Thursday, December 1, 2011

Say Repudiated Say’s Law

This is an interesting point that is rarely mentioned by the apologists for Say’s law. Say did in fact acknowledge that downturns in the business cycle could happen. Baumol has noted:
“Say and other writers recognized that the zero value of the sum of excess demands, or supply creates its own demand (“Say’s identity”), may not hold in the short run. Say’s passage in his Letters to Malthus … even suggests an explanation – a desire to hoard or, as we would now put it, a temporary excess demand for money. But they thought the market would fairly quickly and automatically restore equilibrium” (Baumol 1999: 201).
Thomas Sowell, who is usually regarded as the scholarly expert on Say’s law*, also states that Say “admitted to Malthus that Say’s Law was ‘subject to some restrictions’ and to Sismondi that the fifth edition of his Traite contained a ‘concession’ to the latter’s theory of equilibrium income” (Sowell 2006: 31).

We can see that eventually Say partly (though not fully) understood what Keynes himself believed: changes in liquidity preference can cause insufficient demand and involuntary unemployment. Both Say and J. S. Mill in some writings even appear to have allowed that failures in aggregate demand can cause recession (Hollander 2005: 383-284).

While Say’s recantation is of historical interest, it actually does not provide good grounds in itself for dismissing Say’s law. Why? The reason is that it is possible in principle for Say’s law to be true, even if the original inventor of it later rejected it. E.g., suppose Copernicus rejected the heliocentric theory of the solar system in later life: such a hypothetic repudiation in itself does not in fact provide good evidence for rejection of the heliocentric theory. What matter are arguments and evidence. The evidence for the heliocentric theory is overwhelming. The evidence against Say’s law is also overwhelming:
“The Myth of Say’s Law,” October 7, 2010.
This is why it should be rejected.

NOTE

* N.B. I am not telling readers to believe this just because Sowell says so. So, to the various libertarian readers of my blog: don’t waste my time invoking the argument from authority fallacy; it’s irrelevant. Moreover, not all arguments from authority are necessarily fallacious at all.


BIBLIOGRAPHY

Baumol, W. J. 1999. “Retrospectives: Say’s Law,” Journal of Economic Perspectives 13.1: 195–204.

Hollander, S. 2005. “Review of Two Hundred Years of Say’s Law: Essays on Economic Theory’s Most Controversial Principle,” History of Political Economy 37.2: 382–385.

Sowell, T. 2006. On Classical Economics, Yale University Press, New Haven, Conn.

26 comments:

  1. 1/2

    That Say knew economic downturns could happen, on account of there being too much partial overinvestment in some areas of the economy, and too much partial underinvestment elsewhere in the economy, or even that the economy can go through a period of adaptation through increased demand for money, that doesn't mean Say's law of markets is in any way challenged.

    Say's law is not a law that argues the economy is always in balance, or that the economy is always without unemployment, or that the economy is always without idle resources, or that the economy is always perfectly smooth running.

    Say's law, as Hazlitt has explained very well in his book "The Failure of the New Economics", in a devastating line by line critique of the General Theory, is only a correction to a widely held prejudice at the time (and today still), namely, that there can be such thing as too much wealth in general, that the economy can overproduce in general. Say's law just states "No people, the economy cannot overproduce in general. The desire for more wealth in general is for all intents and purposes practically infinite. The problem is partial overproduction and partial underproduction. Too many shoes and not pants. Too many houses and not enough department stores."

    Then, Say later "qualified" this law, which was really a clarification of it, contrary to what Baumol wants to believe. Say said that his law isn't meant to argue that unemployment can never happen, or that economic downturns can never happen. That's not what Say's law is about.

    The idea that a general overproduction is impossible logically follows from man's nature where populations of men always contain more wants than what can be satisfied by production. Production always lags wants. Economic progress occurs precisely because production is always catching up to what man wants. It ultimately goes back to human action. Action by its nature implies continuous desire to improve. We act because we want to alter the course of affairs from where they would have gone had we not acted, to where we want them to go after being affected by our actions.

