Related a little bit to this discussion. I'm working on a letter from
Galbraith today written on July 4, 1965 with his tongue, as usual, in
his cheek:

"Messrs Lurio and Jones have respectively, a public persecution and a
Federal debt complex. Not much can be done about either. Mr. Lurio's
right to worry about bureaucrats rather than depression, unemployment
and bankruptcy is sanctified by tradition and secured by the First
Amendment. On the matter of debt, if some people save, then others
must borrow and invest or savings will not be used and spending and
production will not be sustained. SO DEBT IS ETERNAL. But like almost
everyone else, Mr. Jones chooses to worry about the Federal debt.
Since World War II, this has played only a balancing role in
offsetting savings... The anxiety over the Federal debt is inevitable,
immutable, nearly universal and entirely independent of the evidence."

John Kenneth Galbraith





On Tue, Jan 28, 2014 at 10:33 AM, James Ahiakpor
<[log in to unmask]> wrote:
> Ricardo understood correctly that income net of taxes is spent in three
> ways, (a) consumption, (b) saving (purchase of interest- or dividend-earning
> assets), and (c) hoarding in cash.  Regarding Malthus's fears that there may
> be a deficiency of demand because of too much saving, Ricardo remarked: "Mr.
> Malthus never appears to remember that to save is to spend, as surely, as
> what he exclusively calls spending" (2: 449).  Modern interpreters of the
> classical literature who interpret saving to mean simply "not spending," as
> Keynes incorrectly introduced into the language of economics, are apt to
> side with Malthus in that debate.  But those who understand saving to mean
> spending one's income "reproductively" or the transfer of one's income to
> borrowers who spend it correctly side with Ricardo.  Such it is that J.S.
> Mill pointed out that "Nothing can be more chimerical than the fear that the
> accumulation of capital [savings] should produce poverty and not wealth, or
> that it will ever take place too fast for its own end" (1874, p. 73).
>
> Furthermore, moderns who use Keynes's definition of investment to mean only
> the purchase of producer's goods find a problem with the explanation that
> savings always equal investment.  But not those who understand investment to
> mean the purchase of financial assets or the employment of savings or
> loanable funds in the sphere of production, as the classics and early
> neoclassicals such as Alfred Marshall, used the term.  Such understanding
> recognizes investment in the sphere of production to take the form of fixed
> capital and circulating capital, the latter including the wages fund and
> cash-on-hand.  Unfortunately, given the persistence of Keynes's definitions
> of terms, contrary to those of the classicals, the confusion in
> understanding the classical literature, including the law of markets,
> endures.
>
> And then there are those who persist in ignoring J.S. Mill's explanation
> regarding the law of markets that "In order to render the argument for the
> impossibility of an excess of all commodities applicable to the case in
> which a circulating medium is employed, money must itself be considered a
> commodity.  It must, undoubtedly, be admitted that there cannot be an excess
> of all other commodities, and an excess of money at the same time" (1874, p.
> 71).  Also, "it is sheer absurdity that all things should fall in value, and
> that all producers should, in consequence, be insufficiently remunerated"
> (3:572).  That is why an excess demand for money translates into an excess
> supply of other commodities such that prices fall while the value of money
> increases.
>
> The law of markets applies at all times, not only in the medium term and
> long run.
>
> James Ahiakpor
>
>
> On Mon, Jan 27, 2014 at 6:00 PM, Lilia Costabile <[log in to unmask]> wrote:
>>
>> Malthus reasoned quite well in his  rejection of  Say's Law. This law
>> consists of two propositions. First, supply creates an income equivalent to
>> its value. Second: all income is spent.
>>
>> Malthus accepted the first, but not the second proposition: "Effectual
>> demand consists of two elements, the power and the will to purchase...I by no
>> means think that the power to purchase necessarily involves a proportionate
>> will to purchase; and I cannot agree with Mr.Mill ...that, with reference to a
>> nation, supply can never exceed demand. A nation must certainly have the
>> power of purchasing all that it produces, but I can easily conceive it not
>> to have the will". (Malthus, letter to Ricardo, September 11, 1814 , in
>> Ricardo, The Works and Correspondence, edited by P.Sraffa, vol VI,132).
>>
>>  By contrast, Ricardo accepted both propositions, as his reply to Malthus
>> shows very clearly: "We all agree that effectual demand consists of two
