In re Waffle Street, Jimmy Adams has himself put up a comment in the comments thread.
While Steve may be unwilling to take an ounce of credit for it, allow me to publicly recognize his “little red book” as being the most influential of all the economic literature that I referenced in writing “Waffle Street.” Say’s Law is the transcendent and ironically, least appreciated, principle of economics. And no one explicates it better than Prof. Kates. Thanks again, Steve.
Why is it my “little red book”? That’s why. The most astonishing part is that around once every decade or so some economist ends up stumbling onto Say’s Law and realises what it actually means and then tries to tell everyone else. The list is not that long, but includes Benjamin Anderson, Henry Hazlitt, William Hutt, Thomas Sowell, Art Laffer and Murray Rothbard. Once you see it, everything about how an economy works suddenly changes shape, and most importantly, Keynesian forms of economic management seems utterly insane. No one who understands Say’s Law is ever surprised that some Keynesian stimulus didn’t work, or that the rise in public spending ever does anything other than pull an economy down. And each of us has tried to explain as best we can why Say’s Law is so important but no one gets it. They don’t even get it to the stage where they could really answer that I see what you mean but I disagree. They do not even understand this enough to be able to explain what it is they disagree with. If you think that “supply creates its own demand” covers it, you have to ask yourself why no classical economist ever said it. The phrase comes from a book published in 1933 by a critic of Say’s Law which was then purloined by Keynes in the General Theory published in 1936. Say’s Law is not even all that hard to understand: all economic activity is driven from the supply side; none of it is driven from the demand side. What is true for an individual product is not true for the whole economy. If there had actually ever been a single Keynesian success story, there might be some case for the continuation of Y=C+I+G in our texts. But a Keynesian stimulus has failed, and failed spectacularly, on every single occasion it has been tried. Yet Keynesian macro persists in our texts. If you would like to understand the entire sordid story, my little red book will explain it, and is also the only place you can find out how the Keynesian Revolution came about.