I have been following with much interest the discussion on "why teach  
the history of error?". I had intended to contribute by adding to this  
discussion no more than the following quotation from William James:  
  
"You can give humanistic values to almost anything by teaching it  
historically. Geology, economics, mechanics, are humanities when  
taught with reference to the successive achievement of the geniuses to  
which these sciences owe their being. Not taught thus, literature  
remains grammar, art a catalogue, history a list of dates, and science  
a sheet of formulas, and weights and measures."  
  
What I would have then said was that economics, when taught in the  
absence of its history, is a quite barren subject. Without some study  
of the history of economics, students are being short changed on what  
ought to be seen as a very important part of their education.  
  
What I was not going to say was what I felt more deeply. That is that  
there is a very large amount to be learned in even thinking about the  
ideas we have discarded. More importantly, I was not going to say that  
at least in some instances, there are ideas that have fallen by the  
wayside which may even be more valid and useful than the ones we find  
in our textbooks today.  
  
Mohammed Gani by citing my book in his criticism of Say's Law has  
brought me into this discussion to pursue, briefly, that last point.  
  
My own introduction to Say's Law may be instructive. It came about  
because I was reading John Stuart Mill's Principles (1848) and came  
across the best refutation I have ever read of Keynes's General Theory  
(1936). Not only did I find the arguments so compelling that I stopped  
seeing myself as "Keynesian" virtually from that moment, but I also  
realised that the arguments on both sides had a long history and had  
been debated for more than a century before Keynes wrote. Keynes  
overturned an older basis for economic thought with another ancient  
economic principle, but one which had been roundly rejected for more  
than a century at the time the General Theory was written.  
  
It also led me to the issue which was to be the subject of my thesis,  
published in 1998 as Say's Law and the Keynesian Revolution. The  
series of essays published in 2003 and cited by Mohammed Gani was  
intended to be an even-handed assessment of where Say's Law stood  
exactly 200 years after the publication of Say's Treatise. But if you  
want a full-scale defence of Say's Law, you should go to that earlier  
work.  
  
And there you will find the following points (amongst many others):  
  
Say's Law was the base framework for "macroeconomics" from the start  
of the nineteenth century through until the publication of the General  
Theory in 1936. Virtually every mainstream economist during that time  
accepted Say's Law, not passively, but actively, formally and  
explicitly. The list includes, but is by no means restricted to, all  
of the following: Say, James Mill, Ricardo, Senior, McCullough, John  
Stuart Mill, Marshall, Jevons, Walras, Wicksell, Haberler and Hawtrey.  
  
No one called it Say's Law, a phrase from the 1920s. The related  
propositions of Say's Law were, instead, the near-universally accepted  
basis for the theory of the cycle and were seen as essential to an  
understanding of unemployment. As a series of concepts, it was basic  
textbook theory and was discussed in just about every introductory  
text on economics published right up to the 1930s. Say's Law was thus  
not some hazy long-abandoned theory of the early nineteenth century.  
It was the absolute mainstream right up until the moment it was  
displaced by the economics of the General Theory.  
  
The phrase "supply creates its own demand" is not an adequate  
interpretation of what those who held Say's Law to be true had in  
mind. Basing criticisms of Say's Law on those words will ensure that  
even if the argument satisfies the author, it will have no  
relationship to the meaning of the Law of Markets held by those who  
thought it was valid. For those interested, the next issue of the  
History of Economics Review, which I believe will be released this  
month, contains an article of mine on this very question: "'Supply  
Creates its Own Demand': A Discussion of the Origins of the Phrase and  
of its Adequacy as an Interpretation of Say's Law of Markets".  
  
The development of Say's Law, moreover, had nothing to do with trying  
to understand barter economies. Since Lange and Keynes that is how  
Say's Law is frequently taught but it is not right. Say himself, in  
his own discussion, was dealing with the problem of a shortage of  
money and whether that would be an adequate explanation for slow  
sales. Discussions of the business cycle, built on Say's Law, never  
intimated that it was an abstraction without real world application to  
a money economy. Those who wanted to undermine the Law of Markets may  
have seen this as a useful line of attack, but it has nothing to do  
with its actual meaning as an economic principle.  
  
Let me end with this. For myself, if you want to study the history of  
error, you need go no further than any modern macroeconomics text  
based on C+I+G+X-M or IS-LM or AS-AD, which are all theoretical  
developments derived from Keynes's 1936 attack on Say's Law. It may be  
the mainstream but if you see things the way I do, descriptions of  
reality based on these models are one error piled on another. One day  
all of these may be added to the boneyard of discarded theories (is  
any theory immortal?). Right now, however, they are the theoretical  
basis for quite a good deal of economic policy, even though some  
people, and not just me, think they are invalid as a means to  
understand how economies in the real world actually work.  
  
Steve Kates