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  2. 2/2

    Say's law is irrefutable. It is a logically necessary truth about markets in freedom of competition. When individuals are free, needs/desires/wants always outstrips production. This is why general overproduction is impossible. For a general overproduction would imply that humans are allegedly showing a desire for no more wealth in general. That there is too much of everything.

    In reality of course, if you ask anyone, even the most recluse ascetic monk, they will tell you that if they could, they would accept more wealth. The monk would accept more monk temples and ink and paper and clothes, everything that is needed to increase the population of monks. An American would tell you that they would accept a larger house, or a nicer car, or better healthcare, or more of something else.

    There is no limit to how much humans want in general. The problem is when too much of certain things get produced, but not enough of other things. For example, the average person would almost certainly not want a second oven in their homes, but would rather want a new dishwasher. Or, people won't want a second queen sized bed in their master bedrooms, but would rather want a new sofa in their basement. Since resources are scarce, not everything can be produced, and it is possible that too many ovens and too many beds can be produced, and not enough dishwashers and sofas.

    Or, to give a more recent example, too many HOUSES, and not enough of other things.

    Say's law implies that the supply of ovens, dishwashers, beds, and sofas, are the determinants of purchasing power of money. Money can buy what is produced. Production creates its own demand. This is not to say that everything that is produced always finds a willing buyer, it means that when the ratio between ovens, dishwashers, beds and sofas are in their desired proportions according to the consumers, then demand that people have with their money, comes from the supply of goods they produce or help produce in the market in exchange for money. Supply itself is what backstops the demand. People earn money through production, and using that money, they buy other people's production. Again, this is not to say that everything is always in proper proportion, but given the context that it is, there can be no general overproduction, and in the aggregate supply creates its own demand.

    You should read Hazlitt's chapter on Say's law. He shows that Keynes misunderstood/misinterpreted Say's law.

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  3. "Say's law just states "No people, the economy cannot overproduce in general. The desire for more wealth in general is for all intents and purposes practically infinite. The problem is partial overproduction and partial underproduction. Too many shoes and not pants. Too many houses and not enough department stores"

    Cite me the passages in Say's writing where he says this.

    In reality, of course Say's makes idiotic statements like this:

    “For, after all, money is but the agent of the transfer of values. Its whole utility has consisted in conveying to your hands the value of the commodities, which your customer has sold, for the purpose of buying again from you; and the very next purchase you make, it will again convey to a third person the value of the products you may have sold to others” (Say 1832: 133).

    Every producer asks for money in exchange for his products, only for the purpose of employing that money again immediately in the purchase of another product; for we do not consume money, and it is not sought after in ordinary cases to conceal it: thus, when a producer desires to exchange his product for money, he may be considered as already asking for the merchandise which he proposes to buy with this money. It is thus that the producers, though they have all of them the air of demanding money for their goods, do in reality demand merchandise for their merchandise" (Say 1816: 103–105).

    Say, J. B. 1816. Catechism of Political Economy, or, Familiar conversations on the manner in which wealth is produced, distributed, and consumed in society (trans. J. Richter), Sherwood, Neely, and Jones, London.

    Say, J. B. 1832. A Treatise on Political Economy; or, The Production, Distribution, and Consumption of Wealth (4th edn; trans. C. R. Princep and C. C. Bibble), Grigg & Elliott, Philadelphia.

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    Replies
    1. How is this in any way idiotic? Say was pointing out that people produce in order to consume. Entrepreneurs go into business and workers supply their labor to employers so that they can purchase other goods and services that they need or desire. What's more, Say also mentioned that money is but a medium of exchange; it merely facilitates transactions and solves some of the flaws resultant from a barter system: namely, the double coincidence of wants problem. In short, we cannot consume that which we do not produce; our capacity to produce, therefore, is our capacity to consume. What is so controversial or difficult to understand about that? What good is a a crisp $100 bill in a grocery store with no food on the shelves?

      Delete
    2. The idiocy is in claiming that

      (1) money is ONLY a medium of exchange, when it is ALSO a unit of account and crucially a store of value
      and

      (2) that "Every producer asks for money in exchange for his products, only for the purpose of employing that money again immediately in the purchase of another product" when businesses save money or buy financial assets with it too.

