I wonder how many economics students would have even heard of Say and his famous law simply said as” Supply creates its own demand”.
Alasdair Macleod has a piece on Say and how his ideas were misinterpreted to push government intervention:
One of my regular readers has raised the important subject of Say’s law, the denial of which both Keynesian and modern monetarists are emphatic. They need this fundamental axiom to be untrue to justify state stimulation of aggregate demand. Either Say’s law is right and state intervention is economically disruptive, or if it’s wrong modern economists are right to ignore it and progress their science beyond it.
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.
Some might ask, well how does this matter? It actually matters a lot. When we talk of economic policy, there are two schools. One says we should rely as less as possible on govt and other sees role of govt as critical in achieving economic objectives. The first school emerged as a result of contribution of several scholars along with Say. As these ideas continue to shape out discourse, these ideas and their nuances are as critical as any.
Most of us can hardly contribute to such debates as we hardly know history of economic thought. Endless pieces are and can be written on whether interest rates are high or low. But there are hardly people around who can go deeper into history of thought which move these very interest rates.
But then the French themselves ignored Say big time and have looked at govt intervention at all possible times.So how do we expect others to remember?
It is particularly sad that France has turned its back on Say’s wisdom, along with her other remarkable nineteenth century French economists, opting instead for a lethal cocktail of Marx and Keynes.
Denying the reality of Say’s law became the foundation for government and central bank policies of today, worldwide. In that denial lies the principal reason these policies are demonstrably failing.
For whatever today’s economists and economics make us believe, much of thinking was already developed way back. All we have done in recent times is to do away with the thought process which was really well argued and debated and replaced with a language that no one can understand.
Economics profession is a prisoner of its own device…