Production Economy vs Consumption Economy
In a recent post, I said that the U.S. should be a production economy, not a consumption economy. Matt Yglesias notes that “I have really no idea what that’s supposed to mean, since presumably the idea is to produce goods and services that people want to consume.”
Let me explain: I believe that the U.S. has come to a fork in the road. The direction we’ve been going leads to the the consumption economy , putting more resources into consumption and distribution rather than production. It hasn’t been working for us.
The U.S. needs to change course to a production economy : put more emphasis on investment in physical, human, and knowledge capital, and less on consumption as the yardstick of success. We need to take up our fair share of the global productive burden.
To see one indicator of the consumption economy take a look at this chart.
It tracks the buildings used for manufacturing (production) versus buildings used for retail, wholesale, and warehouses (distribution). Around 2001 the lines crossed, a sign that distribution was becoming more important than production in the U.S. economy.
The goal of a consumption economy is to provide consumers with low prices and wide variety, with less concern about jobs and wages.
In a consumption economy, successful corporations are the ones who can best manage their global networks of suppliers to obtain the lowest costs. Offshoring is a mark of pride, showing that companies can meet the desire of their customers for lower prices.
In theory, a consumption economy can be a great thing. Low prices can presumably bring higher living standards for households, as real wages rise. In theory, production is not an essential component for economic prosperity if you can create the product and organize the production and distribution process.
The great success story for the consumption economy is Apple ( ). Apple is a spectacularly profitable creator of innovative products and ecosystems, and a successful retailer to boot. However, the company does not produce any of the products it creates and sells. Creation and distribution, but no production.
However, Apple is Apple. For the rest of us, the consumption economy isn’t working so well.
Theories Of Wages - News
In theory, a consumption economy can be a great thing. Low prices can presumably bring higher living standards for households, as real wages rise. In theory, production is not an essential component for economic prosperity if you can create the product
Here, five theories: "Britain is less equal, in wages, wealth, and life chances, than at any time since" the last major financial upheaval, the great crash of 1929, says Mary Riddell in Britain's Telegraph. It's almost poetic that when the riots broke
For it is far from being consistent with the general tenor of the classical theory, which has taught us to believe that prices are governed by marginal prime cost in terms of money and that money-wages largely govern marginal prime cost.
His latest theory is a mathematical formula that links urban population growth to wage rises. “If you double the population of a city, workers will earn 15 per cent more for doing exactly the same job,” he claims in his new TV programme, The Code.
Sneijder will have to take a pay-cut to move to Old Trafford as his wages at Inter amount to £190000 which mean, due to the tax policy at England, United will have to pay him, in theory at least, around £250000 in wages which is more than what Wayne
'Production Economy' vs 'Consumption Economy' « Mandel on ...
In a recent post, I said that the U.S. should be a production economy, not a consumption economy. Matt Yglesias notes that “I have really no idea what that’s supposed to mean, since presumably the idea is to produce goods and services that people want to consume.”
Let me explain: I believe that the U.S. has come to a fork in the road. The direction we’ve been going leads to the the consumption economy , putting more resources into consumption and distribution rather than production. It hasn’t been working for us.
The U.S. needs to change course to a production economy : put more emphasis on investment in physical, human, and knowledge capital, and less on consumption as the yardstick of success. We need to take up our fair share of the global productive burden.
To see one indicator of the consumption economy take a look at this chart.
It tracks the buildings used for manufacturing (production) versus buildings used for retail, wholesale, and warehouses (distribution). Around 2001 the lines crossed, a sign that distribution was becoming more important than production in the U.S. economy.
The goal of a consumption economy is to provide consumers with low prices and wide variety, with less concern about jobs and wages.
In a consumption economy, successful corporations are the ones who can best manage their global networks of suppliers to obtain the lowest costs. Offshoring is a mark of pride, showing that companies can meet the desire of their customers for lower prices.
In theory, a consumption economy can be a great thing. Low prices can presumably bring higher living standards for households, as real wages rise. In theory, production is not an essential component for economic prosperity if you can create the product and organize the production and distribution process.
The great success story for the consumption economy is Apple. Apple is a spectacularly profitable creator of innovative products and ecosystems, and a successful retailer to boot. However, the company does not manufacture the iPads, iPhones, iPods, and so forth that it creates and sells. Creation and distribution, but no production. [ Edited for clarity. See below*] Is the point that creation and distribution don’t create jobs, but production does? The US is absolutely far and away the world’s biggest producer if you’re measuring output. (Manufacturing, value added constant 2000 US$ http://data.worldbank.org/indicator/NV.IND.MANF.KD?
In the Real World of Work and Wages, Trickle-Down Theories Don’t Hold Up -
In the Real World of Work and Wages, Trickle-Down Theories Don’t Hold Up - Theories Of Wages - Bookshelf
The theory of wages in classical economics, a study of Adam Smith, David Ricardo, and their contemporaries
THE NATURAL WAGE The classical economists generally used the term 'natural wage' to indicate an amount of money. But the object of the theory of wages is ...The distribution of wealth, a theory of wages, interest and profit
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THE THEORY OF WAGES ADJUSTED TO RECENT THEORIES OF VALUE BY THOMAS NIXON CARVER Fellow in Political Economy and Finance in Cornell University for tie Year ...The bargain theory of wages ...
THE BARGAIN THEORY OF WAGES. CHAPTER I. THE SUBSISTENCE THEORY. HE great historical theories of wages correspond 1 in their order and in their character ...The theory of wages
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