The Consumption Motive
Apr 7, 2015

The consumption or demand motive is one of the most important maxims of Adam Smith's economic system, aside from Effort Theory of Value. This maxim states that all economic activity is rooted in the people or the demanders in society and not in the producers or the suppliers in society*. This is easily seen in the concept of the human family (the smallest and most common type of society) wherein the parents work to provide or produce food for their children who are the consumers. Humans do this by instinct because this is how our species has evolved to be so advanced over animals.


The human species continues its lineage through the children

This means that there were proto-humans that did not have the same mentality to provide for their children and so naturally became extinct. For example, they might have done the opposite and have eaten their children as a food source just like some animals species.

The maxim that the parents must provide for the children is the opposite of the current maxim of Economics of Say's Law which states that production* is the root of all economic activity and is the source of demand. The maxim of Economics thus makes the children subservient to the parents instead of the parents serving their children. This propensity is rooted in ego and is seen in the animal nature of survival of the fittest or those who can produce the most.


Not all animals focus on sustainability and so some naturally go extinct

It's common to hear that investment bankers (the ones that fund production) being called wolves, as in 'The Wolf of Wall Street'. Smith very clearly explains that such a Production Motive is a mercantile sophistry:

By such maxims as these, nations have been taught that their interest consisted in beggaring all their neighbours. Each nation has been made to look with an invidious eye upon the prosperity of all the nations with which it trades, and to consider their gain as its own loss. Commerce, which ought naturally to be, among nations, as among individuals, a bond of union and friendship, has become the most fertile source of discord and animosity.. But the mean rapacity, the monopolizing spirit of merchants and manufacturers, who neither are, nor ought to be, the rulers of mankind, though it cannot perhaps be corrected may very easily be prevented from disturbing the tranquillity of anybody but themselves.

That it was the spirit of monopoly which originally both invented and propagated this doctrine cannot be doubted; and they who first taught it were by no means such fools as they who believed it. In every country it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it cheapest. The proposition is so very manifest that it seems ridiculous to take any pains to prove it; nor could it ever have been called in question had not the interested sophistry of merchants and manufacturers confounded the common sense of mankind. Their interest is, in this respect, directly opposite to that of the great body of the people.

Wealth of Nations Book 4, Chapter 3

These differing paradigms can lead to different supply curves and business behaviour:

Economics of Marshall and Samuelson

SORAnomics of Smith

CompetitionCompetitive, cut-throat business environment for small companies; Monopoly power for giant companiesFriendly competition, or competition with natural moral limits throughout
SupplyIn Economics, big suppliers can cut supply to achieve shortage and high prices. Suppliers also have an interest in building demand for expensive but useless products such as the Apple Watch, leading to over-exploitation of natural resources. Small companies have difficulty in entering.Downward sloping supply curve as people want "to buy whatever they want of those who sell it cheapest". Businesses will less likely attempt to create useless products or those that cannot be sustainably produced because of limited resources. Small companies can easily enter because of the bond of friendship.
auction-bid
Economic PowerSellers have more economic power. Buyers have no choice of sellers but instead must compete with each other.Buyers have more economic power. Buyers can choose the seller they like.
Success MetricThe success of the producers is the measure of the economy's success, as Gross Domestic ProductThe success of the people to buy what they need and want is the measure of the economy's success, as Purchasing Power
Social ViewHuman creatures are customers and sellers of each other, isolated by ego, connected by money
Human creatures are friends and family of each other, connected naturally by morals and virtue

Without a doubt, it was the spirit of monopoly which originally invented and propagated this doctrine. Those who first taught it were by no means such fools as those who believed it. In every country, it is always the people’s interest to buy whatever they want the cheapest. This proposition is so very manifest that it is ridiculous to take any pains to prove it. It could never have been questioned had not the sophistry of merchants and manufacturers confounded the common sense of mankind. Their interest is directly opposite of the people’s interest.

Update: Aug 2020

We can thus say that the Economics is best for animalistic humans or those who love to prey on others -- a player who wins big in the stock market does not care that he is actually preying on the loss of the other players because he himself is fair game for those players if he loses. SORAnomics, on the other hand, does not promote such predation. Instead it focuses on ironing out the risks so that people can work and spend their capital with lower but more predictable returns. We can say that SORAnomics is best for symbiotic humans.

It would be extremely difficult to convince a gambler not to gamble, or a wolf not to be a wolf, especially if his society has moral systems that promote gambling or even wolf-like behavior. The best solution is to have a symbiotic system that filters out such predatory behavior.


Some societies might actually promote predatory, survivial-of-the-fittest behavior as a means of sustaining their society.