“By choosing an Agropur product you are choosing to promote and contribute to the Canadian economy.”
This statement appears on every milk container they sell in the Great North. In one fell swoop, this company is choosing to attack both the free enterprise system, as well as basic economic law. It does so in two different ways.
First, consider buying any consumer item at all. Does this promote the economy? Well, yes, if you are a Keynesian. Here, the buyer is king. The entire economy revolves around the consumer. But economic science and common sense soon puts paid to this economically illiterate idea. Who do you think can better develop an economy: four big fat huge guys with beer bellies who can consume, oh, 10,000 calories per day with ease, but can’t produce their way out of the proverbial paper bag? Or four thin fellows who thrive on 2000 daily calories and can work all the day long? The former foursome can consume like crazy, but are too obese to produce much of anything. For the latter group, the very opposite is the case.
No, it is producers, not consumers, who create economic growth and development. Production necessarily comes before consumption. You can have the former without the latter (not that you would want to), but not the reverse. If the general public drank less milk, not more, scarce capital could be devoted to mining, education, research, etc., and other such pursuits which enrich us all. On the other hand, we have no reason to doubt that actual practices in this regard are optimal.
Secondly, posit a given level of milk drinking which is claimed to be to Canada’s benefit, but only if this stems from domestic cows. This only follows if we ignore the benefits of specialization and the division of labor. Sometimes it is easier to understand economic concepts if we exaggerate matters. So, instead of merely focusing on Canadians buying made-in-Canada milk, let us posit that people from this country simply refuse to purchase anything not produced north of our southern border. We would then be completely self-sufficient. Would this enrich us? You can believe this only if you never took Economics 101, failed this course, or were “socially” passed.
Why not? This is simply because foreigners can often manufacture some things more cheaply, and better, than we can, and we can do so with regard to other items. For example, we are better at maple syrup than are the Hawaiians, and they can wipe the floor with us insofar as pineapples are concerned.
So much for what economists call absolute advantage. But there is also comparative advantage. Even if Canadians are better than another country (or worse) at producing both goods in bilateral trade, it still sometimes pays not to be inward looking as this milk company would have it. Consider the following numerical example:
Good X good Y GDP
Country A 100 50 150
Country B 10 40 50
No trade 110 90 200
Trade 200 80 380
A is ten times as effective as is B in X (100 to 10) but only slightly better in producing Y (50 to 40). B is only 10% as good in X as A is, but 80% as efficient at producing Y. If no trade occurs, there are 110 Xs in existence, 90 Ys for a total of 200 (we assume these goods are additive); the GDP of A is 150, that of B, 50, again for a total of 200. But if trade occurs, each country specializes not in what it is absolutely best at (A wins in both cases), but rather according to its comparative advantage. A doubles down on X and produces 200 units, while B does the same in Y and comes up with 80 units. GDP now rises to 280 units. Everyone wins.
Should this company’s message be cancelled? Yes, if you support truth and economic efficiency; no, if you favor free speech.
By the way, note this, Canadian snowbirds. With no trade, there will be no winter vacations in the Bahamas or Florida. That would be but one logical implication of Agropur’s anti free trade argument, if taken to its logical conclusion.
Walter E. Block is Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics at Loyola University New Orleans and is co-author of An Austro-Libertarian Critique of Public Choice (with Thomas DiLorenzo).
READER COMMENTS
Mark Barbieri
Oct 17 2022 at 9:32pm
Great article, but your chart has a mistake. The Trade GDP number should be 280 but it is currently shown as 380. The number is correct in the text.
Atanu Dey
Oct 17 2022 at 10:45pm
Mark:
I noticed that typo too. Here’s hoping that it gets fixed.
Prof Block: Thank you for the excellent post.
Jon Murphy
Oct 18 2022 at 8:27am
This is not necessarily wrong, but it is incomplete. There’s a hidden assumption that must be brought to the fore, otherwise it could lead to the opposite sin of mercantilism: the production is being freely bought by consumers.
Production is only valuable insofar as it satisfies some consumer desire (removes felt uneasiness, to paraphrase Mises). If those four fellows consuming only 2,000 calories a day spend their entire day producing junk no one wants, then that is no less a waste of resources than the 4 obese individuals. Ultimately, the consumer is still king insofar as consumption is the end-goal of production. But consumption for its own sake does not produce economic growth.
Economics is about voluntary exchange. It is not about production or consumption, but production and consumption. It’s not about consumers or producers, but consumers and producers.
I am sure you know this, but I always like to make the point explicit. Far too many see “production leads to economic growth” as naturally leading to protectionism, mercantilism, industrial planning, or other forms of “soft socialism.”
TMC
Oct 18 2022 at 2:45pm
This may not be the most economically efficient way, but is no attack on the free enterprise system. Consumers are buying milk and some good feelings for supporting the ‘home team’, which does have some value to them. Outside of coercion, this is an example of free enterprise.
Michael Shulist
Oct 18 2022 at 5:48pm
Your opening paragraph may be a bit misleading. I assume you mean the quoted statement refers to products sold by Agropur and not every milk product sold in The Great White North.
While I personally feel Agropur’s days are numbered most Canadians have access to local dairy products that do not come with such protectionist warnings.
Ron Browning
Oct 19 2022 at 7:29am
Perhaps if professor Block chose better examples of hypothetical consumers and producers, I would give more credence to his main argument. The overweight consumers, packing away 10,000 calories per day, would gain approximately 700# of weight in one year. Their career as massive consumers would be short lived. The producers lives would be even shorter (unless they were some sort of freak of physics that could expend more energy than the btu’s that they consumed in their food). There were somewhat similar producers, in Soviet work camps, described by Solzhenitsyn, who worked far beyond the calories they consumed. These producers died within months.
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