normal method of cognition. Observing a bad, small-town shopkeeper, the kind who is doomed to fail, they believe—as he does—that lack of customers is his only problem; and that the question of the goods he sells, or where these goods come from, has nothing to do with it. The goods, they believe, are here and will always be here. Therefore, they conclude, the consumer—not the producer—is the motor of an economy. Let us extend credit, i.e., our savings, to the consumers—they advise—in order to expand the market for our goods.

But, in fact, consumers qua consumers are not part of anyone’s market; qua consumers, they are irrelevant to economics. Nature does not grant anyone an innate title of “consumer”; it is a title that has to be earned—by production. Only producers constitute a market—only men who trade products or services for products or services. In the role of producers, they represent a market’s “supply”; in the role of consumers, they represent a market’s “demand.” The law of supply and demand has an implicit subclause: that it involves the same people in both capacities.

When this subclause is forgotten, ignored or evaded—you get the economic situation of today.

Copyright © 1986 by Harry Binswanger. Introduction copyright © 1986 by Leonard Peikoff. All rights reserved. For information address New American Library.

Acknowledgments

Excerpts from The Ominous Parallels, by Leonard Peikoff. Copyright © 1982 by Leonard Peikoff. Reprinted with permission of Stein and Day Publishers. Excerpts from The Romantic Manifesto, by Ayn Rand. Copyright © 1971, by The Objectivist. Reprinted with permission of Harper & Row, Publishers, Inc. Excerpts from Atlas Shrugged, copyright © 1957 by Ayn Rand, The Fountainhead, copyright © 1943 by Ayn Rand, and For the New Intellectual, copyright © 1961 by Ayn Rand. Reprinted by permission of the Estate of Ayn Rand. Excerpts from Philosophy: Who Needs It, by Ayn Rand. Copyright © 1982 by Leonard Peikoff, Executor, Estate of Ayn Rand. Reprinted by permission of the Estate of Ayn Rand. Excerpts from “The Philosophy of Objectivism” lecture series. Copyright © 1976 by Leonard Peikoff. Reprinted by permission. Excerpts from Alvin Toffler’s interview with Ayn Rand, which first appeared in Playboy magazine. Copyright © 1964. Reprinted by permission of Alvin Toffler. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Plume, a member of Penguin Group (USA), Inc.