Writing recently at National Affairs, Yale University political philosopher Gregory Collins leveled serious charges against modern economics. Because Collins is an accomplished scholar of the works of Edmund Burke and Adam Smith (among others) — and because he harbors toward the market order none of the knee-jerk hostility that today motivates so many progressives and postliberals — his criticisms deserve to be taken seriously.
Among the economists whose work Collins criticizes is me. Specifically, he criticizes my distinction, expressed in this AIER Explainer, between consumption and production. My respect for Collins and his work fortified me to contemplate his criticisms with an open mind. I nevertheless believe that Collins misses my point. And so while I’ll devote the first part of this essay to addressing some of Collins’s criticisms of other economists, I’ll devote most of this essay to a defense of my distinction between consumption and production.
An Overly Broad-Brush Criticism of Economics
Collins argues that modern economics rests on an impoverished understanding of human nature — one that compresses human beings into creatures seeking to maximize utility by satisfying as many material preferences as possible. Economics, in his view, reduces “the spice and variety of life to the vapid premises of preference satisfaction, utility maximization, and rational-choice theory.” This impoverished understanding, Collins argues, stems from economists’ failure to draw sufficiently on pre-Enlightenment wisdom, especially the insights of Aristotle and St. Thomas.
The best pre-Enlightenment thinkers, Collins argues, understood that human existence involves more than mere preference satisfaction. They recognized that each of us — or at least those striving to live a worthy life — “seeks,” in Collins’s words, “moral purpose and spiritual transcendence.” By ignoring this reality, modern economics misunderstands humanity and, with it, social activity.
I have no interest in defending every tenet of neoclassical economics. Much economic analysis is carried out with too narrow an understanding of human nature. In addition, many economists, focused as they are on quantitative measurement, overlook economically relevant phenomena that cannot be captured in numerical data. But I know of no such flaw in economics that has not been identified and challenged by economists themselves. Although not all of these arguments and discoveries appear in textbooks, they are prominent enough within the discipline to make Collins’s portrayal of economics itself ironically reductionist.
Consider two examples.
The typical neoclassical economist assumes that self-interest encourages individuals to capture as much of the gains from trade as possible, leaving their trading partners with as little as possible. Yet in laboratory experiments of what is called “the ultimatum game,” individuals typically exhibit a sense of fairness and will knowingly sacrifice material gain in order to enforce that sense of fairness.
It’s true that changing the rules of the ‘game’ often changes the outcomes. Indeed, it’s possible to arrange, by changing the rules, for each player to behave more like a narrow-minded homo economicus. But this latter experimental finding itself reveals that narrow-minded homo economicus is, under certain circumstances, an empirical reality — and, thus, attention to both formal and informal institutions is important if we wish to prevent society from being dominated by narrow-minded homines economici pursuing only their short-run material interests.
Another example of work that belies Collins’s description of modern economics is that of the late Nobel laureate Elinor Ostrom. Through extensive fieldwork, Ostrom discovered that individuals in communities often solve collective-action problems, such as creating and sustaining communal irrigation systems, that would never be solved by narrow-minded homines economici.
Of course, one can attempt to describe these behaviors in utility-maximizing terms. But the fact that prominent economic research recognizes human purposes as complex, layered, and often nonmaterial is powerful evidence that Collins’s critique paints economics with too broad a brush.
On Production and Consumption
Collins explicitly rejects my attempt to distinguish production from consumption. He writes:
Many economists today believe that maximizing consumption should be the aim of political economy. Donald Boudreaux asserts as much in an essay published last summer by the American Institute for Economic Research. Powered by the logic of Ludwig von Mises, Boudreaux insists that “consumption is the end, and production is the means” of economic activity, and that all productive activities are “means to the end of achieving maximum-possible consumption satisfaction.”
Boudreaux’s view represents the first commandment of the economic mind today: Thou shalt study the satisfaction of subjective preferences. This assumption, like the philosopher’s stone, transmutes the complexities of human behavior into the hallowed touchstone of economic analysis, effectively chilling serious reflection of the social and moral dimensions of man’s natural constitution.
Collins misunderstands my point because he overlooks the purpose of my essay. That purpose is not the normative claim that “maximizing consumption should be the aim of political economy.” Rather, my purpose is to expose an analytical error committed by many interventionists, especially protectionists such as Oren Cass and Robert Lighthizer.
Protectionists typically justify their policies by pointing to the particular jobs they save. Economists respond that protectionism also destroys particular jobs. They also note that protectionism reduces the spending power of domestic consumers. In public debates, protectionists often ignore the first point while eagerly seizing on the second to make what they believe is a “gotcha” argument against economists.
“Aha!” protectionists cry. “Economists’ view of humanity is absurdly narrow! Unlike us protectionists, who understand that people are not only consumers but also producers, economists think people are only consumers. How silly! We can therefore ignore economists.”
If economists were guilty as charged, then policy recommendations rooted in our positive analysis would indeed be worthless. But we’re innocent.
To see why requires that the analytical distinction between “consumption” and “production” be made clear. “Consumption” is a label for ends; “production” is a label for means. The particular content of the ends (and of the means) isn’t specified. “Consumption” can refer to the wise pursuit and embrace of the true and the beautiful as defined by Aristotle or Aquinas (or by Adrian Vermeule, Pope Leo, the Dalai Lama, Hasan Piker, Nick Fuentes, whoever) no less than to myopic attempts to gratify the most fleeting desires of the flesh.
When economists say that individuals act to satisfy as many consumption desires as possible, we describe a category of human action; we prescribe nothing. We simply mean that individuals act to achieve as many of their ends as possible. When challenging protectionist policies and other government interventions, we explain that such policies increase some individuals’ ability to achieve their ends only by reducing the ability of others to achieve theirs. Economics imposes no restrictions on what those ends are or ought to be, and it makes no value judgment about one set of ends compared with another.
Nor do economists elevate consumption over production. Rather, we point out that production is a means to consumption, whatever the particular consumption desires might be. To argue for policies that treat production as an end in itself is therefore to commit a category error.
It is akin, for example, to mistaking an emergency appendectomy for an end on par with the patient’s goal of good health. The successful performance of the surgery has genuine value, and the surgeon may rightly take satisfaction in performing her craft with skill and care. Yet no sensible person would wish to protect the surgeon’s job by opposing a pharmaceutical breakthrough that ensures appendixes never again rupture. The dignity and satisfaction the surgeon derives from her work come from restoring patients to health. If patients are already healthy, the surgeon would be perverse — and most undignified — to insist on performing unnecessary operations.
No competent economist denies that work has dignity or that individuals find satisfaction and meaning in their work beyond the incomes they earn. What economists deny is the practical possibility of using government to protect some individuals’ pursuit of dignity and other nonmaterial goals without obstructing other individuals’ pursuit of the same.
Similar reasoning applies to the values people attach to their families, communities, churches, and countless other non-monetary aspects of life. Perhaps “consumption” is an imperfect word to describe the pursuit of both material and higher ends. I am open to suggestions for a better term. But until such a term gains currency, scholars should avoid concluding from economists’ description of “consumption” as the goal of human action that economists either deny or dismiss the human pursuit of truth, beauty, and transcendence.
