Over at Macrobusiness we find the quite accurate statement by Rumplestatskin that “Say’s law seems to be making a resurgence”. He does not regard this as a positive step but nevertheless he does take note that there are a few of us around who seem to look on this development with favour. He even crosses to a post of my own which really only disappoints since nothing I have written seems to make the slightest dent. Such is life.
And to tell the truth I’m not all that keen to get into this yet again. How stupid these people must believe our ancestral economists to have been to make such obvious blunders that even they can see them. The things they say economists used to believe are quite incredible. But I am drawn back in because I received in the post today a book I had ordered that I didn’t even recall having asked for but how wise I was to make the purchase. It is a reprint of John McVickar’s Outlines of Political Economy, the first American text in economics, published in 1825. And the very first bit I read was about value added and the nature of the production process, the very thing I had been teaching my class today, having first noted that nothing like this is found in any textbook of the modern era. Economic theory has so regressed in the past 200 years that we are now more primitive than the mercantilists that Adam Smith used to make fun of. We disguise our ignorance by putting it all into maths.
Mt Statskin, of course, has no idea what Say’s Law is about so goes about comprehensively demolishing a construction of his own devices. But if he is ever to work out what the real meaning is, what he needs to do is recognise that the following two statements are 100% compatible and if you understand Say’s Law, 100% valid:
. a general glut is impossible
. recessions are not uncommon and when they occur last a long time.
Let me therefore quote a bit from Mr McVickar which seems relevant to economics today. Were he to have advised our political leaders it might have been possible to constrain their headlong rush into useless, unproductive spending, and we might have been spared the many years in the wildnerness we are about to endure. This is McVickar writing in 1825 (pages 167-68):
It is a fallacy and an absurdity to suppose that production can ever be encouraged by a wasteful consumption of the products of industry. A man is stimulated to produce when he finds a ready market for the produce of his labour, that is, when he can readily exchange them for other products. And hence the true and only encouragement of industry consists, not in the increase of wasteful and improvident consumption, but in the increase in [value adding] production. (Italics in the original)
Mr Statskin, whose beliefs are as fallacious and absurd as the rest of his crowd, seems to believe that such views represent an “ideology, because these writers cannot translate their beliefs into practice.” Oh but we can. Try this for some practical advice. Governments must reduce their spending, balance their budgets and never attempt to revive an economy from the demand side. Seems practical enough to me but no doubt everything Mr McVickar is trying to explain will fly right over Mr Statskin’s head. But nevertheless, Say’s Law will continue its resurgence whether he likes it or not, whether he understands it or not.