      Delete
  4. 'in a devastating line by line critique of the General Theory'

    Please. Robert Vienneau pointed out some time ago that Hazlitt had no idea what he was talking about:

    http://robertvienneau.blogspot.com/2006/07/can-one-respect-henry-hazlitt.html

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  5. "Say's law just states "No people, the economy cannot overproduce in general. The desire for more wealth in general is for all intents and purposes practically infinite. The problem is partial overproduction and partial underproduction. Too many shoes and not pants. Too many houses and not enough department stores"

    "Cite me the passages in Say's writing where he says this.

    That was obviously a paraphrasing, because you don't understand Say's law. I'm trying to explain it using different words that mean or refer to the same thing.

    In reality, of course Say's makes idiotic statements like this:

    "For, after all, money is but the agent of the transfer of values. Its whole utility has consisted in conveying to your hands the value of the commodities, which your customer has sold, for the purpose of buying again from you; and the very next purchase you make, it will again convey to a third person the value of the products you may have sold to others"

    How is that statement "idiotic"?

    "Every producer asks for money in exchange for his products, only for the purpose of employing that money again immediately in the purchase of another product; for we do not consume money, and it is not sought after in ordinary cases to conceal it: thus, when a producer desires to exchange his product for money, he may be considered as already asking for the merchandise which he proposes to buy with this money. It is thus that the producers, though they have all of them the air of demanding money for their goods, do in reality demand merchandise for their merchandise"

    Other than the misleading word "immediately", which can be taken to mean any time at all, since the standard for "short" and "long" periods of time is not objective but subjective, how is that statement idiotic?

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  6. "Say's law implies that the supply of ovens, dishwashers, beds, and sofas, are the determinants of purchasing power of money. Money can buy what is produced. Production creates its own demand.

    In other words, you're using a crude caricature of Say's law, known as Say's Identity, entailing zero excess demand for money and only commodity market sectoral imbalances, which Keynes attacked in the General Theory.

    These comments show contemptible ignorance of what Say even said about the "law of markets". It is doubtful whether Say even endorced the Say's Indentity version of the law. Say actually attacked Ricardo for using it (Mark Blaug, Economic theory in retrospect, p. 150)

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  7. "That was obviously a paraphrasing, because you don't understand Say's law. "

    Cite me chapter and verse in Say's writings or don't waste our time.

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  8. "Other than the misleading word "immediately", which can be taken to mean any time at all, since the standard for "short" and "long" periods of time is not objective but subjective, how is that statement idiotic?"

    I see!! Oh my god.

    Now words have any meaning you wish to ascribe to them: the word "immediately ... can be taken to mean any time at all, since the standard for 'short' and 'long' periods of time is not objective but subjective."

    This is the point at which you have lost all credibility.

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  9. "Say's law implies that the supply of ovens, dishwashers, beds, and sofas, are the determinants of purchasing power of money. Money can buy what is produced. Production creates its own demand."

    In other words, you're using a crude caricature of Say's law, known as Say's Identity, entailing zero excess demand for money and only commodity market sectoral imbalances, which Keynes attacked in the General Theory.

    False. I am correctly explaining Say's law. It does not relate at all to "demand for money" to be either "in excess" or not "in excess".

    There is no such thing as "excess" demand for money. There is only "demand for money", which is different from individual to individual. If an individual wants to hold 10% of their net assets in cash, then this is their demand for money for holding. It is neither excessive nor regressive. It is what it is. This is true for all other individuals as well. You are just injecting a false subjectivist standard that overrules the true subjectivist standard that is the individual owner themselves. You want to believe that YOU are the standard for how much money others should hold relative to their net assets. That is absurd. Value is subjective, meaning subjective to the individual. No individual can claim that another is holding too much or too little money. That is up to the individual to determine.

    Say's law does not require, presume, imply, or depend on "zero excess demand for money."

    It is true for ALL levels of demand for money. It concerns real supply and production. What is offered, what is produced for sale, is what is used by its owners to demand other goods, using money as a medium of exchange. If there is more money being used for transactions relative to money supply, or if there is less money being used for transactions relative to money supply, Say's law holds. It's independent of demand for money holding.

    If aggregate demand for money holding rises, then this will reduce the demand for, and prices of, goods and services, as well as costs with a time lag. Whatever is produced and offered during this transition, Say's law holds. Supply of goods for sale is what is serving to demand other goods, via money as a medium of exchange, albeit a smaller quantity of money in exchanges.

    These comments show contemptible ignorance of what Say even said about the "law of markets".

    Prove it.

    It is doubtful whether Say even endorced the Say's Indentity version of the law.

    Just because you doubt it, it doesn't change what he wrote, and it doesn't in any way serve to refute it. James Mill also had a good explanation of the intuition behind Say's law.

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  10. Say actually attacked Ricardo for using it (Mark Blaug, Economic theory in retrospect, p. 150)

    Didn't you just get finished lecturing people not to confuse Keynes repudiating his own theory with refutations of said theory? Now you're saying that Say telling Ricardo not to presume something, somehow serves as a refutation of that same something.

    "That was obviously a paraphrasing, because you don't understand Say's law. "

    Cite me chapter and verse in Say's writings or don't waste our time.

    But you don't understand it if the only thing you go by is his writings. You've made that perfectly clear.

    I will continue to paraphrase anyone I want if I know you don't understand the original arguments.

    "Other than the misleading word "immediately", which can be taken to mean any time at all, since the standard for "short" and "long" periods of time is not objective but subjective, how is that statement idiotic?"

    I see!! Oh my god.

    You see what?

    Now words have any meaning you wish to ascribe to them: the word "immediately ... can be taken to mean any time at all, since the standard for 'short' and 'long' periods of time is not objective but subjective."

    Yes. Immediately is subjective. It's not even important to the validity of the argument Say is making. That people wait 1 second, 1 minute, 1 year, or 10 years, before they spend a sum of money, doesn't in any way mean that the money that is being used for transactions doesn't exist.

    This is the point at which you have lost all credibility.

    This is the point that you WANT me to lose credibility, because you are so hung up on money holding, as if it is so economically destructive, even though it is a product of free voluntary choice. Nobody has a right to the money of anyone else. If one person wants to hold their money for longer than you subjectively believe is justified, then you are not in any position to say that they are acting wrongly, or improperly, and that violence should be introduced into society to force some abstract aggregate statistic that nobody economizes, upwards.

    This is the point where you advocate for your depraved and violence against innocent people morality, for the sake of helping people that you yourself don't choose to help and yet you believe you're moral for calling for others to help them at gunpoint.

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  11. 1 second, 1 minute, 1 hour, 1 day, 1 week, and 1 year, can all be considered "immediate" if the standard is a person's life.

    Since Keynesians don't even think ahead, and can only think in the immediate moment, since they lack an appreciation of time as an economic factor, and believe time is a hindrance more than anything else, "immediate" to you means "at this very instant" or "by the end of the day, or else I'll call for the government to counterfeit and tax people more after borrowing and spending more."

    You want to believe that people holding onto a a dollar for 1 year, and spending less money, somehow delays economic recovery, or somehow detracts from economic growth.

    Money that leaves circulation just makes the remaining money more valuable. If inflation can increase prices, then deflation can decrease prices. It takes time for prices to rise with inflation of the money supply, and it takes time for prices to fall with deflation of the money supply.

    Inflation is MORE destructive than deflation. For deflation leads to quicker correction. Inflation can lead to years of illusions, because it makes people believe that they are wealthier than they really are.

    Deflation is minimized, and inflation is minimized, in a free market money system.

    Violence that results in government control over money production, leads to much higher inflation, and much greater deflation. It wasn't until governments and central banks took control that massive inflation and deflation periods arose. Prior to that, inflation and deflation were very, very modest.

    If you look at historical charts of the purchasing power of money, volatility greatly increases when money is fiat versus free market money like gold and silver.

