The Economist published my letter!

In the letters section of this week’s Economist

You don’t Say

The term “Say’s Law”, (Economics brief, August 12th) was invented by the American economist, Fred Taylor, and popularised in his introductory text, published in 1921. Moreover, the phrase “supply creates its own demand” is not classical in origin, but was first used in print by another American economist, Harlan McCracken, in a text that John Maynard Keynes is known to have read while he was writing the General Theory. Jean-Baptiste Say neither invented the concept nor was he its most staunch defender.

Associate Professor
School of Economics, Finance and Marketing
RMIT University
Melbourne, Australia

And while you may think this is purely a factual statement about the construction of a book that was published more than 80 years ago, it is actually a suggestion that the mythological version of how Keynes came to write his book is many miles short of the truth. And as for the contents of the book, that falls even many miles shorter not just of the truth [how ridiculous to have argued that classical economists had no theory of involuntary unemployment] but of an understanding how an economy first goes into recession and then recovers.

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10 Responses to The Economist published my letter!

  1. C.L.

    Steve, how would you rate The Economist these days? Used to read it.
    Is it good or a climate/Keynes/kookball mess?

  2. Tintarella di Luna

    Steve my now totally leftist offspring used to call The Economist a conservative publication

  3. Blind Freddie

    Typically, communism statrs with a civil war and.ends with a civil war or anarchy, so why is Keynes economic theory held in such reverance?


  4. RobK

    The Economist was fortunate to have a comment from a competent source giving it an appearance of bona fide. I suspect that for many readers the comment will go right over their heads, unfortunately. None-the-less Steve, keep up the good work and take solace in the fact that the ignorance would be even greater but for your effort. I appreciate your efforts.

  5. Philippa Martyr

    History is bunk, Steve. I am constantly dismantling nonsense of this sort in my field.

    Marvellous novelist Josephine Tey called it ‘Tonypandy’ in marvellous novel The Daughter of Time (the one about how Richard III wasn’t guilty of murdering the Princes in the Tower).

  6. Sparkle Motion

    Does this count as a high impact publication? Congrats!

  7. H B Bear

    Well done Teh Ecommunist. We now return you to your usual programming.

  8. Ray

    There we go again, perpetuating a myth.

    Jean Baptiste Say never wrote the line “supply creates its own demand”. That is a creation of Keynes, or more accurately a deliberate misinterpretation of Say designed to counter the notion that there could not be a general glut. The absence of a general glut means that involuntary unemployment is not possible, thus obviating the need for demand intervention proposed by Keynes in the General Theory.

    However, Say clearly accepted the notion of involuntary unemployment given that he wrote that “a glut can take place only when there are too many means of production applied to one kind of product and not enough to another”. In other words, there can be a glut of labour only if there is a shortage of other products, which means gluts can occur in individual product markets, such as involuntary unemployment, but there can be no general glut.

    Thus it is a shame that Keynes chose to misstate Say’s Law given that it does not run contrary to his General Theory. Yet it is equally disappointing that modern economists, such as Kates, continue to follow Keynes’ lead in misconstruing Say’s Law.

    Indeed, none of the classical economists are quoted as saying “supply creates its own demand”. The closest would be Mill who wrote that “nothing is more true than that it is produce which constitutes the market for produce, and that every increase of production, if distributed without miscalculation among all kinds of produce in the proportion which private interest would dictate, creates, or rather constitutes, its own demand.”

    This brings to mind the old story of Philip II of Macedon’s message to Sparta, “if I bring my army into your land, I will destroy your farms, slay your people, and raze your city.” The Spartans are said to have responded with the now famous laconic line of “If”.

    Perhaps Kates could do with a lesson from the Spartans. “If distributed without miscalculation” can only lead us to the conclusion that Mill envisaged a world where markets could potentially fail to clear, which would lead us inevitably to a breakdown of Say’s Law and to involuntary unemployment.

    Today, most economists accept that gluts can and do occur. More importantly, it is self evident that classical economists such as Mill and Say also recognized the existence of gluts and were not as ideological pure as either Keynes or Kates would have us believe.

    There is no question that Keynes erred in his misrepresentation of Say’s Law. Yet this is not his biggest mistake. That trophy deserves to go to his belief in diminishing returns to capital, a fundamental error he shares with Karl Marx. In this context, the incessant carping on Say’s Law misses the real problems with the General Theory and does a great disservice to Jean Baptiste Say.

  9. sdfc

    Typically, communism statrs with a civil war and.ends with a civil war or anarchy, so why is Keynes economic theory held in such reverance?

    Keynes wasn’t a communist.


  10. sdfc

    but there can be no general glut.

    In a barter economy. Keynes was talking about an excess demand for money.

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