The Consumptionists

October 5, 1964

The Italian economist Maffeo Pantaleoni (1857–1924) used to maintain that there were really only two schools of economists-the good ones and the bad ones. The division was valid enough but unhelpful on specific issues. A young American economist, George Reisman, has now come up with another division of economists into just two groups, but one that throws real light on the chief economic controversies of our time.

In the October issue of The Freeman, published by the Foundation for Economic Education, Inc., at Irvington, N.Y., he divides all present-day economists into Productionists and Consumptionists.

With the exception of a few isolated mavericks, nearly all economists since the days of Adam Smith until say, 1929, identified the fundamental problem of economic life as production. Man needed wealth. He needed goods and services not only for the amenities of life but to keep alive at all. His problem was how to produce the goods and services to satisfy these needs and desires. The classical economists, therefore, took the desire to consume for granted, and focused on the means by which production might be increased.

NO PROBLEM OF ‘JOBS’

In the twentieth century, economists have returned to the directly opposite view—which happens to be the view that was held by the Mercantilists of the seventeenth century. Instead of the problem being how to keep expanding 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 imagined to be how to expand the desire to consume so that consumption can keep up with production. The dominant theory today 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.

The “classical” economist, or productionist, realizes that there is no such thing as a problem of “creating jobs.” There is a problem of creating remunerative jobs, but not just jobs.

At all times, the productionist holds, there is as much work to be done, as many potential jobs to be filled, as there are unsatisfied human desires which could be satisfied with a greater production of wealth. The use of more and better machinery does not cause unemployment. It merely allows men, to the extent that they do not prefer leisure, to produce more and so meet their needs more fully and with less effort.

FEAR OF PRODUCTION

The consumptionist, on the other hand, regards every expansion of production as a threat to some portion of what is already being produced. He imagines that production is limited by the desire to consume. He fears that this desire may be deficient, and, therefore, that an expansion of production in any one segment of the economy must force a contraction of production elsewhere. He fears that the work performed by machines leaves less work to be performed by people, that the work performed by women leaves less work to be performed by men, that the work performed by Negroes leaves less to be performed by whites, and that those who work overtime leave fewer jobs available for others.

The consumptionist, Reisman goes on to show, is driven by his basic premise into one fallacy after another. Because he imagines production to be limited by the desire to consume, rather than consumption being limited by the ability to produce, the consumptionist does not value wealth, but the absence of wealth. He is happy to find a scarcity of anything because to him it represents a large supply of unused consumer desire. He lives in constant dread of an absence of “investment outlets” or “investment opportunities.” He dreads “hoarding.” He regards everyone as a potential miser whose consumption demand has to be constantly whipped up. He is busy devising new schemes for the government “to supplement private demand” by spending more money—the increased expenditure to be financed by bigger deficits.

He is, in brief, a Keynesian, a New Dealer, a Fiscal Revolutionist, a self-styled “liberal” and, mirabile dictu, a “moderate.”