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J. Barkley Rosser has raised two points in regard to Say's Law which he has
asked me to comment on. He wrote:
'Is it not the case that [John Stuart Mill] identifies his father as
linking
this view to Say, even if he did not actually call it "Say's Law"?'
'BTW, I think this point has been made on this list before, but I would
note
that Say himself did not fully accept his own "law" and discussed
exceptions
to it.'
These are, in my view, related questions. John Stuart Mill did
indeed indicate that his father may have been the author of the 'law
of markets'. In the Principles, at the end of the chapter specifically
dealing with Say's Law, the chapter titled "Of Excess of Supply",
he wrote:
'It is but justice to two eminent names to call attention to the fact,
that the merit of having placed this most important point in its true
light belongs principally, on the Continent, to the judicious J.B.
Say, and in this country to Mr. [James] Mill.' (John Stuart Mill,
Principles of Political Economy, Book III, Chapter 14, Section 4 -
page 562 of the Ashley edition.)
This statement is found in all editions of the Principles.
I have little doubt that the formulation of Say's Law was actually
made by James Mill because only he was answering the right
question. Say had constructed an apparatus which would later be
used by the elder Mill, but Say's intent was to demonstrate that
scarcity of money is not a cause of recession. It was James Mill
who first dealt directly with the question of whether demand
deficiency is a sensible explanation for recessions and
unemployment, and it was he who trained his guns on showing
how illogical such a notion actually is.
Although in early classical writings the words 'demand deficiency'
were often used, ultimately 'overproduction' became the way it was
almost invariably described. Nevertheless, whichever way it was
stated, the question addressed was whether supply could outrun
demand. This possibility was rejected absolutely by the entire
mainstream of the economics profession right up until 1936, and it
was this which constituted the central conclusion of the law of
markets.
But I digress. Say himself did seem to have a shaky hold on the
proposition which bears his name and his conception of the
underlying processes were eventually superseded by James Mill's
version. There is fascinating correspondence between Malthus and
Ricardo in which both poke fun at the way in which Say defends
his own theory. I think they were a little harsh, and for the most
part I do think Say had the basic ideas pretty clear in his mind. But
I also think that while Say may have stated the underlying
propositions first, he ended up by following James Mill.
In the 1814 second edition of his Treatise Say rewrote, in its
entirety, his chapter on the thiorie des dibouchis to make it
conform as best he could to the arguments found in James Mill's
Commerce Defended (1807). But even then he sometimes went too
far under what Schumpeter described as 'polemical stress', making
Say a very imperfect guide to Say's Law.
I might also just note that the arguments surrounding the law of
markets had nothing to do with the wages fund or any other early
classical doctrine. It successfully bridged the divide during the
marginal revolution. Jevons himself, in his Theory of Political
Economy, was quite clear that overproduction was 'absurd and self-
contradictory' and demonstrated exactly that using his own
marginalist tools. All this is found in a brief section titled simply
'Over-production' (page 212 of the Penguin edition).
That Say's Law did not survive the Keynesian Revolution is
because it was not intended to. That is what the Keynesian
Revolution was about.
Steven Kates
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