In a free market, the consumer is king

In a free market economy, the consumer retains full choice and freedom over what they do. When they engage in the exchange of goods and services, it is done voluntarily. No other consumer or business has power or authority over them. Their only means of getting a consumer to purchase their product through a variety of methods such as marketing and public relations.

No matter the method, however, they all require consent.

In other words, the consumer retains control at all times, and the business or producer must placate them, not the inverse. The consumer decides what producers should create and sell based on demand. If a business creates a product no one wishes to buy, it will not sell and they cannot use force to get people to buy it.

The failure to understand this reality, and the desire to control people’s actions by discounting reality, is what leads to attempts at economic planning that always result in disaster. Some are huge, such as Stalin’s Four Year Plan and collective farming efforts that resulted in the Holodomor, and Mao’s Great Leap Forward that killed 36 million Chinese people.

In “How Consumers Rule In a Free Economy,” Christopher Westley writes of Austrian economist Carl Menger, who first developed the concept of praxeology, which deals with human action and, according to Westley, “primacy of the consumer in determining value and (by extension) price, not only in the marketplace but in all economic activity.”

He writes:

“The Mengerian approach, which we today call the science of praxeology, emphasized the importance of individual human action resulting from the desire to satisfy felt needs and the relationship of those needs to the external world. Having a felt need and the knowledge that the external world possesses some characteristics that allow the individual to satisfy it provide the basis for logical human action and the subjective valuation of goods and services both within and apart from the market. Menger further noted that as our knowledge about the external world changes, so do individually-felt needs. Efforts to satisfy felt needs presuppose recognition of cause-and-effect relationships that provide the basis for all of human action.

…Note how completely irrelevant such a framework is to modern adherents of the Keynesian or Chicago Schools. The major difference is that both schools view the individual person (or actor) as an object that needs to be manipulated in the name of policy success.”

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