Say's Law and the current recession

Louis Proyect lnp3 at
Sat Dec 8 08:48:19 MST 2001

NY Times, December 8, 2001
Is a New Boom Somewhere Over the Rainbow?


The economy sinks, but the nation's forecasters grow more optimistic. 
A vibrant upturn is just around the corner, they insist, certain to 
arrive by spring. In the world of forecasting, the upturn has been 
just around the corner for months...

But so far the optimism entrenched in mainstream economics guides the 
forecasts, and they are persistently upbeat. "The consensus view 
sounds plausible to me; I have even been trying to get some funds 
back into the stock market," said Deirdre McCloskey, an economic 
historian at the University of Illinois in Chicago. "Still, I do not 
believe that economists understand the business cycle. I say to my 
mom, `Don't worry, there will not be another Depression,' and she 
says, `Why not?' And I say I don't really know why not."

Ms. McCloskey's faith — and the concensus forecast — have their 
origins in the writings of Jean-Baptiste Say, a French economist in 
the early 1800's, who gained fame as a popularizer of Adam Smith's 
"Wealth of Nations," capitalism's seminal treatise, published in 
1776. A "law of markets" that bears Say's name is still the theme 
song for those who count on the economy to repair itself. Say himself 
never wrote or uttered or fully subscribed to what came to be known 
as Say's law, which is expressed in just five words: "Supply creates 
its own demand."


Louis Proyect, lnp3 at on 12/08/2001

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