Error or Lack of Clarity? Steven Kates deserves our thanks for his work on Says Law and his recent clarification in this thread. Says Law of Markets concerns market clearing. Sadly, the debate remains essentially unresolved owing to severe lack of clarity. What exactly is it that we are trying to grasp? The term error is too provocative and aggravating. I would prefer the term vagueness to error. The search for conditions of market clearing may add some clarity and hence help us remove some confusion. One of the first things to do in this connection is to choose a set of rigorously defined variables. I could cite endless passages from Smith, Malthus, Say, Ricardo, Marx, Mill, Marshall, Wicksell, Keynes and others to show that they frequently used terms vaguely such that when they should have said income, they said demand or and so on. This is an argument in favor of rigorous use of symbols for precise analysis. The precision is helpful because it opens up the various distinct scenarios, each with its own set of equilibrium conditions. For example, market clearing is not a problem at all if there is no market: when the seller is the buyer himself. There is a problem of double coincidence in kind if barter is possible, and that problem does not exist under autarky. This significantly affects the analysis. Most importantly, indirect trade requires additional conditions of what I called multiple coincidence in order to permit the creation of artificial double coincidence with money as an artificial good. The whole point is that if we define the terms precisely and sort out the various possible scenarios, we can learn more about market clearing than if we remain vague. The Keynesian articulation of market clearing in terms of broad aggregates of C+I+G+X-M has its own virtues as it permits explorations of important relations among these variables, but it also carries severely crippling confusion between money and credit respectively as tools to transfer value within a given current period and to store value between periods. I have found that indirect trade requires a transfer of value that can be accomplished with fiat money which is most certainly not a store of value, because it is acquired to be spent instantly in principle (within the current period). It has nothing to do with savings or storage of value. Credit however is a separate matter that involves storing value. Credit cannot explain business cycle or the multiplier, because there is no transmission mechanism. All these critically depend on precise use of terms for money, credit, savings, and spending, lending and borrowing, and paying. I have found [Gani 2003] that it is easy to separate the function of the means of payment with a Wicksell Matrix of indirect exchange, and then add money to create a Keynes Matrix. Comparing the matrices shows clearly what Keynes wanted to explain but could not. Showing that the [savings-investment equilibrium] is independent of the [real balance equilibrium] removes the confusion that kept Keynes open to the kinds of criticism Steven Kates refers to in his reply, and in is edited book. By the real balance equilibrium under indirect trade means that an individual sells real output of exactly equal value that he buys back in real goods, and yet he must buy money and sell all of it too. Thus John may sell one dollar of real good x to Tim, and buy one dollar of real good y from Paul; but he cannot do this without also buying one dollar in fiat or commodity money from Tim and then selling one dollar in fiat or commodity money to Paul to balance the payments in each transaction, one with Tim and one with Paul. The use of money can occur only within a payment circuit in which money starts its journey from a given point and must return to the point of origin. If the payment circuit is used, Keynes is suddenly vindicated. That is, Keynes knew the correct conclusion, but did not know how to reach it. I hope that study of history will be rewarding with some careful rewording of past masters. I fully agree with Steve that profound insights were gained by past masters, but I would add that those insights cannot be grasped by our generation unless we do some work on using words and symbols with precision. Mohammad Gani