Monday, August 15, 2016

Alasdair Macleod On Say's Law
Say’s law was first credited to the French businessman & economist, Jean-Baptiste Say, who wrote in the early-1800s, that: "It is worth-while to remark, that a product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value. When the producer has put the finishing hand to his product, he is most anxious to sell it immediately, lest its value should diminish in his hands. Nor is he less anxious to dispose of the money he may get for it; for the value of money is also perishable. But the only way of getting rid of money is in the purchase of some product or other. Thus, the mere circumstance of the creation of one product immediately opens a vent for other products." .. Macleod: "The basis of post-Keynesian economic stimulation assumes a breakdown between consumption and production can occur, and the correct response is for government to step in and revive failing demand. It is the favoured explanation of the 1930s slump. Obviously, Say’s law would have to be discarded. This article revisits this subject, explains where Keynes went wrong, redefines the law to include money as a good, and explains why supply-side is less destructive than demand management. Say’s law is crucial to understanding why increasing state intervention to revive economic demand cannot work, and has led us into the current crisis."
LINK HERE to the essay

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