----------------- HES POSTING ----------------- Thought I might add this bit to the discussion: When teaching Say's law to my history of thought classes I like to use the little Chapter 14 in Book III of J S Mill's _Principles_ called "Of Excess of Supply". Mill first supports Say's law in its strong form, arguing "A general over-supply , or excess of all commodities above the demand, so far as demand consists in means of payment, is thus shown to be an impossibility." I like this as an example of the idea that an excess of supply IS IMPOSSIBLE. No one supplies except to demand, no one can demand except by supplying. However, less than two pages further on Mill starts discussiong commercial crises, and states "I have already described the state of the markets for commodities which accompanies what is termed a commercial crisis. At such times there is really an excess of all commodities above the money demand: in other words, there is an under-supply of money. From the sudden annihilation of a great mass of credit, every one dislikes to part with ready money, and many are anxious to procure it at any sacrifice. Almost everybody therefore is a seller, and there are scarcely any buyers; so that there may really be, though only while the crisis lasts, an extreme depression of general prices, from what may be indiscriminately called a glut of commodities or a dearth of money." So excess of supply is not impossible after all. Say's law is an equilibrium condition that may not hold during a crisis, but an excess of supply cannot be a permanent state. Malcolm Rutherford University of Victoria ------------ FOOTER TO HES POSTING ------------ For information, send the message "info HES" to [log in to unmask]