Thursday, February 12, 2009

Menger on Requirements

This post is part of a series exploring Principles of Economics by Carl Menger.  The following explores content from chapter 2.

Previously in this series: Menger on Human Drives and Human Nature

A person's requirements, as defined by Menger are

those quantities of goods that are necessary to satisfy his needs within the time period covered by his plans.

This term is somewhat analogous to "demand".

He notes that even savages plan ahead for future needs. If a hunter has enough meat to eat for today, but does not have enough meat salted in store for him to feel sufficiently secure, then he does not have his requirements met.

The more advanced an economy is (that is the longer its chains of production are), the further in advance do producers plan in anticipation of the needs of their consumers. Menger demonstrates with one of his many well-chosen examples:

When we are still wearing our heavy clothes for protection against the cold of winter, not only are ready-made spring clothes already on the way to retail stores, but in factories light cloths are being woven which we will wear next summer, while yarns are being spun for the heavy clothing we will use the following winter.

If an isolated economy has plenty of heavy clothes in its closets and stores for the current winter, but fails to spin yarn for the new coats that might be needed the following winter, then that economy is not meeting its requirements.

Next in this series: Menger on Foresight

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