    The two worst calamities in US history, the Great Depression and the last collapse we just had, came under central banking.

    The late 19th century, contrary to the fools who conflate falling prices with depression, was a time of incredible economic growth, and turned the US economy from an agrarian society to the world's most prosperous nation. Prices fell because the rate of productivity was so high, that the purchasing power of gold money kept increasing, meaning prices fell. It is not true that central banking makes money more stable. It makes it LESS stable.

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  12. "If aggregate demand for money holding rises, then this will reduce the demand for, and prices of, goods and services, as well as costs with a time lag. Whatever is produced and offered during this transition, Say's law holds."

    So now you are saying that short term inequality of aggregate supply and demand does occur?

    Get your formulation of Say's law right.

    > These comments show contemptible
    > ignorance of what Say even said about the
    > "law of markets".

    Prove it.


    Nothing easier, old chum:

    http://socialdemocracy21stcentury.blogspot.com/2011/12/jean-baptiste-say-on-failures-of.html

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  13. @David

    Say's law is linked with a commodity-based monetary system. In such a system where a commodity acts as the unit of account we can only accumulate wealth by supplying our own production. A shift to liquidity ultimately means an increased demand for the production of the commodity used as money.

    This does not have any resemblance to the modern credit-based economy where money is produced without cost and is associated with credit. Credit can be provided either to purchase production or existing assets. So as Steve Keen points out change in aggregate demand is change in income plus change in debt while change in supply is change in production plus net turnover of existing assets. The accounting identity in a credit based economy is quite different from a commodity based one and a general glut of production due to unsustainable ponzi debt accumulation is possible.

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  14. "Now you're saying that Say telling Ricardo not to presume something, somehow serves as a refutation of that same something.

    I'm not doing anything of the sort. I am trying to establish what Say thought about the law of markets, and specifically whether he ever adhered to the crude "Say's identity" version of the law. What he thought doesn't constitute the reason for rejecting Say's law in all its forms.

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  15. Now words have any meaning you wish to ascribe to them

    That's what you have been doing when you have said that increased money for holding leads to "long" periods of time of depression. That's what you have been doing when you have said that government deficits end depressions "soon."

    Heck, that's even what you have been doing when you say that people "hoard cash."

    EVERYONE "hoards cash." The only question is how long. There is nothing wrong with holding a sum of money for 1 year versus 1 day. If people hold their money for longer or shorter periods of time, then their actions will bring about market forces that tell others that if they want to engage in free market activity, they must adapt and change their actions too. Instead of producing and selling more goods tomorrow and fewer in one year, they should produce and sell more goods next year and fewer tomorrow.

    What is so wrong about people buying more in the future as opposed to the present? If people want to delay their consumption for longer than 1 day, what's so wrong about that? What is so wrong about the consumers having sovereignty over capital and labor? If capital and labor have to be redirected to accommodate consumer desires changing, then why shouldn't it redirect, and why should the government use violence against innocent people to prevent such needed changes?

    The desire to reach a state of rest is untenable in human life. Your metaphysics is all screwed up. You believe that optimality is a state of no change, and that change is evil. If changes are needed in the labor market, on account of consumers changing their tastes, if changes are needed in the capital markets, on account of consumers changing their time preferences, then that will require temporary unemployment and temporary idle resources, until the owners of capital and labor figure out where the consumers value them the most.

    Your whole worldview is nothing but a violent war against the sovereign consumers. You don't care about putting capital and labor in the places where consumers want them. You want capital to be used and labor to work, FOR ITS OWN SAKE. You want capital to be used for the sake of being used. You want labor to work for the sake of working. It doesn't matter to you if the capital and labor are not directed towards voluntary consumer demand.

    You want capital and labor to be used for your own desires through government power. But not all capital and labor. Only that capital and labor which is in transition between uses, where you can act like a pickpocket and steal money and wealth from those who are working, in order to put these workers to use in your own plans, like bridges to nowhere and building more government indoctrination camps called public schools.

