James, the three words you marked as 'anticipations' all concerned the intention of consuming. Ricardo here is trying to prove Say's law. He says: Production gives rise to consumption because the purchasing power created by the act of producing will be spent. This is the sense of Ricardo's statement (not what I think, but what Ricardo is saying in this passage). If purchasing power was not spent, THIS statement by Ricardo would not hold.  Underconsumptionists believed this to be a possibility, Ricardo thought it would defeat the purpose of production. I am not discussing who was right. I am saying that if you introduce the possibility that the producer, after haviing sold his product, changes his mind with respect to the original anticipation that he was doing so with the purpose of buying something else, you are introducing the possibility that the underconsumptionists were right.

In other words, all I am saying is that the THIS passage does not warrant your interpretation of Ricardo talking in terms of anticipations. If you think he does so elsewhere, you quoted the wrong passage

Daniele Besomi

On 4-feb-2014, at 22:04, "James C.W. Ahiakpor" <[log in to unmask]> wrote:

> 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
> 
> -- 
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