Peter Wilby should read some Adam Smith

Whining about supermarkets:

The central issue, however, is whether \”what the consumer wants\” should close down the argument. What people want as consumers may not be what they want as householders, community members, producers, employees or entrepreneurs.

And in Smith we find ourselves being told that the purpose of all production is consumption.

Thus, when we decide about how prodution should be done, the interests of the consumers are indeed paramount. For this is the whole point of the system of production.

If consumers do value the non-efficiency of the non-supermarket method of retail distribution that\’s just fine. Good luck to them. If consumers on the other hand value the efficiency of the supermarket system that is equally fine. Similarly good luck to them.

For yes, \”what the consumer wants\” really does close own the argument. For what the consumer wants is the whole point of the entire system.

11 comments on “Peter Wilby should read some Adam Smith

  1. still, I wouldn’t say that “what the consumer wants” should “close down” the argument.

    this is just a thought – could we have a state of affairs in which consumers choose cheap products whose production involves miserable working conditions, which makes us miserable at work … could our choices as “consumers” hurt our selves as “producers”? That would involve something like an externality – we do not internalize the effect of our consumption decisions upon our working conditions, acting as if working conditions are given. I don’t immediately see you can rule that out, or dismiss it because the ultimate point of production is consumption (actually the ultimate point is utility maximization and I’m suggesting utility might not be maximized because of something like a market failure).

    [I wonder how many people believe something like: we are buying cheap products ignoring the fact that means we get paid low wages. i.e. forgetting what the real wage is W/P. ]

  2. actually, the above idea doesn’t make a great deal of sense – if you think that “good working conditions” have a cost (so would be passed on in prices) and are also part of the reward of working (rewards of working = wages + utility/disutility of working) it falls prey to the W/P argument.

    Still, I can’t shake the suspicion there might be welfare gains to be had by rejigging things to that our (i.e most people’s) working lives are a bit better and our goods are bit more expensive. I am not convinced that market mechanisms mean we attain the optimal combination.

    I’ve been down this road before: see comments of this WWCI post

  3. So I am some sort of extreme schizophrenic; independent personalities when I consume, household, commune, etc. ?

    Could be, I suppose, if I don’t talk to each other.

  4. of course there’s nothing to stop the consumption decisions of one group imposing costs on other groups – if it turned out the choices of grocery shoppers were resulting in terrible misery for farmers, Wilby might have a point, but I’m not sure the “misery” imposed on farmers is any different from producer A going out of business because producer B is preferred, that is to say, tough cheese.

    and this whole thing suffers from a gigantic non-random sampling error – campaigners go about collecting anecdotes of farmers having a dreadful time and completely fail to gather data on farmers making out like bandits or think about what happens across the whole distribution of farmers.

  5. Still, I can’t shake the suspicion there might be welfare gains to be had by rejigging things to that our (i.e most people’s) working lives are a bit better and our goods are bit more expensive.

    This is entirely possible and we do see, over the decades, improvements in the comfort of work (eg a great-uncle worked in mining in Australia, and by the time he retired the big trucks and diggers and like he drove had air-conditioning and CD players installed as standard).

    But what drives this is normally competition for labour – ie at some times it’s cheaper for companies to improve workers’ utility by providing more comfortable working conditions than by paying more.

    Another thing Tim doesn’t mention is that sometimes costs such as pollution mean that it makes sense to increase the costs of goods by adding in taxes to the cost, while still overall improving consumer utility.

  6. ” Money spent in independent retail outlets tends to stay in the community, providing work for local lawyers and accountants, plumbers and decorators, window cleaners and builders. ”

    What a load of twaddle. The money is not leaving the local community through the presence of the supermarket. The supermarket consumers now have it rather than the mythologised small shopkeeper. What Peter Wilby is implying is that they are more entitled to the income than the consumers. The few living off the many.

    The supermarkets do not drive the small retailers out of business, it is their former customers who are driving them out of business. The small shopkeeper apparently is such an integral part of the local community and is so popular that no one shops there anymore. Call me cynical but their popularity may have been a tad overestimated.

  7. I’ve never quite understood this ‘local shop’ love-in. Where do people think small shops get their wares? From little backstreet producers just round the corner? Your local milk bottling plant? The local TV factory?

    Of course they don’t. They go to cash’n’carry places and buy them there, or belong to one of those big buying groups for small shops like ‘Happy Shopper’, and it all gets delivered in a lorry from a warehouse in Swindon.

    Pretty much everything we buy nowadays, apart from the really artisan made stuff which is fiendishly expensive, come from mass production lines in big factories, either here or (more likely) abroad. The only reason Tesco et al are cheaper is because of their buying power and economies of scale. The manufacturing profits still go to the same factories and wholesalers, whether Tesco sell you a TV or you buy one from a little independent shop. Tesco just manage to screw the manufacturer’s share down, and make a profit themselves, as well as giving the customer a cheaper TV.

  8. the local shop can only survive as a niche operation, which means working out wht the niche is.

    EG if I need a bolt for something, I can go to Homebase etc and buy a pack of 6 bolts. Or I can go to the local ironmonger if there is one and buy the single bolt I need.

    Similarly, as in France, if I want a salami, i can buy the hypermarket salami or I can go to the small butcher on the mall and buy a more expensive but tastier salami. But, in France, the hypermarket exists alongside a load of small niche boutiques. This does not seem to happen in the UK where Tesco and Sainsbury’s build their campuses. I wonder why.

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