Once someone gets Say’s Law, the reality of what is going on in an economy becomes so obvious that it is impossible to go back to the pallid and utterly inadquate nonsense that passes for modern theory. The following is a letter I received the other day from someone I have been corresponding with for a while, and after that is my reply to him.
Hope you are well. Yes I read (and watched) all you have given me. [I even read (and bought) your conversation with Gregoire Canlorbe ‘Say’s Law, between Classical, Keynesian and Austrian Interpretations (2016)’ (from De Gruyter)].
I read your ‘200 years of Say’s Law (2003)’. Another thought provoking gem.
Back in the early 2000s I undertook 3 and a half years of bible college. I learnt the importance of hermeneutics and exegesis. Today, I am not surprised Economics scholars also struggle with proper interpretation of another author and can fall into eisegesis. The four scholars, arguing against Say’s Law, could only attack the many straw men (eg. ‘supply creates its own demand’, or Say’s economy is barter-only economy, or Say’s Equality, or change Savings’ definition) and reduce its meaning, or, read something of Say’s Law which wasn’t really there and added their own meaning (eisegesis). Misinterpreting is common, unfortunately, across disciplines as you well know. Let me illustrate my two theological favourites, however. If you can you find anywhere in the bible where it says “Money is the root of all evil” or “The truth will set you free” I will happily give you/anyone $15,000 cash and clean one’s house for a year! The point is: if we omit the few words before these popular phrases then the originator’s point is changed and COMPLETELY lost. Sound familiar?
In the tradition of Hayek’s name calling of some scholars to be ‘quasi-scientific’ (p 20) I thought I could respectively/humbly/comically generally refer to those ‘against’ Say’s Law as:
1. ‘One-side of the ledger Economists’: Aggregate Demand (and full employment) is their God, and ignoring the complexity of the supply side is welcome by their herd. Not sure why some Economists think they can ignore one side of a transaction when professional Accountants get fired for it.
2. ‘Unsustainable-loving Economists’: They are at peace to see government spending on unproductive consumption even if it alters the dynamics of the economy and reduces its viability to stand on its own feet.
3. ‘Second-rate Economists’: It is written “All things are [permissible], but not all things are beneficial” Amplified version. Maybe most complacently see policies in action and gravitate to think that must be the best option. Just because a policy is enacted doesn’t mean it is the most beneficial. Most don’t stand for a strong economic view- so they fall for any.
4. ‘Ignore the opportunity-cost-type of Economists’
5. ‘Short term-ism Economists’
6. ‘I missed school that day they taught ‘the cause-and-effect principle’ Economists’ (or ‘Symptom-is-a-cause Economists’)
7. ‘Blinker Economists’: They focus on only that scope of economic activity which supports their limited explanation.
8. ‘Soft-love loving Economists’… as opposed to hard-love=real love (but you get the idea).
I asked my successful business owner brother-in-law how much he has in idle cash (hoard). He answered it was a lot less than 1% because “you try to put all your money to the best use in every way”. I’m sure if I asked my trader friends what makes them buy and sell a specific trade I am sure they would respond “there is always a reason” rather than Littleboy’s reference of Keynes’ “…people, typically investors, spontaneously change their mind…” (p 160). Ask any banker what they do with savings deposits and they definitely do not lay waste any dime above the ratio reserve law. And I remember asking a wealthy person once as to what keeps him going? The context was why he wants to keep making more and more money. I will never forget his response. “Choices! I can choose to work when I want, or not work when I want” was his reply. Not sure why Keen says capitalists build up money for the sake of it. There is always a reason and it eventually comes back to enriching their lifestyle in some way – whether buying larger home, braces on kids’ teeth, buy another business, securing their wealth/freedom more concretely etc. Lifestyle is the end- not money. Finally, I have been working in the financial sector for the last 4 years. Not sure why this sector is the leakage from the expenditure/circular flow model. We are all charging fees and employed and spending our incomes… maybe we can add ‘Different planet Economists’ to the above list.
Recently I threw a simple question at my demand-worshipping colleagues: “Name one thing you can spend money on that hasn’t been produced?”. They could only resort to the usual retorts: “you have weird economic ideas” preceded by “spending will always be the driver of the economy”.
I am now off to read your 3rd edition Free Market Economics. I only read about half of the 2nd edition nearly a year ago preparing for my anti-Keynesian essay. I have read a quarter of Smith’s Wealth of Nations, but, you are right, these can be difficult to read- I need a break.
All the best Steve and thanks for a wonderful discourse. I am still totally addicted to this issue. Chat soon.
This was my reply.
That is the most original and possibly insightful non-strictly-economic explanation of Say’s Law I have ever come across. Looking at Say’s Law within the framework of the theory of knowledge is something I do not think I have come across before and may never have been previously done. Also not having come across eisegesis before (and neither has my spell check apparently) I can only emphasise that it is a very useful conceptual distinction that really does help get to the heart of the issue. I, of course, share your frustrations in trying to make others even become aware of the problem. When you ask them to name a product they have bought that had not already been produced (which naturally implies a very lengthy structure of production that must go back a considerable distance in both time and space) the only reaction you are likely to get is that even if they don’t know the answer themselves, someone else does because how could it be possible that you have asked something so penetrating that the entire company of modern economists have no answer for. But they don’t have an answer other than to say that buying something will mean that a replacement item will have to be produced to put on the shelf so it will encourage more production. Except that this new order, if there is a new order, can only be filled if the producer had already made the decision to produce this additional replacement item long before you bought what you bought. But for them to go there would mean they had already seen the problem and understood that it is not demand that causes the supply, but that supply is created in anticipation of some future demand. So you will just have to keep teasing them just for your own satisfaction but do not be surprised if the scales fail to fall from their eyes anytime soon (I hope I have not mis-used the metaphor).
I also found your classification system astonishing and accurate. It is also funny but finding it so on the money, its ironical intent seems more serious than anything. The list truly does begin with the implied words, “Look stupid . . .” but where you go from there I do not know. Well actually, where you go is you write this up in some more polished form and try to get it published. There is no Journal of Irony and Economics but I would not want you to mess with the vision you have shown here or try to diminish your satirical intent. You should just expand what you have written and see what follows.
Anyway, we can discuss when you come to visit which you MUST do if you have the time. I will also pass on a copy of my Economics for Infants discussed here on my blog:
As I mention, it is the only children’s book that incorporates Say’s Law, which is indeed an actual feature of the text and the fantastic picture that comes with it.
I do look forward to catching up, but as a kind of cautionary note before we meet I will just say that we had a School retreat the other day where at the dinner we were asked to come as our favourite literary character and I came as the much maligned and mis-understood Edward Casaubon.
With kindest best wishes