Say’s Law and economic revival

Here’s an article worth your time: There Will Be No Recovery Without Production. To understand what needs to be done to get recovery going, you need to start with Say’s Law. Or as Richard Eberling puts it, you need to understand that ‘Our Ability to “Demand” Arises from Our Capacities to “Supply”’. This is from the text:

What the government lockdown policy response to the coronavirus has highlighted is the fundamental and inescapable truth of what the 19th French economist, Jean-Baptiste Say (1767-1832), called “the law of markets.” Contrary to the reawakened Keynesian mindset that all of our economic troubles are “aggregate demand failures” arising from a lack of spending due to people not having enough money in their pockets, the dramatic collapse in production, the massive rise in unemployment, and the falling off in people’s spending on final goods and services are all due to governments shutting down the “supply-side” of the economy.

As Jean-Baptiste Say, and those who followed his reasoning, argued, there is always work to be done, since there are always human wants that are as yet not fully satisfied; and as soon as one such human want has been significantly fulfilled to one degree or another, the human mind looks ahead and imagines other things that seem attractive and desirable to have. As a result, work merely of different sorts is there to be taken up in even greater amounts.

People may satisfy their wants and desires in one of two ways, Say explained. They may directly work and produce the goods they want for their own purposes. Few of our desires, however, can be fulfilled through our own personal efforts. So, the other way is to work and produce something that others might consider worth buying from us in exchange for what they can offer in trade; that is, goods that we want that either we do not have the ability to make for ourselves or only at higher costs than at which that potential trading partner can sell them to us.

There was then this I came across a couple of weeks ago: The COVID Stimulus is the Government’s Latest Rejection of Say’s Law. This is the final para:

Say’s timeless contribution to economics reveals that no matter what levers are pulled by the fiscal and monetary authorities, stones will not be turned into bread. The longer this economic shutdown lasts, the more critical it becomes to end it.

All this lost economic knowledge, available only on the fringes. The point is, if you hear any political leader discussing the need for an economic stimulus consisting of increased public spending, however bad things have been so far, you ain’t seen nothing yet.

1 thought on “Say’s Law and economic revival

  1. Pingback: Say’s Law and economic revival - The Rabbit Hole

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