>> elements, the power to purchase and the will to purchase, but I think that
>> the will is very seldom wanting when the power exists... we all wish to add to
>> our enjoyments or to our power. Consumption adds to our enjoyment,
>> accumulation to our power, and they equally promote demand" p.133).
>>
>> Ricardo thought that income is entirely spent, for either consumption or
>> investment purposes, i.e. he conceived that savings (income not spent for
>> consumption  purposes) is entirely converted into investments .
>> Consequently, he argued that "demand is only limited by production"
>> (Ricardo, The Works..., vol.1, p.290). He admitted that demand may fall short
>> of supply only on individual markets (excess supply on one market would be
>> compensated by excess supply in other markets), in such a wise that sectoral
>> disproportions were possible, but not a general excess of supply over
>> demand.
>>
>> Contrary to Ricardo, Malthus saw that investment may not fill the gap
>> between income and consumption, when investment outlets are lacking. See,
>> e.g. "Where are the understocked employments which, according to this
>> doctrine [Ricardo's theory of disproportions, NdR] ought to be numerous and
>> fully capable of absorbing all redundant capital, which is confessedly
>> glutting the markets of Europe in so many different branches of
>> trade?"(Malthus, Principles of Political Economy...2nd ed.1836, p.420).
>>
>>  On this difference  between Malthus and Ricardo see also Keynes, "Thomas
>> Robert Malthus. The first of our Cambridge economists" (in Keynes,Essays in
>> Biography)
>>
>> Lilia Costabile
>>
>> Il giorno Jan 27, 2014, alle ore 8:45 PM, Giancarlo de Vivo
>> <[log in to unmask]> ha scritto:
>>
>> I am afraid that Malthus (at least at one point) agreed with Ricardo that
>> public spending would not create additional work (see his letter to Ricardo
>> in vol. XI of Sraffa's edition of Ricardo's Works, p.x-xi): "I quite agree
>> with you in thinking that the funds raised for the support of the poor
>> (though perhaps necessary at the moment) essentially interfere with other
>> employments". But Malthus at difference with Ricardo was eminently
>> inconsistent (as Stigler wrote: "[Malthus] had one great weakness - he could
>> not reason well. He could not construct a  theory that was consistent with
>> either itself or the facts of the world" (AER 1953, p. 591).
>>
>>
>> Giancarlo de Vivo
>>
>> Il giorno 27/gen/2014, alle ore 18.41, Rosser, John Barkley - rosserjb ha
>> scritto:
>>
>> However, while Say asserted that "the law of markets" holds in the medium
>> to long run, he recognized that it might not in the short run, and in fact
>> at the moment of post-Napoleonic War crisis, he supported public works
>> spending to help overcome the rise in unemployment, and in that regard sided
>> with Malthus over Ricardo in the policy debate of that time.
>> ________________________________
>> From: Societies for the History of Economics [[log in to unmask]] on behalf of
>> E.Schoorl [[log in to unmask]]
>> Sent: Monday, January 27, 2014 3:01 AM
>> To: [log in to unmask]
>> Subject: Re: [SHOE] L'offre crée même la dema nde: Say 1814-2014
>>
>>  Say's Own Law (1814)
>>
>> Mu"nchau in the FT suggests: 'It is that official economic thinking in
>> Paris has not progressed in 211 years.' He clearly refers to the first
>> edition of Say's Treatise (1803). Baumol (Economica 1977) has plausibly
>> argued that Say's Own Law only appears in the second edition of 1814,
>> stating that in the long run, demand will be able to keep up with enormous
>> increases in output. This may seem a truism today, but it was a burning
>> question at the beginning of the Industrial Revolution.
>> My recent Say biography 'Revolutionary, Entrepreneur, Economist (Routledge
>> 2013)' corroborates Baumol's interpretation by quoting from Say's
>> correspondence with his relative Michel Delaroche. Say asks his comment on
>> the manuscript version of 'a chapter containing very fundamental matters ...
>> too imperfectly discussed in my first edition.'
>> And in another letter: 'If such a chapter would be generally recognised,
>> people would know the origin of one of the causes of the present lack of
>> sales, and of the one threatening us. ... What an indignation people would
>> feel if they knew the entire present misfortune.'
>> Official economic thinking or not, this dates back exactly two centuries,
>> not 211 years.
>>
>> Evert Schoorl
>>
>>
>> ******************************
>>
>> Giancarlo de Vivo
>>
>> Dipartimento di Economia, Management, Istituzioni
>> Università di Napoli "Federico II"
>> via Cinthia - Monte S. Angelo
>> 80126 Napoli
>>
>> tel. +39.081.675049
>>
>>
>>
>>
>
>
>
> --
> James C.W. Ahiakpor, Ph.D.
> Professor
> Department of Economics
> California State University, East Bay
> Hayward, CA 94542
> 510-885-3137
> 510-885-7175 (Fax; Not Private)