11 Producer and Consumer
A bit of a grumble that the terms producer and consumer are a bit too closely associated with material items, but the concepts are germane to both goods and services. A producer is one who performs an action that conveys a benefit (regardless of whether it is conveyed by a material object), and the consumer is the one who receives the benefit created by the act of the producer.
Another problem is that, when roles are defined, it tends to set up a false dichotomy - that people are either one or the other. We are both producers and consumers.
It is easy enough to witness that a man in isolation must produce something in order to be able to consume it. In society, this often becomes obscured: as we consume the product of others, and offer our product for their consumption. In this way we often fail to recognize the connection between the two - or to imagine that it is possible to be one or the other exclusively.
In society where there is division and specialization of labor, each person does not produce the very items he consumes, but specializes in a trade or profession to produce specific goods or services, trading with others who produce different ones. We provide service to others, and receive service from them - we are neither masters nor slaves of one another, but collaborators equal in status and privilege.
It is incorrect to say that we act out of a social spirit, or are in our daily affairs at all concerned for our fellow men in any altruistic manner. Each man seeks for his own interest, and "fair dealing" balances those interests with one another. So long as a man has a right to refuse to trade if a deal does not suit his liking, then his self-interest will protect him from being abused. The buyer may want as much as he can get for his money, the seller may wish to get as much as he can for his product, and their interests are freely negotiated to a voluntary agreement.
It is for this reason that no interference can be made in the dealing between producer and consumer for their mutual benefit. Any benefit to one is created by means of injustice to the other. They must come to their own agreement, or refuse to interact with one another, of their own free will.
The subjective nature of value must also be considered. There is no objective measure of what an item is "worth" to a person - it depends on the idiosyncratic desires and situation of a particular individual in a particular situation. No third party can appreciate the value each of the two parties involved in a trade seek to gain from one another.
He returns to the topic of man in isolation: his main motive is his desire to consume, and he will produce only the specific items he desires. There is no point in producing things if he does not desire them. It is only in society that we can engage in ritual production - to become obsessed with amassing "credit" by producing without a thought of whether the value will be consumed, under the assumption that any production can be traded for value.
Notice that certain economists measure "economic activity" in terms of the goods that are produced - without a consideration of whether the production of these things will render any value. The flaw in this approach should be very obvious: it encourages activity that may be pointless.
Critics of free trade insist that every commercial transaction to give rise to "argument," implying that the discussion between producer and consumer is antagonistic and destructive of social harmony. It is instead a discussion that arrives at a harmonious and mutually beneficial arrangement - and certainly less antagonistic than the seething silence and resentment that occurs when a person is compelled by force to do something against his own interest.
It is a distorted perspective to consider a commercial transaction to result in a transaction in which neither party is happy. Were that the case, they would simply walk away from the bargaining table. Instead, it should be seen as a negotiation to a transaction with which both are happy. Neither has gotten what he demanded of the other, which means neither has taken advantage of the other. The fact that they have arrived at terms of exchange indicates that they are in agreement, not in discord.
He returns briefly to the difference in the perspective of producer and consumer. The producer wishes to be paid for the effort he put into providing a product, whereas the consumer is willing to pay only as much as the benefit of the product is worth for him. An agreement is struck only in instances in which the effort of producing something is equal or less in value than the benefit of consuming it. In the autistic economy, a man living in isolation considers whether he wants something enough to invest the time and effort in producing it for himself. In the trade economy, a person must consider whether he wants something enough to invest the time and effort in producing whatever he must offer in trade for it.
Bastiat attempts to convert this into an equation, but it seems a bit oblique and clumsy and adds nothing more to the argument. (EN: I also think it is a distraction from a more simply way of expressing the relationship - if the product is priced in terms of time, then a person seeks to bargain only if it would take him more time to produce a product for himself than it would to produce whatever may be traded for it. Though "time" is a bit inaccurate as it may relate to the effort or pleasantness of the work.)
