The Dependence Effect

Monday, Sep 13, 2010

The "Dependence Effect" [described in The Affluent Society by Professor J. K. Galbraith]... starts from the assertion that a great part of the wants, which are still unsatisfied in modern society are not wants which would be experienced spontaneously by the individual if left to himself but are wants which are created by the process by which they are satisfied. It is then represented as self-evident that for this reason such wants cannot be urgent or important. This crucial conclusion appears to lead to a complete non sequitur... that the urgent need is therefore no longer a further expansion of the output of commodities but an increase of those services, which are supplied (and presumably can be supplied only) by government.

How complete a non sequitur Professor Galbraith's conclusion represents is seen most clearly if we apply the argument to any product of the arts, be it music, painting, or literature. If the fact that people would not feel the need for something if it were not produced did prove that such products are of small value, all those highest products of human endeavor would be of small value. Professor Galbraith's argument could be easily employed, without any change of the essential terms, to demonstrate the worthlessness of literature or any other form of art. Surely an individual's want for literature is not original with himself in the sense that he would experience it if literature were not produced. Does this then mean that the production of literature cannot be defended as satisfying a want because it is only the production, which provokes the demand? In this, as in the case of all cultural needs, it is unquestionably, in Professor Galbraith's words, "the process of satisfying the wants that creates the wants."

The innate wants are probably confined to food shelter, and sex. All the rest we learn to desire because we see others enjoying various things. To say that a desire is not important because it is not innate is to say that the whole cultural achievement of man is not important.

The joint but uncoordinated efforts of the producers merely create one element of the environment by which the wants of the consumers are shaped. It is because each individual producer thinks that the consumers can be persuaded to like his products that he endeavors to influence them. But though this effort is part of the influences, which shape consumers' tastes, no producer can in any real sense "determine" them.

Though the range of choice open to the consumers is the joint result of, among other things, the efforts of all producers who vie with each other in making their respective products appear more attractive than those of their competitors, every particular consumer still has the choice between all those different offers.

The critics of the free enterprise system have resorted to the argument that if production were only organized rationally, there would be no economic problem. Rather than face the problem, which scarcity creates; socialist reformers have tended to deny that scarcity existed. Ever since the Saint-Simonians their contention has been that the problem of production has been solved and only the problem of distribution remains.

For over a hundred years we have been exhorted to embrace socialism because it would give us more goods. Since it has so lamentably failed to achieve this where it has been tried, we are now urged to adopt it because more goods after all are not important. The aim is still progressively to increase the share of the resources whose use is determined by political authority and the coercion of any dissenting minority.

The Non Sequitur of the "Dependence Effect", Friedrick A. Hayek, April 1961, http://mises.org/etexts/HayNonseq.pdf.