On The Fallacy of "We Make Too Much"

On The Fallacy of "We Make Too Much"
Profile photo of James E. Miller

fred_reedMurray Rothbard had a saying about economics: “It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.” Basically, if you don’t have an informed opinion about economics, keep your mouth shut.

Some people just don’t know when to keep their mouths shut.

Conservative writer Fred Reed, it turns out, is one of those people. He adorns his website with the title “Serious Commentary.” In some areas, that’s true. Reed is unassailable when it comes to social matters. Unfortunately, one of his latest screeds is anything but serious. In fact, it’s on par with the most illogical of economic analyses. Reed may as well be the American expatriate version of Thomas Piketty.

In deciding to tackle the dismal science head on, Reed writes, “This column contains everything there is to know about economics.” He promises that by the time he’s done, “it will be possible to shut down university deprtments [sic] and stop talking about Keynes and the Asutrian [sic] School, to the great relief of mankind.” Imagine my excitement. A sensible thinker I respect is going to put all intellectual conflict to rest and give us the perfect societal model for allocating resources! What could go wrong?

It turns out everything. Reed’s canon is no Human Action. It’s overly simplistic and reads like a rant rather than a serious observance. Reed starts with a brief history of the American agrarian economy. He correctly explains that people mostly grew their own food and didn’t have access to modern conveniences, given that they weren’t invented yet. “There was in 1850 tremendous demand for refrigerators and cars,” he writes. Once their creation rolls around, people begin moving to the city to build appliances and automobiles.

Everything runs smoothly until, Reed informs us, the country encountered a problem: there was suddenly “too much supply and not enough demand.” Too many refrigerators, cars, and whatever else were being created. This fed into a vicious cycle where factories had to produce more and more to ensure workers had a purpose. Reed thus calls economics “the study of the squirrel wheel.”

Soon enough, producers began making things nobody “really needed or would think to want” including “nail salons, electronic gadgets, and designer jeans.” At the point, Reed’s power of reasoning begins to lose steam. If nobody ever wanted to get their nails done, why was the salon invented to begin with? If nobody wanted a cellphone, why did someone think to create it? If snuggies are the infantile contrivance of bamboozler and have no sensible usage, why are they even a thing?

The answer is simple: the market demanded them. Nail salons, smartphones, snuggies, and kitsch knickknacks may not be immediate desires on Maslow’s hierarchy of needs, but consumers still want them. If they didn’t, producers wouldn’t be in business. Snuggies aren’t pulling in $500 million based on a non-existent demand. In economics, supply and demand are interrelated. One doesn’t survive without the other.

Reed then goes full John Kenneth Galbraith and lays the blame for man’s insatiable appetite for useless trinkets on advertisements. You see, it’s not the consumer’s fault for gorging on worthless junk. They were tricked, Reed attests. But by whom? Those slick-haired advertisers who play mind games with our cognition of course! Reed uncovers the conspiracy, claiming that “Advertising came about to manufacture demand for things that, without advertising, no one would buy.” The dastardly Don Drapers of the world are to blame for our materialistic greed apparently.

Galbraith’s theory about marketers with psychic powers was already dispelled by Rothbard long ago. Writing in Man, Economy, and State, Rothbard details why thinkers like Galbraith and Reed are horribly mistaken on advertisements. The biggest logical gap in the ad trickery theory is that believers are mysteriously unaffected by the pernicious circulars in the Sunday newspaper. Rothbard points out that advertising determinists like Galbraith leave “an implicit escape clause from the determination for people like himself, who are, unaccountably, not determined by advertising.” Reed decries the market power of ad men, but is somehow immune to their duplicity. How convenient.

The logical argument against ad determinists is even more basic. If advertising was really as effective as Reed contends, then no business would ever go under. No entrepreneur would ever fail. “Going Out of Business” signs would have no market. Of course, none of that is the case. Businesses and entrepreneurial endeavors fail all the time. As someone who works in the marketing industry, I’d love to hear Reed’s magic formula to make copy irresistible. I’m all ears.

The most basic logical fallacy in all of Reed’s economic tenets is the plain fact that we don’t live in a country of super abundance. There is no oversupply. We aren’t producing without a sense of rational purpose. If that were true, then goods and services would cost nothing. If modern American society is filled with overproduction, why do I still pay $8.00 for a cheeseburger at Whole Foods? Why do I spend $20.00 a week at Target for basic toiletries? How come I can’t walk into the supermarket and walk out with bag after bag of groceries for free?

If there is excess supply, basic reasoning says the price of all things should drop. But that isn’t the case if you’ve seen large medical bills recently. Or if you’ve attempted to live in a big city. Or if you want to take a vacation. The land of milk and honey that Reed describes doesn’t actually exist. Basic necessities are plentiful (at least in industrialized countries) but that doesn’t mean they are free.

Reed can comment all he wants about the spiritual emptiness of rampant consumerism. I’ll join him in the condemnation actually. But personal value judgements aren’t welcome in economics. The science of Adam Smith is based on positive assessments about human exchange. It’s not a finger-wagging science.

One thing I’ve learned in the years I’ve spent writing about economics is that even the most intelligent observers can absolutely butcher the science. A keen eye for social affairs doesn’t always translate into sharp economic analysis. Pat Buchanan, Rod Dreher, Patrick Deneen, and even Pope Francis all lack a sophisticated economic understanding of the world. You can now lump Fred Reed in that category.

Profile photo of James E. Miller

James E. Miller is editor-in-chief of Mises Canada and a regular contributor to the Mitrailleuse . Send him mail

More in Blog

My letter to the NY Times re: Typical Keynesian Whitewash

Patrick BarronAugust 14, 2018

My letter to the NY Times re: Typical Keynesian Whitewash

Patrick BarronAugust 14, 2018

Join Us at the Rothbard U 2018 Opening Reception

Mises CanadaJuly 10, 2018

Understanding Economic Theory Is Essential for Understanding the Benefits of Free Trade

Patrick BarronJune 23, 2018

China’s Currency Manipulation Does NOT Harm Its Trading Partners

Patrick BarronJune 19, 2018

Trumping to Serfdom

Doug FrenchJune 18, 2018

The market provides its own punishment for irrelevant discrimination

Patrick BarronMay 20, 2018

Unilateral Free Trade Would Benefit All UK Citizens

Patrick BarronMarch 21, 2018

The EU elite are ignorant of the true meaning and importance of “comparative advantage”

Patrick BarronMarch 15, 2018