It could sell those 25 along with the new 25 goods at half the price
Everywhere in this post you assume that demand is inversely proportional to the price set by a single seller. Well, it is not. It is not even inversely proportional to the market price (mainstream economists talk about elasticity or Giffen/Veblen goods).
Depending on the market, it may be sufficient to undercut the market by 0.1% to be able to sell 1000 times more. In terms of your example, to sell extra 25 goods it may be sufficient to give a very small discount, certainly not 50%. Then again, some markets will be quite insensitive to price change. And no, this is not an empirical claim :)
Dave: The link a bit earlier, Duality of Say's Law,lays that out.
OK, I'll check it out.
That's the eternal question, isn't it? Wish I knew the answer. AE seems to say there isn't one, because all value is subjective, meaning subject to individual's feelings of the moment. So anything could lose value, in theory. I'm not sure what you are driving at with this q.
You said people buy things only to use them. People also buy things like gold or real estate if they think it might hold its value.
Say preceded the Austrian school and so did not attempt to refrain from empirical claims. In any case, the key principles of Say's Law are deducible from first principles using logic, no empirical claims needed.
How do you deduce a priori principles such as: producers want to sell their goods immediately "99% of the time"? Or people generally try to spend their money right away? The propositions of Say's Law concern the way in which people behave. They do not necessarily have to behave in this way. People have the ability to choose and could choose to do otherwise. It would be like concluding that people generally sleep at night. While that might be true, you can't derive that a priori.
What would they eat? In any case, I am not sure why you emphasize consumer goods. Say's Law is talking about all goods produced, not just consumer goods. I am not sure what you are getting at with your example. Money put into an investment of any kind doesn't sit there and do nothing. How could there be profits from it if it did. It is invested, meaning it is used to buy stuff [or to pay workers who will buy stuff].
What would they eat? In any case, I am not sure why you emphasize consumer goods. Say's Law is talking about all goods produced, not just consumer goods.
I am not sure what you are getting at with your example. Money put into an investment of any kind doesn't sit there and do nothing. How could there be profits from it if it did. It is invested, meaning it is used to buy stuff [or to pay workers who will buy stuff].
It was a simplistic example. I'll try to see if I can touch up my model and post it.
Why [would there be no profits]?
We assumed that there were $1 trillion worth of goods in the economy. Then I said that the workers would produce $1 trillion more and receive $1 trillion in money. If the workers bought all of the goods for $1 trillion, then the goods would have been sold for roughly half of the price they cost to produce. Even assuming the workers only bought the new $1 trillion of goods with the money, the capitalists are still only breaking even.
BTW, you write, "businesses have workers on salary. They can't just stop paying them for two weeks." Right there is the essence of why a worker deservedly gets less than what he would make if self employed. A self employed person would suffer for those two weeks; a worker gets paid come what may. For that perk, which is worth money, [in addition to being paid in advance in most cases] he pays by getting diminished salary.
Just to be clear, I'm not expressing an opinion about whether they deserve it or not, whether it is just or not. I'm just trying to figure out how things work.
Esuric: Also, Marx's theory of crisis does not really revolve around the notion of general gluts, though it is undoubtedly there ( at least implicitly). The crux of his framework is truly rooted in his theory of accumulation which has more to do with the general need to engage in cost-cutting/capital accumulation (lowering the "organic composition of capital") which diminishes the capitalist's source of profit, namely exploitable labor.
Admittedly, I haven't yet gotten to the main part of Marx's crisis theory. The things I've claimed in the last couple of posts are mainly extrapolations of my own.
Either way, the analysis above seems to deny the very existence of profit, even in the short-run. This is, of course, absurd.
Yes. I was making an extreme example because I thought it would make my point clearer. My fleshed out model shows a falling average rate of profit, not zero profits.
Andris: Everywhere in this post you assume that demand is inversely proportional to the price set by a single seller. Well, it is not. It is not even inversely proportional to the market price (mainstream economists talk about elasticity or Giffen/Veblen goods). Depending on the market, it may be sufficient to undercut the market by 0.1% to be able to sell 1000 times more. In terms of your example, to sell extra 25 goods it may be sufficient to give a very small discount, certainly not 50%. Then again, some markets will be quite insensitive to price change. And no, this is not an empirical claim :)
Andris: Everywhere in this post you assume that demand is inversely proportional to the price set by a single seller. Well, it is not. It is not even inversely proportional to the market price (mainstream economists talk about elasticity or Giffen/Veblen goods).
Yes, I was only partially acounting for competitors. But if a reduction in price of 0.1% allowed me to sell 1000 times more, then that means that other businesses are likely having more difficulty selling their goods. So the analysis just shifts to another business.
bump
My humble blog has a long quote from an article by Steve Keen, where he claims that Marx has relegated Say's Law to the trash bin of History, and my refutation.
http://smilingdavesblog.wordpress.com/2012/04/21/marxs-refutation-of-says-law-thank-you-steve-keen/
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer