Friday, August 31, 2012

On Consumption in General

Jean-Baptiste Say

We have already seen what consumption is: finish the development of its effects.
"To consume is to destroy its value by destroying its utility; by destroying the quality which had been given to it, of being useful to, or of satisfying the wants of man."
It must be remembered that to consume is not to destroy the matter of a product: we can no more destroy the matter than we can create it. To consume is to destroy its value by destroying its utility; by destroying the quality which had been given to it, of being useful to, or of satisfying the wants of man. Then the quality for which it had been demanded was destroyed. The demand having ceased, the value, which exists always in proportion to the demand, ceases also. The thing thus consumed, that is, whose value is destroyed, though the material is not, no longer forms any portion of wealth.
A product may be consumed rapidly, as food, or slowly, as a house; it may be consumed in part, as a coat, which, having been worn for some months, still retains a certain value. In whatever manner the consumption takes place, the effect is the same: it is a destruction of value; and as value makes riches, consumption is a destruction of wealth.
What is the object of consumption?
To procure to the consumer either an enjoyment or a new value, in general superior to the value consumed, otherwise the consumer would not obtain any profit. In the first case it is anunproductive, and in the second a reproductive consumption.
What would that consumption be which had for its object neither to procure an enjoyment, nor to create a new product?
That would be a sacrifice without compensation; a folly.
What must be thought then of a system, the tendency of which is, to consume for the sole purpose of favoring production?
That which must be thought of a system which should propose to burn down a city, for the purpose of benefiting the builders, by employing them to restore it.
Develop what relates to reproductive consumption.
Everything which has been said on production, serves for that purpose.
What have you to say on the subject of unproductive consumption?
Unproductive consumption, which we shall hereafter, for shortness, call simply consumption, divides itself into two kinds, private and public.
What do you understand by private consumption?
That which has for its object to satisfy the wants of individual and of families.
What do you mean by public consumption?
That which has for its object to supply the wants of men whose association forms a community, a province, or a nation.
Are these two sorts of consumption of the same nature?
They are entirely of the same nature, and their effects are the same. One set of persons cause the consumption in one case, and other persons in the other; that is all the difference.
What is meant by these words, annual consumption of a nation?
It is the sum of the values consumed by a nation in a year, whether for the wants of individuals or of the public.
Do these words comprehend reproductive consumption as well as the others?
Yes; for we may say that France consumes annually so many quintals of soda or of indigo, although the indigo and the soda can only be consumed reproductively, as they cannot satisfy directly any want; and as they can be employed only in the arts, they serve necessarily for reproduction.
Do you comprehend in the consumption of a nation, the merchandise she exports to other countries?
Yes; and I comprehend in its products whatever it receives in return; in the same manner that I comprehend in its consumption the value of the wool it uses for the manufacture of cloth, and in its productions the value of the cloth which results from it.
Does a nation consume all that it produces?
Yes, with very few exceptions; for it is our interest not to create products unless they are demanded, and they are never demanded but to be consumed.
If a nation consumes the total of the values which it produces, how can it accumulate values, form capital, and maintain it?
The values, which serve the purposes of capital, may be consumed perpetually, yet are never lost, for in the same proportion as they are consumed they are reproduced under new forms by the action of industry. This reproduction, once accomplished, if the value reproduced is found superior to the value consumed, there has been an augmentation of capital. In the contrary case, a diminution of capital. If the reproduction has simply equaled the consumption, the capital has been merely kept up.
Show me the application of these truths by examples.
Take, for instance, a farmer, or a manufacturer, or even a merchant. Suppose that he employs in his enterprise a capital of twenty thousand pounds, that is to say, suppose that all the values that he has in his enterprise on the first day of a year, are equal in value to a sum of twenty thousand pounds. In the course of his operations these values change their forms perpetually; and although his capital does not exceed twenty thousand pounds, yet we may suppose, that if all the values which he has consumed in the course of the year were added together, they would amount to sixty thousand pounds, because a value destroyed may have been reproduced, destroyed again a second and a third time before the year revolves. We may suppose also, that if all the values produced in the same year were added together they might amount to a sum of sixty-four thousand pounds. If then this entrepreneur of industry has had consumption for sixty thousand pounds, and productions for sixty-four thousand pounds, he ought to have at the end of the year values amounting to four thousand pounds more than he had at the beginning.
That appears clear to me.
Let us go on. If he has expended unproductively in the same year, to satisfy the wants of his family four thousand pounds, he will have consumed his profits; and if he takes his inventory he will find himself, at the end of the year, with a capital of twenty thousand pounds only, as he had at the beginning of the year. But if, instead of having expended unproductively for the support of his family four thousand pounds, he had only expended two thousand, unless he has hid two thousand pounds, he will find that this value of two thousand pounds, which has not been expended unproductively, will have been laid out productively, and that it will appear in his inventory in augmentation of capital under some form or other, either under that of provisions, of goods in process of manufacture, or even of advances capable of being recovered.
I conceive that.
You perceive then, that although the value of the capital has not been more than twenty thousand pounds, the total value of the products for the year may have been much more considerable?
That this form of products, whatever it may be, may have been entirely consumed, and that, nevertheless, the capital of this individual may have been augmented.
Well, then, multiply in your mind what has happened to a single individual, and suppose that the same thing has happened to all the individuals of the same nation: or at least suppose that the consequences that have happened to some, balanced by those which have happened to others, have produced a general result analogous to the preceding example, and you will find, by a second example, that a nation which had at the commencement of the year a capital of a hundred millions, may have consumed in a year three hundred millions of values, producing three hundred and twenty millions of values, of which she has consumed reproductively three hundred millions, and unproductively twenty millions; or rather reproductively three hundred and ten millions, and unproductively ten millions.
I grant it.
In this last supposition this little nation, which will have consumed all its productions, will, nevertheless, be enriched during the year ten millions of values, which will be found distributed under different forms among those individuals who have conducted their affairs with the greatest intelligence and economy.

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