He strays into taxation for a moment. His core point is that taxes are always a burden upon the consumer of a good, as the price he pays for it must compensate for the taxes charged to anyone involved in the production of it. However, it can also be said that it robs the producer of potential profit, because the customer is willing to pay more for the good than the price of its creation, at least by a margin that would cover the cost of taxes. And because higher price decreases demand, it is also to the detriment of those whom the producer employs, as he will be able to sell less of his product. Hence a tax on wine makes the customer pay more, the producer earn less, and eliminates the employment of vineyard laborers, bottle blowers, wine merchants, cork sellers, and so on.
While the rabble-rousers seek to stir discontent by insisting that consumers are servants to the producers, the opposite is actually true. The producer must provide what the consumer wants, and at a price the consumer is willing to pay, or the consumer will refuse to purchase his products. And having invested his capital (and perhaps even gone into debt) to finance production, the producer is more desperate to sell his good that the consumer is to purchase it. The consumer's ability to purchase it from someone else, produce it for himself, or simply to do without it for a time places him in a position of advantage and bends the producer to his will.
A brief consideration: there is no demand for goods unless there is a willingness to pay for them. A consumer who insists that he cannot afford to purchase a fish is like a fisherman who feels that it is not worth his effort to catch one. By being unwilling to pay the price, he has simply indicated that he does not desire it enough to undertake the effort to obtain it.
The use of money and indirect trade gives evidence to the notion that man does not care for the pains of anyone else as much as he cares for his own. The consumer does not care about the effort required to produce a good for his benefit - and this is often the reason he balks at the price that a producer demands.
(EN: It's been observed elsewhere that dishonesty is the reason that haggling exist. If the producer was honest about the price he would accept and the buyer was honest about the price he would pay, transactions would be more straightforward. It is only because each believes the other to be attempting to cheat him that the producer demands a higher price and the buyer offers a lower own, and they haggle.)
He speaks of the risk of the producer. Because it requires time and investment to create goods for sale, he must predict what goods will be wanted, and assumes the risk of being incorrect. The farmer must predict what crop will sell (and for how much) before he sows his field, the manufacturer must predict demand of his goods before building a factory, and even a worker must predict what wages he might receive when he seeks to train for a given profession. None of them can compel buyers to pay a price, or to buy a product they do not want - so they must guess and take risk.
There's a brief consideration of alleged versus actual wants. IF you ask a person what he wants, he will tell you those things that he feels are proper and dignified for a man to want. But this is not what he really wants, as his purchasing behavior will attest. People have "unreasonable desires" and "immoral wants" and act accordingly.
Likewise people do not want what others think they ought to want. A socially-minded person will proclaim that the work of a teacher is of great value to society - yet when the coins are counted it is found that teachers are paid less than bartenders. This indicates the actual values that a culture holds, regardless of those it claims. Once a man's basic survival needs are met, everything else is a matter of taste.
He suggests that you can look at production and consumption in any society to see what the people really value.
- The English devote an enormous amount of labor to producing luxury foodstuffs
- The French employ an inordinate number of singers, comedians, and actors
- The Chinese spend a significant amount of their money on opium
- In Italy, a large proportion of personal income is spent on fashionable clothing
The moralist may pronounce these behaviors immoral or wasteful, but the economist must refrain from passing such judgment and observe merely that this is true - man behaves as he does, wants what he wants. "Should" is an ideal outside of reality.
And again, the producers of luxury foods, entertainment, fashion, and drugs are not to be blamed for corrupting society. They produce these things only because they expect people wish to consume them, and are rewarded only because their assumptions are correct.
There's a brief bit about those who rail against the consumer and attempt to make people feel ashamed or guilty for consuming so much. But in a free society, people are only able to consume an equal amount to that which they produce - so no man need feel guilty for his success. Those who have the means to consume much have earned it by having produced much to give in exchange. It is their just reward, given them by those who have enjoyed the products they have given in trade, and the situation would be no different if they worked in isolation to produce for their own consumption.