    You crap on consumer's needs. You take dumps on their values. You want to replace their values, with your own, which you hide behind a veil of democratic wants. There is no individuality in your worldview at all. Such crudeness is why you don't understand economics. You can't understand that the foundation of all economics knowledge is through individual action, and in fact only has reality in individual action. By individual action it of course means individual action in groups or individual action alone.

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  16. "Nobody has a right to the money of anyone else. If one person wants to hold their money for longer than you subjectively believe is justified, then you are not in any position to say that they are acting wrongly, or improperly, and that violence should be introduced into society to force some abstract aggregate statistic that nobody economizes, upwards."

    (1) you have just engaged in a red herring. We are not discussing the ethics of taxation or deficit spending.

    (2) The issue was the absurd view that the word "immediately ... can be taken to mean any time at all". No, 5, 10, 20 30, 100 years is NOT "immediately". In terms of short term equality of aggregate supply and demand even a year cannot possibly be regarded as a legitimate sense of "immediately".

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  17. "If aggregate demand for money holding rises, then this will reduce the demand for, and prices of, goods and services, as well as costs with a time lag. Whatever is produced and offered during this transition, Say's law holds."

    So now you are saying that short term inequality of aggregate supply and demand does occur?

    Aggregate supply and aggregate demand are incommensurable units. There is no difference between them, because that would require a common denominator. But t-shirts and shoes on the one hand, and piles of dollars on the other, are two DIFFERENT sets of goods. You cannot say that there is more money than there are t-shirts and shoes. You cannot say that there is more t-shirts and shoes than money. You cannot say that there is an inequality between t-shirts/shoes and money.

    The whole notion that supply can outstrip demand, is nonsensical on its face. Supply and demand are two different factors that determine a third factor, namely price.

    The common equation P = D/S is a symbolic representation of a verbal proposition. It is NOT a mathematical equation. Demand cannot be divided by supply mathematically. You cannot divide t-shirts into money. Units can only be divided by other like units.

    The D/S is a ratio of "one t-shirt trades for $30".

    Get your formulation of Say's law right.

    I already have. YOU need to get it right. I've recommended that you read Hazlitt's chapter on Say's law, and yet you clearly have not read it yet.

    These comments show contemptible ignorance of what Say even said about the "law of markets".

    "Prove it."

    Nothing easier, old chum:

    http://socialdemocracy21stcentury.blogspot.com/2011/12/jean-baptiste-say-on-failures-of.html

    That is not a proof that what I said shows ignorance of what Say said.

    "Now you're saying that Say telling Ricardo not to presume something, somehow serves as a refutation of that same something."

    I'm not doing anything of the sort. I am trying to establish what Say thought about the law of markets, and specifically whether he ever adhered to the crude "Say's identity" version of the law.

    OK, but identifying whether Say held it or not, doesn't say anything about its truth or falsehood. I am only concerned with the truth and falsehood of ideas. So whether Say in fact held Say's identity, is irrelevant to the validity or invalidity of it.

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  18. What is so wrong about people buying more in the future as opposed to the present? If people want to delay their consumption for longer than 1 day, what's so wrong about that? What is so wrong about the consumers having sovereignty over capital and labor?"

    These comments are irrelevant to original issues being discussed here.

    What is so wrong about people buying more in the future as opposed to the present and delaying their consumption for a year or for years on end?

    You get failures of aggregate demand. It means Say's law don't work, you utter fool. You have involuntary unemployment.

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  19. (1) you have just engaged in a red herring. We are not discussing the ethics of taxation or deficit spending.

    (2) The issue was the absurd view that the word "immediately ... can be taken to mean any time at all". No, 5, 10, 20 30, 100 years is NOT "immediately". In terms of short term equality of aggregate supply and demand even a year cannot possibly be regarded as a legitimate sense of "immediately".

    (1) Your arguments have been ethical pronouncements, couched behind a veil of seeming value-free economics.

    The government "ought" to tax, borrow, print and spend money to avoid correction phase unemployment.

    The government "ought" to tax, borrow, print and spend money to avoid correction phase idle resources.

    The government "ought" to tax, borrow print and spend money when private individuals voluntarily hold higher cash balances than they used to in the past.

