The Duality of Say’s Law
[This term paper was originally written for ECON 2110 W - History of Economic Thought]
The “Duality” of Say’s Law
A Restoration of J.B. Say’s Original Intentions
I. INTRODUCTION
The concept known as “Say’s Law of Markets” has been challenged many times over the centuries but the actual theory remains to be disproven. During every economic depression, businessmen and economists proclaim it null due to “underconsumption,” “overproduction,” and the presence of “general gluts.” Jean-Baptiste Say, a laissez-faire economist who wrote on the subject of gluts casually and without revolutionary intentions, is traditionally understood to have proved these phenomena impossible. In turn, history is supposed to have proved Say wrong, and his law is now widely considered refuted. The alleged law, however, has only been attacked on the terms of its hecklers, and has always been straw-manned as a vulgar apologia. Economists act as if there are two Say’s Laws; the first, (Say’s original insight) arguing that, provided a functional free market with sound money, general gluts will not occur; the second (a vulgar creation considered to be the “disproven” Say’s Law) declaring that general gluts are always and everywhere impossible.
Say’s Law has been challenged, among others, in two famous episodes, first by Reverend Thomas Malthus in 1820, and more famously by John Maynard Keynes in 1936. There can be no denying that general gluts did appear in 1816-1823 and in 1929-1941; doing so would be to advocate the vulgar Say’s Law. The crucial point is that prolonged gluts were not caused by the free market, but by the rampant government interventions in the market during these historic episodes, acquitting Say by default. Both detractors observed largely circumstantial evidence which provided the impetus for them to attempt pure “theories of underconsumption” contra Say’s Law. They observed that there were gluts, but failed to fully comprehend what had caused them. Both Malthus and Keynes were attacking a straw man, blaming the free market for the problems of government, and ironically appealing to the latter to fix the former.
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Adam Smith’s Capitalism – Positive or Normative?
by Ryan Safner
[This essay was originally written for ECON 3462 - History of Economic Thought]
Adam Smith’s classic argument for capital accumulation is not a positive analysis of a functional market economy, but instead a strong normative account of his preference for investment over consumption. While Smith is widely hailed as the father of economic science, it is commonly understood that he vaguely mixed positive descriptions with value judgments. His magnum opus, The Wealth of Nations, functions as the economist’s bible, written archaically and vaguely enough for economic historians to draw numerous contradictory exegeses. Many of Smith’s more regrettable or idiosyncratic theories on political economy can be explained by his ethical interjections, which in turn reflect his Presbyterian background. The most vigorous preference he displays is for frugality and thrift over gluttony and conspicuous consumption. This ethic puts into perspective his confused labor theory of value, specifically the differentiation between “productive” and “unproductive” labors. The classical conundrum of the diamond-water paradox that he attempted to grapple with was but a mere illusion spawned by these potent inclinations. The epitome of this bias is his otherwise inexplicable defense of usury laws which blatantly violates his alleged policy of “lassiez-faire.” Adam Smith’s Wealth of Nations elucidates many truths about the free market economy, but these are unfortunately buried underneath mountains of vagaries and ethical interjections.
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People often use the collective term “society” as some hypostatized entity without realizing it. Let’s take a look at some common examples:
- “You can’t blame x for committing crime y, it’s the fault of society.”
- “We need to do z for the good of all society.”
- “Society owns all the common land, resources, property, etc.”
- “The rights and interest of society trump individual concerns.”
- “Society is cruel, bigoted, prejudiced, uncaring, racist, homophobic, excessive, dysfunctional, materialistic, dull, and/or crass.”
“Jobless Recovery” and Common Jobs Fallacies
“Economists” and cable TV commentators have been tossing around the idea that we are experiencing what they have termed a “jobless recovery.” Under this theory, we are able to experience economic growth (defined as an increase in real GDP) yet have no growth in jobs. I wonder what else we can expect to accompany this phenomenon, perhaps more irrational logic and noble lies from these soulless priests on such educational television. This oxymoronic concept defies all rational economic theory: how can you have a recovery without job creation – or even more fundamentally (and relevant), how can you possibly have a recovery with additional job loss?
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What is law? What is justice? What makes a “good law” and what is a “bad law”? Are we obliged to follow a bad law? Are we obliged to follow law at all? Is disobedience moral? Is law necessary for society? What would the law in a free society look like? These are just some of the questions that I’ll answer in my Law & Justice series.
In Part I: Ethics and Natural Law, we’ll derive the origins of law by examining human nature and the theory of natural rights, as well as form a simple code of ethics for a theory of law to abide by.
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In Defense of [Austrian] Economics
“The habit of talking and writing about economic affairs without having probed relentlessly to the bottom of their problems has taken the zest out of public discussions on questions vital to human society and diverted politics into paths that lead directly to the destruction of all civilization…Our contemporaries consider that anything which comes under the heading of Economics…is fair game to the unqualified critic….[E]ven those whose activities have, notoriously, often led to failure and bankruptcy, enjoy a spurious prestige as economists which should at all costs be destroyed…It is time these amateurs were unmasked.” Ludwig von Mises[1]
First Impressions of Economics*
What do you think of when you hear “economics?” Perhaps you imagine a middle-aged man with thick-rimmed glasses and a Ph.D pointing to graphs and a long list of financial equations. Or maybe you think it’s just the wicked “science of money.” Odds are, if you pictured something like that, you’ve got a lot of company.
Economics has a bad reputation – it is mind-numbingly boring, filled with incomprehensible jargon, graphs of a bunch of curved lines, a morass of equations, and it seems the only thing all economists are always concerned with are “the latest numbers.” The average person is overwhelmed by the complexities, but in addition, they may also feel a hint of universal awe and wonder–The thought that “these things must be incredibly important!” may linger among your distaste. Of course, we’re all aware that topics like unemployment, wages, and taxes certainly do affect all of us, and we all have some conception, however vague, of the forces of “supply” and “demand.” We know that these things are important, but due to their seemingly complicated nature, it’s probably best left to those who can comprehend their complexities (and withstand their dullness!). Economics has become applied mathematics, and the economist is merely a glorified statistician.
But it is all a farce, a clever ruse! Economics is both tremendously fascinating and commonsensical so that the average layman can appreciate it!
