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.
Ayn Rand “Egalitarianism and Inflation,” Philosophy: Who Needs It, 132.
Deferred consumption (i.e., savings) on a gigantic scale is required to keep industrial production going. Savings pay for machines which enable men to produce in a day an amount of goods they would not be able to produce by hand in a year (if at all). This enables the workers in turn to defer consumption and to save some of their income for their future needs or goals. The hallmark of an industrial society is its members’ distance from a hand-to-mouth mode of living; the greater this distance, the greater men’s progress.
The major part of this country’s stock seed is not the fortunes of the rich (who are a small minority), but the savings of the middle class—i.e., of responsible men who have the ability to grasp the concept “future” and to deposit one dollar (or more) into a bank account. A man of this type saves money for his own future, but the bank invests his money in productive enterprises; thus, the goods he did not consume today, are available to him when he needs them tomorrow—and, in the meantime, these goods serve as fuel for the country’s productive process.
Ayn Rand “The Inverted Moral Priorities,” The Ayn Rand Letter, III, 21, 1.
Monday, March 8, 2010
I wrote the other day about Krugman's wacky notion that unemployment benefits decrease (?!?) unemployment (I didn't actually comment, I quoted some people who know better than I). Giving it some more thought, in a truly capitalist economy, unemployment "insurance" would be one's own savings. Thus, government subsidized unemployment insurance doesn't just decrease the incentive to look for work while unemployed, it discourages savings while one is employed. Why would I save my money now when I'll collect unemployment when I lose my job? This points out another of Krugman's clueless stances on economics - that demand drives the economy. Savings are the basis for capital formation, which leads to production. Consumption doesn't lead to production, as Krugman thinks. You can't consume what hasn't first been produced. And that production is by someone's effort. And if your effort doesn't offset your consumption, you're essentially a parasite.