Consumption is the enjoyment of consumers’ goods and the satisfaction of wants.
The role of capital is to advance men toward their objective in producing consumers’ goods. It allows increased production, but more importantly, it allows man to acquire goods which he could not obtain otherwise at all.
For any formation of capital, there must be first saving — a restriction of the enjoyment of consumers’ goods in the present — and the investment of the resources in the production of capital goods.
What holds people back from investing more and more into capital goods is the time preference for present goods. If man, other things being equal, did not prefer satisfaction in the present to satisfaction in the future, he would never consume; he would invest all his time and labor in increasing the production of future goods. But "never consuming" is absurd, since consuming is the end of all production.
Because capital is perishable, it must be renewed, if man wishes to enjoy the fruits of higher production. Saving must be repeated over and over, capital could break down and be replaced in whole or be repaired and kept in shape.
Man can avoid the trouble of saving and enjoy a higher consumption now. But if the capital is not replaced, production will later drop. Instead of saving and maintaining capital structure, capital is consumed. In this case, time preference has led man to prefer more present consumption, in exchange for greater losses in future consumption.
- ↑ 1.0 1.1 1.2 1.3 Murray N. Rothbard. "Chapter 1—Fundamentals of Human Action", online version of Man, Economy and State, referenced 2010-02-18.
- Consumption on Wikipedia
- Christmas and Consumption, December 2007, by Art Carden
- Production versus Consumption, March 2006, by George Reisman
- The Consumption Tax: A Critique, 1994, Murray Rothbard