ECON: It's all about demand

Brent Regan takes a classical supply-side approach in his letter of Friday, Oct. 19. Unfortunately, he’s wrong. The capitalist (at least any sane one) only takes the risk of investment when there exists a market to buy his product.

Consider: the farmer sees a need for corn. He takes a risk and plants a crop, tends it and puts it on the market. According to Mr. Regan, he deserves all of the profit. He goes so far as to say, “if you take away the profit in taxes then you remove the incentive to take the risk.”

There are two problems with that view. First, the farmer uses public roads, fire protection and all the necessities that society provides, taxes pay for those things. More importantly, if there is no market for his product he is not taking a risk the farmer is throwing money down the drain.

Think of the capitalist who invests in mass-producing buggy whips. When he runs out of money there are no jobs and contrary to Mr. Regan no one suffers. Only if the consumer has a desire or need for a product is there an opening for a capitalist to create a job. But, the customer comes first.

In my experience opening a new business, the first and most important consideration is market research. If there is no market, capital just disappears. When we expanded to a second location we researched whether there were enough bowlers who would use the new lanes and where in town to locate the new business. But, and this is essential, the first thing we considered was how many bowlers would join our leagues. Customers came first in any investment.

The supply-side approach simply doesn’t work. Without demand supply simply leads to capital being wasted. Profit does not exist without consumption.

JEFF BOURGET

Coeur d’Alene