    The government "ought" to regulate the financial sector while retaining credit expansion.

    The government "ought" to allow FRB to take place.

    Etc, etc, etc

    Every economics theory argument you are making in this thread is an ethical pronouncement of what people ought to do.

    (2) Immediately can in fact be taken to mean any time at all, because there is no implied standard with it. The dictionary definition says instantaneously, but nothing in human action is instantaneous. No human can do anything instantaneously. Everything takes time.

    The fact that you are compelled to give only very rough and crude negative goalposts, saying something like "1 year is NOT immediate, but 1 second IS immediate" proves this.

    If one year is not immediate, then what about half a year? Still no? How about 1 month? Still no? Or is it yes? If yes, what about 1 month and 1 day? If no, what about 1 week?

    WHAT IS THE EXACT TIME THAT HAS TO PASS BEFORE IMMEDIATE TURNS INTO NOT IMMEDIATE?

    This is what I mean by immediate being subjective. There is nothing objective about immediate, because it is a subjective based concept. The universe does not tell us when a time period is immediate and when it is not immediate. WE HUMANS make that judgment. It is a judgment of time relative to some subjective standard, namely, the individual human's own judgment.

    So I ask again, if one year is not immediate, then what time period IS immediate, and given your answer, what is the foundation for that time, and why does that foundation lead you to consider that time to be immediate, but not one second or 1 day or 1 week later than that?

    The whole semantics over "immediate" is why you are not able to understand the objective logic behind Say's arguments. Sure, he could have used a different word than immediate. He could have said "for a longer as opposed to a shorter time relative to a given arbitrary period of time" and everything else would have followed.

    You're getting confused because you don't know how to integrate time into your economics. You view time, and thus interest, as more hindrances, or worse, intolerable phenomena that must be transcended through government force. The government must force things so that "not too much time passes" for a given dynamic market to not accommodate 100% labor. The government must force things so that "interest rates are minimized".

    You see, the reason why you can't understand economics is because you don't have a rationalist philosophy that underpins the whole thing. You don't understand time, so you view it with fear, and thus disdain, and thus you consider it violent, and so you call for violence against it, which means violence against innocent people who exist in time.

    ReplyDelete
  20. "Aggregate supply and aggregate demand are incommensurable units. There is no difference between them, because that would require a common denominator."

    These words are gibberish.

    incommensurable
    adj.
    (1) Impossible to measure or compare.
    (2) Lacking a common quality on which to make a comparison.

    If supply and aggregate demand are incommensurable units ("impossible to measure or compare") then Say's law is meaningless and invalid, for it requires that in a particular period aggregate supply (= value of total factor payments from production) and aggregate demand (total spending on goods and services or money spent on capital goods investment) can be measured, compared and found to be the same.

    If that is not possible asserting Say's law is impossible.

    Also, the idea that they are "incommensurable" in sense 2 ("Lacking a common quality on which to make a comparison") is patent rubbish: the common thingby which they measured is money, a monetary value.

    This is the worst piece of idiocy yet.

    ReplyDelete
  21. "Aggregate supply and aggregate demand are incommensurable units. There is no difference between them, because that would require a common denominator."

    These words are gibberish.

    No, saying that supply exceeds demand is what is gibberish.

    incommensurable

    (1) Impossible to measure or compare.

    (2) Lacking a common quality on which to make a comparison.

    That's what I have been arguing is the case with t-shirts and dollars. They are different entities. Different concepts. You cannot add them and subtract them. You cannot say one is in excess of the other.

    If supply and aggregate demand are incommensurable units ("impossible to measure or compare") then Say's law is meaningless and invalid, for it requires that in a particular period aggregate supply (= value of total factor payments from production) and aggregate demand (total spending on goods and services or money spent on capital goods investment) can be measured, compared and found to be the same.

    Argument from ignorance fallacy.

    No, Say's law is not invalidated by understanding that money and real goods are incommensurable units.

    Again you do not understand Say's law. Say's law does not require that money and goods be "found to be equal." That contradicts Say's law. Say's law is about real production and real purchasing power. It does not require money and goods to somehow do the impossible and be "the same". They can't be "the same," because t-shirts and dollars are different concepts.

