Peter Reavy

Not enough to produce satisfactory soap

Posted in Uncategorized by Peter Reavy on January 5, 2012

From this paper on Joseph Schumpeter:

Besides innovating in production, entrepreneurs often had to change
habits of consumption. Confronted with growing inventories, industrialists had to convince reluctant customers that they actually needed the new goods. Here Schumpeter, unlike most economists, places heavy emphasis on the role of marketing in mass consumption, and in economic growth itself. “It was not enough to produce satisfactory soap,” he writes; “it was also necessary to induce people to wash—a social function of advertisement that is often inadequately appreciated.”

From the perspective of producers and investors, it did not matter
whether new wants were real necessities. “Needs,” Schumpeter observes, “whatever they may be, are never more than conditioning factors, and in many cases mere products of entrepreneurial action.” Undeniable needs such as food, clothing, and shelter do not, by themselves, “set the capitalist engine into motion.” This is why “economic development (capitalist consumption included) has never been conspicuous in the countries which to the observer seem to be most lavishly supplied with needs.”

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