Say’s Law and Hollande posted at SHOE

I posted the following comment on the SHOE list (Societies for the History of Economics) on 25 January.

This only came to my attention a few days ago but apparently François Hollande, the President of France, quoted what he believed to have been the actual words J.-B. Say used to describe the meaning of what we today refer to as Say’s Law: L’offre crée même la demande. He quoted it because he intends to use this maxim as a guide to policy in directing the French economy. Here is the quotation, in French:

Le temps est venu de régler le principal problème de la France : sa production. Oui, je dis bien sa production. Il nous faut produire plus, il nous faut produire mieux. C’est donc sur l’offre qu’il faut agir. Sur l’offre ! Ce n’est pas contradictoire avec la demande. L’offre crée même la demande.

François Hollande – January 14, 2014 [My bolding]

This only came to my attention because of an article reprinted from The Financial Times dated 19 January and written by one of the FT’s columnists, Wolfgang Münchau.

This was the relevant para:

“Last week, we heard another Frenchman, President François Hollande, proclaiming: ‘L’offre crée même la demande’, which translates as ‘supply actually creates its own demand’. If you want to look for the real political scandal in France today, it is not the sight of the president in a motorcycle helmet about to sneak into a Parisian apartment building. It is that official economic thinking in Paris has not progressed in 211 years.”

This is significant to me for two reasons which I have discussed in past threads on this site, not to mention in my Defending the History of Economic Thought. First, economic ideas of the past are never transcended in the sense that once something better has been devised, older ways of looking at things never come back. As we can see here, older ideas retain a life of their own and may, in the right circumstances, turn out to be relevant in understanding contemporary events. With the now generally recognised failure of the Keynesian stimulus packages, the question has become, what should be done now?

There can be no doubt that the Socialist President of France, who more than anything else would have liked to have spent the French economy into recovery, but having personally experienced the consequences of trying to use Keynesian economic policies, has concluded that economies are not driven by a public sector stimulus. Hollande is therefore looking in another direction and has embraced Say’s Law as best he understands it.

You may be sure Hollande did not do this lightly. This awareness has come as the result of the bitter fruits of experience. The stimulus packages of 2009 are today’s debt and dying economies.

Which brings me to my second issue which is also something I have discussed on this website. The classical economists may well have been right that there will be no recovery until demand is again constituted by actual value adding supply. And what is interesting is that Hollande, far from leading the way in his approach to economic theory, is following in the footsteps of others who are trying to achieve a turnaround in their economies. This is again from the article in The Financial Times:

“The third significance lies in the fact that the new consensus spans the entire mainstream political spectrum. If you live on the European continent and if you have a problem with Say’s Law, the only political parties that cater to you are the extreme left or the extreme right.”

Economic policy everywhere is, according to this article, guided by Say’s Law. I don’t actually believe that is literally true, but the problem remains that while policy makers are trying to walk away from Keynes there are no longer any guideposts on what to do since almost no economics text will explain the actual meaning of Say’s Law, the classical theory of the cycle and what needs to be done to generate a recovery when the economy is in recession.

History of economic thought has its uses as economics. It is not the history and philosophy of science, it is not the discarded ideas of Dead White Males. It is part of the collective wisdom of economists that we, as historians of economic thought, do our best to keep alive.

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