Economics Questions

Re: Apparently, there is a war on demand

Isaac "Izzy" Marmolejo — Thu, 27 Jan 2011 06:49:25 GMT

Krugman is taking Says Laws as Keynes explained Says Law. But Keynes misunderstood Says Law to begin with and just piled a whole bunch of assumptions together to dismiss the law... (Keynes creating assumptions....how ironic.. huh?)

Re: Apparently, there is a war on demand

BioTube — Thu, 27 Jan 2011 05:53:54 GMT

It looks like it can be simplified into "there's no magic difference between barter and non-barter markets".

Re: Apparently, there is a war on demand

EmperorNero — Wed, 26 Jan 2011 18:17:17 GMT

Southern:
Is it true that Say's law, as descrided by krugman, is the notion that "income must be spent, hence supply creates its own demand"? That is not how I understand it.

It comes close. But that specific definition seems to be a Keynesian misrepresentation of Say's law. Here is the passage from wikipedia that discusses that. I can't make sense of it though. If you can, please let me know.

Say's Law did not posit that (as per the Keynesian formulation of Say's Law) "supply creates its own demand". Neither was it based on the idea that all that is saved will be exchanged. Rather, Say sought to refute the idea that production and employment were limited by low consumption.

Thus Say's Law, in its original concept, was not intrinsically linked nor logically reliant on the neutrality of money (as has been alleged by those who wish to disagree with the Law) because the key proposition of the Law is that no matter how much people save, production is still a possibility as it is the prerequisite for the attainment of any additional goods of consumption. Say's Law states that in a market economy, goods and services are produced for exchange with other goods and services -- 'employment multipliers' -- therefore arise from production and not exchange alone-and in the process a sufficient level of real income is created to purchase the economy's entire output due to the truism that the means of consumption are limited ex vi termini by the level of production. That is to say, (with regard exchange of produce within a division of labour) the total supply of goods and services in a market economy will equal the total demand derived from consumption during any given time period – in modern terms, "general gluts cannot exist", although there may be local imbalances, with gluts in one market balanced by shortages in others.

Re: Apparently, there is a war on demand

Southern — Wed, 26 Jan 2011 17:52:48 GMT

Is it true that Say's law, as descrided by krugman, is the notion that "income must be spent, hence supply creates its own demand"? That is not how I understand it.

Re: Apparently, there is a war on demand

EmperorNero — Wed, 26 Jan 2011 14:06:13 GMT

He makes it seem as if people who don't think that demand side matters don't get it. That they are missing some understanding, or are driven by simplistic moralism. But every economic illiterate thinks that more demand cures recessions. "If people would just buy more stuff, that would get the economy going."

Apparently, there is a war on demand

ITGF — Wed, 26 Jan 2011 13:21:11 GMT

Anyone read Krugman's post where he describes Say’s Law as "the notion that income must be spent, and hence that supply creates its own demand"?

http://krugman.blogs.nytimes.com/2011/01/24/the-war-on-demand/