All Commentary
Wednesday, July 1, 1998

Such a Deal!

Consumption by the Rich Makes Us All Better Off

Let’s keep this among ourselves, but we non-rich folks have a good thing going. Even though we are of modest means, we have a huge staff of servants who perform valuable services for us. The best part is that we don’t even have to pay them.

Think back to when the VCR came out almost two decades ago. A typical model was over one thousand dollars. Like most of you, I couldn’t afford that. Today they are two hundred dollars or less, within the reach of most Americans–and with better features! What happened?

Our servants did us a huge favor. They spent their own money to buy the new VCRs. Sure, they enjoyed the benefits, but they also suffered the headaches that the bugs in a new product often cause. In the process, they gave the manufacturers a chance not only to work out those bugs but also to get better at making VCRs. Costs dropped, and competition translated that into falling prices. Eventually the price dropped low enough that you and I could afford VCRs. Some of us have more than one.

The same thing happened with many other products. Everyone can afford a television today. A short time ago, that was not the case. Only the richest families got TVs when they first came out. Same with telephones, automobiles, clothes dryers and washers, stereos, dishwashers, calculators, microwave ovens, and personal computers–things we all take for granted now.

We should be grateful to the people who bought those products early on. Had they not, we would not be able to afford them today. They might not be offered at any price. And it isn’t only entertainment and convenience products that have undergone that process. Lifesaving devices, such as the latest medical technologies, were also tested by our servants.

The reason I said we should keep this to ourselves is that those people may not know they have done us such a big favor. It may never occur to them that we get a free ride off their consumption. I like this state of affairs and don’t wish to rock the boat.

This is ironic, really. They consume and we benefit. Who’d have thought it could work out that way? We don’t even have to command them to help us. They do it for themselves. Yet we get things that improve our lives immeasurably and that otherwise would be out of reach.

You might be curious about the identity of these people who serve us so well. I’ll tell you only on the condition that you not seek them out and express your gratitude. Remember, we’re keeping this quiet.

Our unwitting servants are the rich. Who else had the money to buy a thousand-dollar VCR for home use? They are the same kind of people who bought the first ballpoint pens at over ten bucks a pop, when a dollar was worth something. Today pens, like pencils and matches, are given away as promotions. You can go through life and never have to buy one of these items. What will they be giving away tomorrow?

Spillover Benefits

Fortunately, our racket is safe because the rich don’t test products for our sake. They buy new, expensive, flashy things for their own pleasure. The benefits then spill over onto us, regardless of their intention. That’s how so many benefits from living in society get passed around. Adam Smith observed that we get our dinner not because the butcher, baker, and brewer love us, but because they love themselves. It’s a good thing they do. As Smith added, “By pursuing his own interest [a person] frequently promotes that of society more effectually than when he really intends to promote it.”

Like the rich, the rest of us also strive to make ourselves and the ones we love better off. That’s proper. No apology is needed. But it’s good to know that there are significant secondary benefits from that activity. It confirms there is a fundamental harmony of interests in society. Classical liberals have always stressed that feature of life. It is so ubiquitous that most people don’t appreciate it. The surface conflicts are more noticeable and thus get more attention. Two people applying for the same job, for example, see each other as rivals. Two firms in the same industry are in a kind of conflict with respect to wooing consumers. Even consumers may now and then be in direct competition for an especially scarce product.

But that conflict is superficial. Deep down there is a harmony of interests among rational people. The job applicants have an ultimate mutual interest in a process in which employers freely choose their employees and anyone is free to aspire to any job. Ayn Rand, in her essay “The ‘Conflict’ of Men’s Interests,” wrote, “Both men [applying for the same job] should know that if they desire a job, their goal is made possible only by the existence of a business concern able to provide employment . . . and that their competition for the job is to their interest, even though one of them will lose in that particular encounter.”

Similarly, two companies have an ultimate interest in a process in which consumers freely choose whom to buy from and anyone may aspire to be in any business—even though one loses out in the bid for a given customer and may even go bankrupt.

Fundamental Concord

Ludwig von Mises saw this concord among people as natural and fundamental. No one better appreciated that it is what makes society and prosperity possible. For him, the worst thing that could be said about government intervention is that it jeopardizes civil peace. In his essay “The Clash of Group Interests,” he wrote, “In a free-market society . . . [t]here prevails full harmony of the rightly understood (we say today, of the long-run) interests of all individuals and groups. . . . The short-run interests of a group may be served by a privilege at the expense of other people. The rightly understood . . . interests are certainly better served in the absence of any privilege.”

The division of labor and knowledge benefits us all. Competition is simply another word for cooperation. It’s the result of multiple offers to cooperate in any given endeavor. If we are free to choose with whom we will cooperate, there is competition. The idea that cooperation and competition are opposites is silly. The idea that libertarians oppose cooperation is worse than wrong. The marketplace is the paradigm of cooperation. I’ll give you item A if you give me item B. What’s that if not cooperation?

To their credit, Americans do not hate the rich, despite decades of anti-capitalist envy-mongering. (That was reconfirmed earlier this year in a public opinion poll.) Now we see there’s another reason not to hate them. Not only do they invest most of their incomes, providing new products and opportunities for all, but they also make us better off simply by engaging in what was once condemned as conspicuous consumption.

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.