Which came first — the chicken or the egg? Many economists debate whether production or consumption is the true driver of the economy.

If you produce something doesn’t that drive the economy? It’s on store shelves and people buy it. How could they buy it if it was never produced?

But what about consumption just because one brand is there and I consume another brand have I not also done my part in stimulating the economy?

As you can see there are many ways to look at this question.

The Apple Pie

If I combine apples, flour, sugar, spices and an oven I will have an apple pie.

I have produced something.

You could make a case that I stimulated the economy by buying the ingredients for the pie and used electric power to bake it.

So I used consumption for production. But is that the whole story?

Until I sell the pie and it’s consumed then I’m out the cost of the ingredients to produce the pie.

I produced an apple pie for consumption. Suppose I produced a sawdust pie made with rotten tomatoes. Is my production going to stimulate the economy?

Not unless there are those that wish to buy and consume my tomato/sawdust delicacy.

The True Economic Driver

In the end consumption is the true economic driver. There have been many failed products produced over the years.

They are gathering dust in warehouses across the globe as bean counters try to find a way to recoup some of the losses.

So production by itself is not the key to economic stimulation.

Unless there is an existing consumer, or marketing can create a new consumer, nothing will move off the store shelves unless the desire to own, use or consume the product exists.

What About Demand?

Doesn’t demand drive production? Where was the demand for the cell phone in the 50s or tractors in the 1800s?

Someone came up with an idea for a product that could be produced and consumed (used) at an affordable price and that, not production, created a demand for those products.

Producing just to produce does nothing unless there is a consumer who wants that product more than the dollars in his or her wallet.

Washing dishes by hand is much more economical than a dishwasher. Window fans are much more economical than air conditioning.

Using these products buy us time and comfort.

Some Final Thoughts

Every product that goes on the drawing board is there because somewhere there is a consumer either needing it, or not yet knowing they need it, but will buy it nevertheless.

We are talking about people who purchased The Pet Rock.

So produce all you want. Fill warehouses and ships to overflowing. But unless there is a consumer who sees a perceived value in your product the warehouses and ships will remain full.

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