No Free Lunch

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“If you build it, they will come” — unknown

“Some people say, “Give the customers what they want.” But that’s not my approach. Our job is to figure out what they’re going to want before they do. I think Henry Ford once said, “If I’d asked customers what they wanted, they would have told me, ‘A faster horse!’” People don’t know what they want until you show it to them. That’s why I never rely on market research. Our task is to read things that are not yet on the page.” — Steve Jobs

“’No such thing as a free lunch’ is just another way to state Say’s law, and Say’s law says that production must precede consumption” — Austin Jones

I want to explain the last quote, the one I attribute to myself. It is often said and generally agreed that there is no such thing as a free lunch. I have never heard a refutation or an argument against this, at least, not a good one. First, I will explain the quote that “there is no such thing as a free lunch”. It means nothing is free. Anything you consume you have to pay for. An elementary objection might be that someone could pay for you, but that just means it is free to you, but not free in general because someone else still had to pay for it. The next objection may be that a restaurant could give you free food. But in this case, the restaurant paid for the food, if not from a supplier, then they paid for it by growing it, harvesting it, and cooking it. So, it cost them time, energy, and extremely minute wear and tear on their body as well as wear and tear on the cooking tools. There would also be the opportunity cost of using the space in the garden for something else or using the land the restaurant is on for something else. Even if they gave you a meal out of pure love and joy of providing free meals, there is always a cost, even if it is solely the opportunity cost. This means there is always a cost involved before something can be consumed, and that is essentially what production is — a cost. But it is not for nothing — the reward is that consumption can follow, that all the work put in can now result in an enjoyment of the product.

Now, to hammer in the concept that production must precede consumption, I will explicate (and maybe pontificate) further. You have to build a business before consumers can enjoy the results or the products of the business. A business cannot be demanded into existence. And a new business cannot exactly be bought either. It can be started, or an existing one can be bought, but a new business cannot be bought or demanded. Supply comes before demand, meaning that production precedes consumption. Businesses must come before consumers can consume or use or buy their products. It has to, or else there is nothing to consume. You can “demand” all you want but your wishes mean nothing until the work is put in. A business i.e., production, will not come into existence until the blood sweat and tears are put into getting the business off the ground and into production. Supply affords demand. As in, what an economic actor demands other production with is in fact his own production. A person must go to work and produce before he can go out and consume, or else there is nothing to afford his consumption.

From this it derives that, ultimately consumption and production are in balance at all times, similar to a balance sheet in accounting. Economic data is only as good as the accounting used to arrive at it and that depends on the margin of error in accounting, which is — surprise! — unaccounted for. Our measures of supply and demand may not be equal but at the core they must be since you can only demand with your own production. An objection could be that what if someone makes something and no one demands it, then there is production without consumption. But that is just confusing the use of the words. If no one wants a product, it is irrelevant, it is not an economic good to be considered. And the producer will have no ability to use it to demand for anything, since no one else wants it. Resources and wealth exist, and the economy fundamentally starts as a natural world with naked man. From that, everything that is built is our resources, our production and consumption flows — our stock, capital, wealth — whatever it shall be called. If current consumption flows are outpacing production flows, then the consumption must come from previously accumulated capital. This last point I hope to expand on in the future.