This paragraph from Human Action forces me to check my vulgar antimilitary reflexes and seek a subtler understanding of the nature of demand and the fallacy of manufactured demand:
The moralists’ and sermonizers’ critique of profits misses the point. It is not the fault of the entrepreneurs that the consumers — the people, the common man — prefer liquor to Bibles and detective stories to serious books, and that governments prefer guns to butter. The entrepreneur does not make greater profits in selling "bad" things than in selling "good" things. His profits are the greater the better he succeeds in providing the consumers with those things they ask for most intensely. People do not drink intoxicating beverages in order to make the "alcohol capital" happy, and they do not go to war in order to increase the profits of the "merchants of death." The existence of the armaments industries is a consequence of the warlike spirit, not its cause. (c15, s9)
What did Mises make of President Eisenhower’s warning of a growing “military-industrial complex”? Did he dismiss the MIC as a left-wing bogey man? And what did Rothbard make of the statement, “The existence of the armaments industries is a consequence of the warlike spirit, not its cause”?
We Rothbardians tend to reject the standard left-wing claims about “manufactured demand” when they are hurled at private enterprise; do we fall into a similar fallacy when we imply a manufactured demand for military spending?
In one sense, no, it’s not parallel: you can get people to “support” all sorts of things when they’re not free to volunteer or withhold payment. Political polls on spending priorities falsely imply that how people choose to spend their dollars and how they want the government to spend “its” dollars is somehow the same thing.
Of course it’s not. My real-life expressed preferences, complete with internalized opportunity costs and the direct benefit of my spending decisions, are very concrete. They reveal my values based on what trade-offs I’ve actually made. My vocalized “preferences” for how tax dollars are spent is always abstract, and produces very little practical consequence for me either way.
So when the voting public howls for Osama’s head or Saddam’s head or for the head of whoever is the current bad guy, there’s definitely something manufactured about this “demand” — something orchestrated. People tend to lose their enthusiasm for war when they start to see the bill, so to speak. This suggests that their initial support for war would be similarly muted if they had to make the immediate choice of reaching into their wallets and paying for war or using that same money instead to buy beer or books, faster DSL or a bigger HDTV.
But there’s another sense in which I think I’ve been sloppy in attributing power to the malevolent MIC. I sometimes unthinkingly blame the arms dealers for the knee-jerk hawks themselves. When, in fact, the hawks are just knee jerks.
I think there’s a lot to be said for the political power of hiding the costs of policy. But this externalization of costs is really different from the manufacturing of demand. A more pacific people would not have fallen for the great neo-Con, no matter how much the books were cooked.
It is not the business of the entrepreneurs to make people substitute sound ideologies for unsound. It rests with the philosophers to change people’s ideas and ideals. The entrepreneur serves the consumers as they are today, however wicked and ignorant. (Ibid.)