What is the Consumption Motive?April 7, 2020
The Consumer is King
The consumption or demand motive is one of the most important maxims of Adam Smith’s economic system, aside from the Effort Theory of Value . This maxim states that all economic activity is rooted in the people or the demanders in society and not in the producers or suppliers.
This is easily seen in the concept of the human family which is the smallest and most common type of society. We see parents work to provide or produce food for their children who are their consumers. Humans do this by instinct because this is how our species has evolved to be so advanced over animals.
This means that there were proto-humans that did not have the same mentality to provide for their children and so naturally became extinct. For example, they might have done the opposite and have eaten their children as a food source just like some animals species.
In Economics, the Supplier is King
The maxim that the parents must provide for the children is the opposite of the current maxim of Economics of Say’s Law which states that production* is the root of all economic activity and is the source of demand. The maxim of Economics thus makes the children subservient to the parents instead of the parents serving their children.
This propensity is rooted in ego and is seen in the animal nature of survival of the fittest or those who can produce the most. This is seen in modern societies like in Cambodia where parents sell their children,
It’s common to hear that investment bankers (the ones that fund production) being called wolves, as in ‘The Wolf of Wall Street’. Smith very clearly explains that such a Production Motive is a mercantile sophistry:
Economics vs Pantrynomics
These differing paradigms can lead to different supply curves and business behaviour:
|_||Economics Of Marshall, Keynes, Samuelson, Jevons||Pantrynomics Of Smith, Hume, Socrates, Lao Tzu|
|Competition||Either cut-throat competition or monopoly||Friendly competition with natural moral limits|
|Supply||Big suppliers can cut supply to achieve shortage and high prices, or build demand for unnecessary products||Supply is generated depending on real needs|
|Economic Power||Sellers have more economic power. Buyers have no choice of sellers but instead must compete with each other||Buyers have more economic power. Buyers can choose the seller they like|
|Success Metric||The success of the producers is the measure of the economy’s success, as Gross Domestic Product||The success of the people to buy what they need and want is the measure of the economy’s success, as Purchasing Power|
|Social View||Human creatures are customers and sellers of each other, isolated by ego, connected by money||Human creatures are friends and family of each other, connected naturally by morals and virtue|
In the next post, we shall explain this spirit of monopoly that is in the Producer’s motive, as espoused by Jean Baptiste Say