Consumer Sovereignty or Producer Sovereignty?

With the idea of “consumer sovereignty,” standard economics may seem to claim or to assume that the utility of consumers is more important than the utility of producers. Notwithstanding the impossibility of scientific interpersonal comparison of utility, one objection is that this hierarchy is arbitrary, normatively if not also positively. Since any working person and any rentier is both a consumer and a producer, the utility of one is indistinguishable from the utility of the other. Moreover, many socialists and many traditional conservatives have argued (against classical liberals) that it is in his role as a producer that an individual’s life is significant. Thus, the objection goes, an economic system based on the sovereignty of the producer would be as efficient as, if not more efficient than, one mistakenly founded on consumer sovereignty.

Due perhaps to the influence of Marxism (and other post-Enlightenment philosophies such as Hegelianism) during the last two centuries, these ideas have gained some intellectual respectability. Frank Fukuyama’s recent book Liberalism and Its Discontents provides an illustration. There is no reason, he explains, “why economic efficiency needs to trump all other social values.” Are human beings “consuming animals” or “producing animals”? he asks. “This a choice that has not been offered to voters under the hegemony of neoliberal ideas.” As I note in my forthcoming review of this book in the Fall issue of Regulation, the absurdity of putting such a choice before voters can be seen by imagining a referendum that would ask “the people”: “What animal do you want to be, a consuming animal or a producing animal?”

After a victory of the producing-animal campaign, an injunction would probably follow from whoever believes he represents the collective: Now, get back to work!

More fundamentally, I think the answer to the question of the primacy of the consumer or the producer is the following. If it is the producer who strives to satisfy the consumer, he will automatically strive to satisfy his own preferences because he gets income to the very extent that he satisfies the consumer. If it were instead the consumer who endeavored to satisfy the producer—by letting the latter have the easiest working conditions and generally deferring to him—he would not simultaneously maximize the satisfaction of his own preferences, quite the contrary: producers would have no incentives to produce as much as possible for consumers. Therefore, the individual, who is both producer and consumer, would have less to consume. Looked at from another viewpoint, an individual who, did not as a producer work for consumers, nor as a consumer try to get as much as possible from his suppliers, would not go far in maximizing his utility. (Recall that maximizing one’s utility simply means getting in one’s most preferred situation.)

If we assume that an individual usually wants to maximize his utility, he will naturally adopt a commanding posture before his suppliers and a service mentality toward his customers. There is thus a good positive reason for assuming that, in a context of individual liberty, most individuals will adopt the behavior just described. And if we make the normative judgement that the welfare of individuals as natural equals (to use a classical liberal expression) is what counts, we will favor a political-economic regime of consumer sovereignty, not of producer sovereignty: only in the former, where the self-interests of consumers and producers are well coordinated without coercion, can we hope to have an equal liberty and an good chance of prosperity for all. Such is the main argument in favor of consumer sovereignty as opposed to producer sovereignty.

The political word of “sovereignty” can be misleading in this context. Consumers are not sovereign over producers in a coercive sense. Every producer is also a consumer. Moreover, production often has a consumption or pleasurable (even if stressful or even anguished) component: think of artistic work as the paradigmatic case. And in a free society, although we expect the typical individual to produce in order to consume and not the other way around, eccentricity is not forbidden nor is affection or charity (producing for the benefit of somebody else) banned. What is pretty clear is that a regime of generalized producer sovereignty is at best meaningless.