1 of 1

Write now Article Tools

Page 3 of 4

demands classical music. Thus, in a free market, the majority decision is not binding on all, and minority preferences of all sorts will be satisfied by entrepreneurs desiring to profit from them. While democracy severely limits individual self-sovereignty, the free market guarantees it absolutely.

While the Misesian concept of consumer sovereignty is a fine analogy for describing the functions of a free market and the role of consumers therein, Rothbard correctly pinpointed the areas in which the analogy breaks down. Fortunately, with respect to those areas, the free market is even better than a universal application of the analogy would suggest.

Opponents of the fully free market might raise the following worst-case scenario to challenge it. The producer of a certain good has mistakenly underrated the market demand for that good. In the efforts to keep the price of the good high enough to maximize monetary returns, he destroys what he believes to be the "excess" stockpile of his good, a stockpile that consumers actually demand. Consumers thereby suffer by not getting enough of a product which they highly value. Yet even here Rothbard came to the defense of the free market.

Rothbard's first response to such a scenario would be: It will not likely happen again. The producer has made a mistake and has recognized it after the fact. He can only maximize his profits by correctly estimating consumer demand and selling precisely the quantity of goods his customers desire. He can best eliminate waste only by producing what he plans on selling, and nothing more. Surely, producing something only to destroy it in the future would be doubly wasteful, and the prudent businessman will rationally seek to avoid this in the future. Cutting costs to the optimal level will free up resources for the businessman to either personally consume or to devote to another line of production advantageous to consumers. If he wants to remain in business and prosper, he will adjust his operations to prevent future underestimations of consumer demand.

Furthermore, Rothbard would defend the producer who makes the decision to destroy a part of his stockpile by claiming that we cannot condemn him without entering his head and learning his motives. For example, if a producer grew one million bushels of grain and consumed 100,000 of them in a massive feast that he created for himself, his family, friends, and employees, nobody who supports individual liberty would suggest that the producer did anything

• << previous page
• 1
• 2
• 3
• 4
• next page >>

Add your voice

Know something about The concept of consumer sovereignty in economic theory?
We want to hear your view. Write now!