Written by Derryl Hermanutz
Christopher Wesley wrote an analysis article about the role of the consumer in a free economy 15 May 2014:
"The Mengerian approach... emphasized the importance of individual human action resulting from the desire to satisfy felt needs and the relationship of those needs to the external world."
That presentation is somewhat incomplete and the following is offered to extend the discussion.
Hence the ideal of "the sovereign consumer", and the poor wee capitalist contorting himself into knots striving to serve consumer needs and wants. That delusion was permanently laid to rest by John K Galbraith's 1958 book, The Affluent Society, where Galbraith demonstrated that businesses design products that they can sell at maximal profit, then "create" markets for that junk via the professionalized brainwashing campaign known as "advertising".
Akerlof, Spence and Stiglitz received the Nobel Economics prize for their work on asymmetrical information, the selling of "lemons" by sellers who possess a lot more information about what they are selling than do buyers. Today mass market consumers purchase a steady stream of unhealthy, unnecessary crap that they would not need, want or buy were it not for the 24/7 propaganda of ubiquitous advertising by corporate producers who either don't care or don't want to know whether what they're selling is good or bad for the consumers. Maybe it's not their job to know or care.
But don't try to hide the causation (corporate producers aggressively "sell" their products; they do not "offer them for sale") behind the myth of the sovereign consumer driving production. Producers decide what they will produce, then hire professional brainwashers to create a market for that stuff.
So yes, it is consumer values that determine consumer purchases, as Menger recognized. But 20th century capitalism and politics learned how to make consumers "value" whatever corporations and politicians wanted to sell them. The myth of the sovereign consumer is as delusory as the myth of the informed voter. The public is systematically propagandized by the corporate state, both in its private sector arm and its public sector arm.
"The people" do not recognize reality or the truth when it is stomping their face into the dirt. The people "believe in" the myths, because the myths are infinitely more pleasant than the reality.
Government by the people and free markets are comforting myths to disguise the reality that the people are governed by rulers and markets are owned by corporate oligopolies.
For a couple of decades after WWII, when corporate America owned the only productive infrastructure that wasn't blown to smithereens, the US almost seemed like a free market democracy. But once Japan and Germany came back online, the democratic illusions gave way to the hard reality that concentrated wealth and power, not "the consumer" and not "the voter", exercise economic and political sovereignty.