Consumer sovereignty or producer sovereignty?

Standard economics with the concept of “consumer sovereignty” may claim or assume that the utility of consumers is more important than the utility of producers. Despite the impossibility of scientific interpersonal comparisons of utility, one objection is that this classification is arbitrary, naturally if not positively so. Since any working person and any tenant are both a consumer and a producer, the utility of the one cannot be separated from the utility of the other. Moreover, many socialists and traditional conservatives (against classical liberals) have argued that an individual’s life is significant in his role as a producer. Thus, an economic system based on producer sovereignty will be as efficient, if not more efficient, than one falsely founded on consumer sovereignty.

Perhaps due to the influence of Marxism (and other post-Enlightenment philosophies such as Hegelianism) over the past two centuries, these ideas have gained some intellectual respectability. Recent books by Frank Fukuyama Liberalism and its discontents provides an example. There is no reason, he explains, “why economic efficiency should trump all other social values.” Are humans “consuming animals” or “producing animals”? she asked the question. “It is a choice that has not been given to voters under the hegemony of neoliberal ideas.” Fall numbers as I note in my upcoming review of this book regulationsThe absurdity of putting such a choice before the electorate can be seen by imagining a referendum that would ask “the people”: “Which animal would you rather be, a food animal or a producer animal?”

After the victory of producer-animal propaganda, an order from whoever he believes represents the collective will likely follow: Now, get back to work!

More fundamentally, I think the answer to the question of consumer or producer primacy is as follows. If the producer tries to satisfy the consumer, he will automatically try to satisfy his own preferences because he earns his income to the extent that he satisfies the consumer. If instead the consumer tried to satisfy the producer – by giving the latter the easiest working conditions and generally deferring to him – he would not be able to maximize the satisfaction of his own preferences at the same time, quite the opposite: producers would have no incentive to produce as much as possible for consumers. Therefore, individuals, both as producers and consumers, must consume less. Viewed from another point of view, a person who does not work for the consumer as a producer, nor as a consumer tries to get as much as possible from his suppliers, cannot maximize his utility. (Remember that maximizing one’s utility means finding oneself in one’s most preferred situation.)

If we assume that a person generally wants to maximize his utility, he will naturally adopt a commanding posture toward his suppliers and a service mentality toward his customers. Thus there is good positive reason to assume that, in the context of individual freedom, most individuals will adopt only the behavior described. And if we make the normative judgment that the welfare of individuals counts as natural equals (to use a classical liberal expression), we will favor a politico-economic regime of consumer sovereignty, not producer sovereignty: only in the former, where the interests of consumers and producers are coercive. Without being well integrated, can we hope to have equal freedom and a better chance at prosperity for all? This is the main argument for consumer sovereignty as opposed to producer sovereignty.

The political term “sovereignty” can be misleading in this context. Consumers are not sovereign over producers in a coercive sense. Every producer is also a consumer. Furthermore, production often has an indulgent or pleasurable (even if stressful or painful) element: consider the artistic work as a case in point. And in a free society, although we expect the common man to produce for consumption and not the other way around, insanity is not forbidden nor is affection or charity—producing for someone else’s benefit—prohibited. What is quite clear is that a regime of generalized producer sovereignty is meaningless at best.

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