The Futility of Utility – Conclusion

The Futility of Utility - ConclusionAny individual involved in the process of market exchange simultaneously acts as both a consumer and a producer. If the individual was not a producer, he or she would not have a product to exchange for other products in the barter economy and the individual would not have money to purchase goods under modern economic conditions. A firm is a voluntary association of individual producers who agree to fulfill the commands of managers in order to maximize their consumption. The numbers of goods produced and their prices depend on all market participants. They vote with their money, which enables them to maximize profit. The market exchange of a product for money, of money for a product, or of a product for another product can only take place if both parties will be able to gain profit from the process, not an immeasurable value of utility. If there is no external interference in the economic process, the set of goods and their prices are optimal for the existing level of knowledge and technology. Concepts such as over-production and shortages of goods and services cannot exist in a free market. If a portion of the goods of a certain producer are unsold and a certain individual keeps their savings in a personal garage, then cases such as these should be more of interest to psychiatrists than economists.

These cases may only interest economists due to the fact that a certain amount of goods and money are excluded from the exchange process. Therefore, in the first case there will be a slight increase in inflation and in the second case – a reduction in inflation. Say’s Law is always satisfied and should read more or less as follows: the supply creates a demand at a price agreed with buyers and the demand creates a supply at a price agreed with producers. It is time for governments and government officials to stop worrying about consumers whilst inhibiting producers and helping producers to the detriment of consumers. It is like an elephant in a china shop. In turning its head towards broken crockery, the elephant risks demolishing the items on the other side. Having smashed the items on the other side with its bulky body, it turns its head again and finishes off everything that is left. It must be remembered that a consumer and a producer are different sides of the same person. In the daytime at work this person may thank the government for the help given to producers and in the evening curse the government and producers on a visit to the shopping centre.
If you agree with the ideas presented in this article, you will not have to change textbooks on economic theory. It will be sufficient to simply substitute the word “utility” for “profit”. The graphs, formulae, objectives and all conclusions will remain the same. If you try to read a textbook like this, it will most likely turn out that many of the problems discussed today seem clearer and the solutions will become more apparent. For example, the topic of observing copyrights on the Internet, which is the subject of many heated debates, causes endless disputes. Many people tend to resolve the issue through additional regulation and accepting a whole set of new laws. Some have already decided, using the utility of theory of course, that observing copyrights is better for everybody rather than failing to observe them. But this is not as clear as it would appear at first glance. Both the owner of a certain text or idea and the users will seek to gain profit from the text or idea. Primarily protecting his or her rights, the owner will evaluate their own profits if the text or idea is used by them alone and if the text or idea is used by other people as well as himself or herself. If it turns out that the profit in the second case is the same as in the first or greater, which does sometimes occur, the author will decide against any protection of their rights. However, if the profit in the first case is greater, the author may spend the entire difference between the profit in the first and second cases on protecting their rights. The next events depend on the profit received by other users. If their profits are greater than the owner’s profits, they may possibly gain free access to the text or idea through measures that are legitimate, or not entirely so. This is wonderful because a higher level of profit means a higher level of production, consumption and economic growth. The free market is able to distribute consumers’ rights in the optimum manner possible. The Coase Theorem is true both for the producers’ market and the consumers’ market. When Coase wrote his famous article, one would hope that he used the words “gain” and “benefit” as synonyms for the word “profit”. Therefore, governments should eliminate any obstacles for the free exchange of rights and they should not get involved in, for example, the protection of copyrights on the Internet, especially because people who use other people’s ideas are in a worse position than the author. They incur additional transaction costs due to the need to carry out joint concerted actions. Strangely enough, this means that all users of a text or an idea, except the author himself or herself, are in need of help. If the market, for whatever reason, is not able to manage the task of distributing property rights, then the best solution for the government will be that which brings the highest profit to consumers and producers.
For many years the utility theory has served us faithfully explaining consumer behaviour. It has also enabled countless researchers to further their studies. Its great merit is that it has at least been able to protect the foundations of the classical economic school from attacks from certain followers of the Keynes Theory, for whom any unexplained occurrences can be easily explained by the irrational behaviour of people. But the time of the utility theory has come to an end. As one famous character once said: “The Moor has done his duty, the Moor can go”.