A second look at a common economic fallacy 

It is often believed that consumption is the driver of production in an economy as opposed to production being the driver of consumption.

In this short analysis I will cover why production is the driver of consumption.

While it is understood that consumption in an economy is the driver of demand, it is misunderstood that a healthy economy is consumption based and not the result of production.

Measuring consumption is much easier than productive increases in the economy and this is likely why we do so, but

Consumption in an economy is only the result of production.

In the modern economy, acts of printing money (Increasing the monetary supply) do often have immediate short term consumption increases if this newly created money is in the hands of consumers and not producers.

As it is seen that these short term consumption increases jump start economies in distress, it is misunderstood if you view consumption as the driver of the economy.

Production always precedes consumption just as demand always precedes supply.

Demand is often misunderstood in this realm as well in that we didn't know we 'needed' (Demanded) smart phones, but this is a surface level examination.

The demand for greater technology is always there, as technology helps to improve our efficiency in life and increase our perception of wellbeing. 

In this, 'Demand' precedes the 'Supply'

This can confuse people when we move on to examine an economy and measure its driver as consumption.

Consumption is earned through an economies increase in production, just as we are unable to 'consume' a new smart phone until it is produced.

This common misunderstanding has lead many modern economists to focus on the wrong side of the equation, and as a result, excess money can be pumped into the consumption side rather than increases of production.

There is most definitely a balance between 'short-term' and 'long-term' actions as we live day by day, moment by moment but also plan to live fairly long lives.

In this, production increases require long term inputs where the benefits of increasing production in an economy are realized long term for the most part.

Short term stimulus to increase consumption can jumpstart a shocked economy, but these are not long term solutions as there is little productive increases. People must return to production, and in doing so will have sustainable jobs that provide for long-term consumption.

Just as everything in life, there are consequences, and short-term thinking doesn't fair well long-term.

Just as thinking and acting too long term does not fair well moment by moment.

Economic suffering in the near term is visible and can take precedence over focusing on increases in production.

Short-term thinking and actions are not long-term solutions.

Examination on the actions of consumption stimulus vs productive stimulus:

Consumption stimulus that is created or distributed in some way to consumers most certainly does increase short-term spending.

While the result of that can be increased revenue for businesses, this does little for the long-term problem of these people need productive jobs in an economy to thrive.

Productive market based jobs produce their own revenue as desired from a market economy, and as a result, a sustainable long-term provider of consumption for the employees is built.

This is a self repeating cycle as one persons spending is another persons income, and we have a long-term sustainable solution that provides income for people to consume, and incentivizes production first over consumption.

The modern misconception is that people can consume without producing.

To build a thriving economy, production must be favored first and prioritized over short term consumption. 

- Chalk