Economic Myths #2: Consumption Boosts Growth

[First published on Free Life]

The belief that economic progress is boosted by consumption is based upon the kind of misunderstanding that could be made only by intellectuals – the product of theorising that is completely detached from the common sense that everyone else possesses.

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The Choice Illusion

In the mainstream debate both for and against a free market, one notion that seems ubiquitous is that the free market is predicated upon individual choice. Consequently, those in favour of such a market are likely to argue that the more choice there is the greater the competition between firms, leading to increased economic efficiency as those firms seek to meet their customers’ needs for the lowest possible cost. On the other hand, opponents will counter that choice can be wasteful, costly, inefficient and overwhelming, particularly when it concerns supply of provisions as basic as water. They might suggest further that choice is often an illusion conjured up by private companies that basically operate in a profit-maximising cartel.

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