----------------- HES POSTING ----------------- 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a shaky hold on the proposition which bears his name and his conception of the underlying processes were eventually superseded by James Mill's version.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 ------------ FOOTER TO HES POSTING ------------ For information, send the message "info HES" to [log in to unmask]