Mises on “production for use”

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December 20, 2011 by galudwig

Talk to a socialist for a while and you’ll undoubtedly hear of so-called “production for use”, or the organization of production according to human needs, as opposed to “production for profit”, the result of an economic structure supposedly based on greed.

Even though it makes no sense, this is one of those slogans which just refuse to die. If only there were no big corporations, and people cared enough about one another to work to serve other people’s needs, instead of caring only about profits, the self-styled socially conscious decry, generation after generation.

Ludwig von Mises in Human Action responds:

Profit-seeking business is subject to the sovereignty of the consumers, while nonprofit institutions are sovereign unto themselves and not responsible to the public. Production for profit is necessarily production for use, as profits can only be earned by providing the consumers with those things they most urgently want to use.

Indeed, as Mises brilliantly explains in Human Action (and, more succinctly, in Planning for Freedom), profit provides the essential incentive for individuals in society to shift production to those branches of industry which best serve consumers’ demands. Production for profit is production for use. Those producers who make a profit (on an unhampered market) are those who in the past most successfully predicted future consumers’ needs and acted accordingly. More from Mises:

The market economy is essentially characterized as a social system in which there prevails an incessant urge toward improvement. The most provident and enterprising individuals are driven to earn profit by readjusting again and again the arrangement of production activities so as to fill in the best possible way the needs of the consumers, both those needs of which the consumers themselves are already aware and those latent needs of the satisfaction of which they have not yet thought themselves. These speculative ventures of the promoters revolutionize afresh each day the structure of prices and thereby also the height of the gross market rate of interest.

And, in one of the last chapters, he unmasks the true face of socialism:

The distinctive mark of socialism is the oneness and indivisibility of the will directing all production activities within the whole social system. When the socialists declare that “order” and “organization” are to be substituted for the “anarchy” of production, conscious action for the alleged planlessness of capitalism, true cooperation for competition, production for use for production for profit, what they have in mind is always the substitution of the exclusive and monopolistic power of only one agency for the infinite multitude of the plans of the individual consumers and those attending to the wishes of the consumers, the entrepreneurs and capitalists. The essence of socialism is the entire elimination of the market and of catallactic competition.

What those who dislike that which they call “capitalism” forget is that we are the market. We control production in the “capitalist system”, which is not really a system at all, but more the lack of coercion. Nowadays, socialists and interventionists hardly ever openly call for the elimination of the market and of competition. But the mask drops when they talk of “production for use”.

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