Note 212-6 — Chapter I

Ricardo, Principles, p. 475, was of opinion that an outlay of the national or of private income in the payment of personal services increased the demand for labor and the wages of labor in a higher degree than an equal outlay for material things. The error at the foundation of this is well refuted by Senior, Outlines, 160 ff.

The first to zealously advocate and treat the theory of productive consumption was J. B. Say, Traité, III, ch. 2, seq.; Cours pratique, II, 265. But the germs of the doctrine are to be found in Dutot, Réflexions politiques sur le Commerce et les Finances, 1738, 974, éd. Daire. His distinctions are in part drawn with great accuracy. Thus he says that, among others, a manufacturer of cloth, productively consumes the results of his workmen, but that the workmen themselves who exchange these results for bread, consume the latter unproductively. Say is guilty of the inconsistency of claiming that only that consumption is productive which contributes directly to the creation of material exchangeable goods, spite of the fact that he gave the productiveness of labor a much wider scope. Rau, Lehrbuch, I, § 102 ff., 323 seq., is more consistent in so far as he applies the same limitation in both cases. (Compare also § 333, 336.) Hermann, Staatsw. Untersuchungen, 170 seq., 231 ff., would prefer to see the idea of productive consumption banished from the science, for the reason that if the value of the thing alleged to be consumed continues, there can be no such thing as its consumption. But, I would rejoin: in a good national economy, there would be, according to this, scarcely any consumption whatever, because the aggregate value of that which I have called above productive consumption is unquestionably preserved, and continues in the aggregate value of the national products.

Productive consumption is ultimately a stage of production, just as production itself is ultimately a means to an end, consumption, and therefore a preparation for the latter. Both ideas may be rigorously kept apart from each other, just as the expenses and receipts of a private business man, who makes a great portion of his outlay simply with the intention of reaping receipts therefrom, may be. Every one desires his production to be as large as possible, and his productive consumption, so far it does not fail of its object, as small as possible. Riedel rightly says that the theory of reproductive consumption serves Political Economy as the bridge which closes the circle formed by the action of production, distribution and consumption. (Nat. Oek. III, 49.) One of the chief fore-runners of the view we advocate was McCulloch, Principles, IV, 3 ff. Gr. Soden, Nat. Oek., distinguishes economic consumption, un-economic and anti-economic consumption. (Nat. Oek., I, 147.)