In the common tongue the term “demand” simply means the needs and wants that people have. It is applied to what people decide to buy and explains business success: If your product is successful, it is because it satisfied a demand. Sales therefore prove preexisting demand, and where they happen, all is well: The economy is thriving, people are being satisfied, and the entrepreneur is a hero.
But demand is not simply needs and wants. Economists know that, but usually don’t point it out to themselves or others: Demand is needs&wants times available funds. If you have no money you have no demands, economically speaking. And if you have a lot of funds available, your demand gets amplified. As long as “demand” equals sales, your needs and wants are overrepresented in the sum of all demands in an economy.
If 20 people are willing to pay $200,000 for a massage chair for dogs, there is a high demand for dog massage chairs. If 200 people are unable to pay for a $20,000 heart surgery, there is no demand for heart surgery. These extreme examples I hope illustrate the point: your needs and wants are turned into demand by multiplying them with what you are able to pay to satisfy them. This means that the folk economic term of “demand” is sematically wrong (because it does pretends but does not actually represent what people actually need and want), and turning a blind eye to a problem: That the market tilts to serving those who have the most resources.
But the term is not _simply_ wrong. It is not just doing one stable error that needs to be rectified. The error grows dynamically the more unequal the wealth distribution becomes. With growing inequality the equation demand=needs*funds tilts to the second factor as the determining one. Needs and wants show up less and less proportionally on sales tables, viz. the common sense version of “demand”. Gentrification, for example, is proportionally worse of a problem the more unequal wealth distribution is. The problem is maximised if the whims of the few trump the needs of the many. Like if, thanks to the market, there is a 2 billion dollar video game industry, but little incentive to transport food into Jemen.
Two additional notes:
A. Note that “demand” is already an abstraction, even where we are adequately aware of how the term sees actual needs and wants through the lens purchasing power. “Demand” abstrats from all the different desires and circumstances of needs, wants, whims, whishes. And like all abstractions, it buries the specifics and is then mislead by being associated with simple paradigms and narratives, instead of being handled as an actual universal.
B. Note also that I am not saying that the free market is bad and all wealth differences should be erased; nor do I say the opposite. All I say is: let’s first acknowledge and agree in what is actually happening. Then we can have that discussion. The entrepreneur can still be a hero…
