Daniele Besomi wrote:
> James C.W. Ahiakpor wrote:
>> But I think we can recognize the role of anticipations in David Ricardo's discussion of Say's law in chapter 21, pages 290-92, of his /Principles/, including:
>>
>> "M. Say has ... most satisfactorily shewn that there is no amount of capital [funds or savings] which may not be employed in a country, because demand is only limited by production. No man produces, but with a view [anticipation?] to consume or sell, and he never sells, but with an intention [anticipation?] to purchase some other commodity, which may be immediately useful to him, or which may contribute to future production. By producing, then, he necessarily becomes either the consumer of his own goods, or the purchaser and consumer of the goods of some other person. It is not to be supposed that he should, for any length of time, be ill-informed of the commodities which he can most advantageously produce, to attain the object which he has in view [anticipation?], namely, the possession of other goods; and therefore, it is not probable that he will continually produce a commodity for which there is no demand.... Too much of a particular commodity may be produced, of which there may be such a glut in the market, as not to repay the capital [funds] expended on it; but this cannot be the case with respect of all commodities."
> This seems to me to be too clever by half. If all the things marked as 'anticipations' in this passage were true anticipations, that is, predictions or expectations not realized with certainty, Say's law would NOT hold on EVERY occasion in which things do not turn out as anticipated.
>
> Daniele Besomi

You're too quick to declare "victory" here, Daniele.  The person who 
produces more than he anticipated would be bought at current prices 
would face the choice to lower prices and clear the excess -- in the 
short run.  Or else, as Ricardo also explains, he may hold on to some 
unsold inventories and borrow funds to sustain his own desired level of 
consumption.  That increased demand for loanable funds would the cause 
interest rates to rise.  The rise of interest rates would put pressure 
on the seller quickly to decide to reduce prices or reduce the rate of 
production.  But the important point to note is that the excess supply 
causes prices to fall while the excess demand for credit (than formerly) 
causes interest rates to rise  -- in the short run.

Say's Law or the law of markets is about the interconnectedness of all 
markets for produced goods and services.  It explains the causes of 
changing relative prices and interest rates from changing excess 
supplies and demands.  You incorrectly seem to think that it does not 
apply to situations of disappointed expectations such that the rates of 
production may decline (and unemployment rise) or prices fall or losses 
are made.  This is how Keynes thought that the Great Depression was 
proof of the invalidity of Say's Law.  But he was wrong.

James Ahiakpor

-- 
James C.W. Ahiakpor, Ph.D.
Professor
Department of Economics
California State University, East Bay
Hayward, CA 94542

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