AUSTRIAN ECONOMICS ADDICT

I stumbled across this commercial for a product that I thought couldn’t be real, but the product and the company really exist. As much as we talk about the consumer reigning supreme in the market, the entrepreneur is the one who takes a chance on a new idea, product, or service, for which  there is no consumer demand. The entrepreneur takes a risk, a leap of faith in his ability to come up with an idea he thinks consumers will want. If he is wrong and consumers won’t support the product, or activity, in large enough numbers to make a profit, he suffers the loss, and the scarce resources used to produce the unwanted product, are freed up to be used in more productive activities. The entrepreneur is essentially trying to supply his own demand (production comes before consumption). Watch the commercial for a product called Poo-Pourri. I thought it was funny, but I might be a little touched.

The marketing is pretty good because nobody wants to take the dreaded away dump. This commercial asks and answers the question, “So how do you make the world believe your poop doesn’t stink, or in fact that you never poop at all? Poo-Pourri- the before you go toilet spray.”

If Poo Pourri produces a paltry profit that can’t support the price of production, they have another option, in our crony capitalist system, to overcome their failure under voluntary exchange in the free market. They can lobby the Government and try to get them to mandate that all public restrooms have a supply of Poo-Pourri, because second-hand stink is not just offensive, studies have shown it can cause headaches, nausea, watery eyes, asthmatic reactions, dizziness, and other reactions too numerous to name. If the Government will not grant them their demand, that Government create a limitless demand for their product, they always have an option of sue. There has to be some obscure rule under the purview of OSHA, the EPA, HHS, or the CDC, that is being violated by businesses who are shirking their responsibility to protect the public from second-hand stink.

Fortunately, in our current crony capitalist system, there is enough freedom left for entrepreneurs to take a risk and supply a demand that doesn’t yet exist. Growth happens on the frontiers of the economy where risk is a way of life, not in the old status quo businesses that are just trying to protect their current position of supplying an already existing demand. Government intervening in the economy won’t make it grow, one reason is because it is risk averse and will always prop up the status quo big businesses (remember too big to fail). and the other reason can be summed up in a quote by Robert Bradley Jr., “When Government tries to pick winners and losers, it typically picks losers. Why? Because the Free Market Consumers pick winners to leave the losers for Government.” 

It is not possible for Government to manage an economy because the amount of information it would need to make decisions doesn’t exist in a single place or at a particular time. This information is also constantly changing day-to-day which makes it exponentially impossible to know this widely dispersed information. Prices arrived at by individuals voluntarily cooperating and competing in a free market is the only way this amount of constantly changing information can be utilized as optimally as possibly. Prices coordinate economic activity.

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RELATED ARTICLE – Milton Friedman on Market Failure vs. Government Failure. Which Has A Higher Cost, at austrianaddict.com.

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This entry was posted on September 19, 2013 at 12:41 am and is filed under Econ. 101. You can subscribe via RSS 2.0 feed to this post's comments.

Tags: Business, Crony Capitalism, Entrepreneur, Entrepreneurship, Government, PooPourri, Price Coordination, Supplying your own Demand