Demand

As I have been reading around I have frequently encountered the assertion that "there is no limit to demand". I confess that I have not really stopped to think about that proposition before. I have kind of had an unease about it, and my comments on the lack of imagination of the very wealthy about what to do with their money reflects that. But I had not really considered the implications.

I reject the proposition. We are corporeal and we are limited by time. I suggest there is indeed a limit to demand, and I think that the existence of advertising shows that is true. We have to create artificial wants in order to create demand: and I think there is a limit on that too.

One position which follows from the idea that there is no limit on demand is that what we call demand is the same thing as supply. This again trades on the specialised use economists make of the word "demand": if demand is unlimited then they must be talking about something other than the ability to buy. I have touched on that ambiguity before in the context of the lack of demand for food when folk are starving. In the specialised sense used by economists demand does not exist if there is no ability to purchase: and it becomes divorced from what one might ordinarily understand from the word.

But what I am really considering at present is whether demand is unlimited in any sense of the word: and I think the answer is no. This is not a new idea. I think that is precisely what Marx thought of as the inherent instability of capitalism: overproduction. You see similar ideas when you look at some of the analyses provided by "greens" and those who consider we must abandon the notion of economic growth because we live on a finite planet. However those latter positions tend to focus on the supply side: they are worried about the resource limit. That is also important given a growing population: perhaps more important in the scheme of things.

Yet it seems to me that a rejection of the idea of unlimited demand leads quite naturally to a focus on more equitable distribution. For example, if all the money spent on advertising to create demand out of thin air were devoted to price reduction, then it is likely that some more of the real demand out there could be met. I wonder why that is not what happens. Genuinely wonder.

Do you have any thoughts on that? I am not able to think it through properly, as yet

Edited by FionaK - 30/8/2012, 10:13