My reason for this posting is a rejoinder to three others.  

Whatever else may be the case, when we teach macro we teach at least one of and often all three of C+I+G+(X-M), IS-LM or AD-AS. These would have been utterly foreign conceptually to economists pre-1936 because they had been taught and understood that there could be no such thing as a general glut and that demand was constituted by supply. This principle did not at the time have a specific name but it has come down to us as Say?s Law because Keynes, in the book that he wrote to overturn this principle, referred to this principle in that way.  

I think that the disappearance of Say?s Law has done economic theory a very great deal of harm and as a result, has obscured the operation of economies and the proper principles of economic policy making. I therefore wish to clarify, following Sumitra Shah?s interesting post, that for myself I do not regard the disappearance of Say?s Law ?as a positive development?. The sub-title for my book hopefully makes that clear: _How Macroeconomic Theory Lost its Way_. I think macroeconomic theory has been in a wilderness since the publication of the General Theory, but this is not the time to get into that.  

In reply to Pat Gunning?s comments where he states ?that what remains of Keynesianism in the U.S. today is anachronistic? Few noted  economists today see public spending, by itself, as a means of avoiding recession.? To some extent this is true although I have some worry about the words "by itself". In teaching macro we have in a way returned to a form of Say?s Law through the Long Run Aggregate Supply Curve (LRAS) which is a feature of virtually every introductory macro book I have seen during the past decade. Aggregate demand no longer is seen to have an effect on the level of economic activity in some period of time described as the long run. But it has not been, in my view, the development of theory as such that has made the difference. It is that fiscally expansionary macroeconomic policies have run into walls wherever they have been tried, so we no longer have the simplicity of more G to create more Y and N. 

The base Keynesian model has been modified to take into account its inability to account for the inability of expansionary fiscal policy to generate recoveries. The final nail in that particular piece of theory has I think been the disastrous consequences for the Japanese economy of the fiscal reflation that was tried throughout the 1990s and into the present century. But for all that we do teach the theory as if expansionary fiscal policy can have a place, at least in the short run. And, just briefly harkening back to the issue of what it means if we are all dead in the long run, the willingness to use fiscal policy will remain alive so long as we, in teaching theory, do not make it clear that we think of it as a policy option that cannot work in practice. 

In this let me note that I had had the same experience as Pat as a student where Keynes and the Classics was used as the framework in which macro was taught. It may be older than this, but it was already evident in the 1950s and continued into the 1970s until it was replaced by Keynesians versus the monetarists. It did indeed give students the sense that we were part of a vanguard that was finally burying an old and discredited classical theory. Even now, to utter a good word about Say?s Law creates a degree of dissonance in many, yet it is only to overturn Say?s Law that the General Theory was ever written. Either the classics were right or Keynes was right, but it is one or the other. The Keynesian bequest to economic theory, as he himself was at pains to point out, is the aggregate demand curve, and as near as I can see, it remains completely embedded in macroeconomic models to this day. 

Let me finally note that I am to a great extent in agreement with Warren Young in his belief that it has been versions of IS-LM (which he refers to as SILL) that may have been the crucial ingredient needed to bring to completion he actual revolution in economics instigated by Keynes. 

Where I especially agree with Warren is that the IS-LM apparatus operationalised the basic demand-side framework initiated by Keynes. Hick?s 1937 ?Mr Keynes and the Classics? placed the arguments of both sides into an aggregate demand framework. It would at that stage have required someone to point out that IS-LM could not possibly have represented the classical view since it made the comparisons in terms of aggregate demand, the fifth wheel of classical theory. No one of influence came forward, or if they did their voices were not heard, leaving Keynesian economics at the core of macroeconomic theory where it remains to this day.

Dr Steven Kates