    Say's law says that purchasing power is borne out of real supply. That real goods trade against money doesn't mean that goods and money have to be the same. They are never the same. They are not commensurable units!

    You are completely oblivious to the nature of money and catallactics. You don't get it that goods that trade for money does not mean that goods and money become equivalent, or commensurable, or able to be subtracted such that you can arrive at some "difference" between them. Money and goods are not only different concepts, but they are VALUED differently, even in exchanges of one for the other.

    When individuals trade money for goods, they trade because one person values the good more highly than the money, and the other values the money more highly than the goods. That's why they trade in the first place. The money isn't "equal" to the goods. The price paid isn't "equal" in value to the good bought.

    Goods trade AGAINST money. You can't subtract, add, multiply or divide a real good with/and money.

    What's $20 minus a t-shirt equal to? What's $20 multiplied by a t-shirt equal to? What's $20 plus a t-shirt equal to? What's $20 divided by a t-shirt equal to? These questions have no coherent answer.

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  22. If that is not possible asserting Say's law is impossible.

    False. Say's law is not refuted by understanding that money and goods are incommensurable units.

    Also, the idea that they are "incommensurable" in sense 2 ("Lacking a common quality on which to make a comparison") is patent rubbish: the common thingby which they measured is money, a monetary value.

    FALSE. The key word in that quote you mentioned is COMMON QUALITY.

    Between $20 and a t-shirt, and a trade you see between $20 and a t-shirt, what is the COMMON QUALITY between them? In terms of metaphysics, they are both entities. But in terms of economics, where the context is human values and human action, THERE IS NO COMMON QUALITY. There is no common valuation. When A trades $20 for t-shirt from B, it's because there is a DIFFERENCE in relative valuation between the t-shirt and the $20. Each of the people values what the other person has by MORE than what they value what they themselves have.

    You are speaking gibberish, founded upon a profound ignorance of the nature of catallactics, of trade, and of money.

    You hold the very ancient prejudice that trading money for a good somehow makes the money equal to the good in terms of value. They are not the same. They are different in nature, they are different concepts, and they are valued differently.

    Knowledge increases when discernments are made within categories that used to be considered impenetrable. Your level of understand is still too crude to understand economics. You adhere to anti-economic prejudices the confusions of which is preventing you from understanding Say's law, and now of money and trade.

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  23. Say's law is not invalidated by understanding that money and real goods are incommensurable units.

    If money could not be used to measure worth, there would be no such thing as money prices.

    "Say's law does not require that money and goods be "found to be equal."

    That real goods trade against money doesn't mean that goods and money have to be the same. They are never the same. They are not commensurable units!

    And nowhere above have I asserted that "Say's law requires that money and goods are found to be equal." This is all straw man nonsense.

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  24. The original point of this post was that Say did not adhere to the crude Say's identity formulation of Say's law.

    You were challenged to cite Say for the idea that

    "Say's law just states "No people, the economy cannot overproduce in general. The desire for more wealth in general is for all intents and purposes practically infinite. The problem is partial overproduction and partial underproduction. Too many shoes and not pants. Too many houses and not enough department stores"

    Yet no citations are provided.

    Then at December 1, 2011 7:29 AM, you present a crude "Say's identity" version of Say's law:

    "Say's law implies that the supply of ovens, dishwashers, beds, and sofas, are the determinants of purchasing power of money. Money can buy what is produced. Production creates its own demand. .... Again, this is not to say that everything is always in proper proportion, but given the context that it is, there can be no general overproduction, and in the aggregate supply creates its own demand."

    http://socialdemocracy21stcentury.blogspot.com/2011/12/say-repudiated-says-law.html?showComment=1322753376802#c4787184312219512732

    At December 1, 2011 8:03 AM, you make the absurd statement that the word "immediately ... can be taken to mean any time at all".

    Your points are all in tatters. The more recent comments are just red herring distractions from the original issues.

    Readers can decide for themselves what to make of your ramblings.

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