EconClub: Consumer Sovereignty and Natural vs. Contrived Scarcities

The economist Richard Ebeling belies one of the great myths about the capitalist system, which is the presumption that businessmen make profits at the expense of consumers and workers in society. He explains how in reality, entrepreneurs only can earn profit by satisfying the consumers’ wants. What enables this system to be guided by our choices is the concept of individual liberty, voluntary agreements and mutual consent. In a market economy, there’s inherently a division of labor, Ebeling says, and this intensifies the entrepreneurial necessity to be guided to our wants and desires. Each one of us in the division of labor, in our producer roles, are put in the position of serving our fellow men. The consumers are the masters, and all of us in the division of labor are the servants.” Ebeling explains the cycle that a individual in the division of labor is in, as he goes from producer by serving others, to consumer by being served from the ones that are now producers earning incomes to be enabled to return back to the market and demand what they want. William H. Hutt was one of the economist that make famous the phrase of “consumer sovereignty”. The market dictates wages to the competition of enterprises for the worker’s labor as much as businessmen have to compete for our business in our roles as consumers”. Due to the natural scarcity of resources, prices are competitive in markets and show a reflection of what people think services, finished goods and resources are worth. Ebeling explains Hutt’s conceptions of government intervention in markets that produces contrived plenitudes, which is when there’s an excess of goods in markets that consumers actually would have found it profitable to supply and contrived scarcities, which is when a reduced availability of the goods and services that producers would have been able to have. Lastly, Ebeling discusses Hutt’s proposal of eliminating contrived scarcities and plentitudes by ending government intervention in order to have more freedom and greater prosperity.