False Villians

Here are two good posts about where the true power lies in capitalism.

First, Don Boudreaux’s Quotation of the Day, quoting Gordon Tullock on cooperation:

Where the market is broad and there are many alternatives, you had better cooperate.  If you choose the noncooperative solution, you may find you have no one to noncooperate with.

Second, Mark Perry, quoting Ludwig Von Mises and himself on the power of the consumer (this one from Mises, pronounced meezes):

The real bosses, in the capitalist system of market economy, are the consumers. They, by their buying and by their abstention from buying, decide who should own the capital and run the plants. They determine what should be produced and in what quantity and quality. Their attitudes result either in profit or in loss for the enterpriser. They make poor men rich and rich men poor.

The consumers are merciless. They never buy in order to benefit a less efficient producer and to protect him against the consequences of his failure to manage better. They want to be served as well as possible. And the working of the capitalist system forces the entrepreneur to obey the orders issued by the consumers.

Here’s Perry summing it up:

Bottom Line: Consumers ultimately run the market economy, and for that we should be thankful. Because what’s the alternative? The alternative is allow producers to run the economy, inevitably with the assistance of their government enablers who help erect barriers to entry and restrict competition for producers in the form of occupational licensing, protectionist trade barriers, artificial limits on the number of firms allowed to operate (e.g. taxi cartels), etc. In other words, the alternative to consumers running a capitalist market economy, is to have producers running an economy based on the corrupt, anti-consumer principles of “crony capitalism.”

When have you heard this? Too often, corporations are cast as the villain. We are told they “control” such and such percentage of the “market” and we are warned about their “powers”.

But what control or power do they really have? Is the corporation that ‘controls’ 50% of the market controlling consumers to accept its products, or are 50% of consumers choosing to buy the products because they find value in them.

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