Say What, Murray?
I am reading Thomas Sowell's On Classical Economics, which I have thoroughly enjoyed so far. He was describing the debate between J.B. Say, on one side, and Thomas Malthus and Jean Charles Léonard de Sismondi, on the other, over Say's Law. Sowell notes that these critics of Say's Law never suggested the possibility of a "permanent glut," but merely that there is an equilibrium level of aggregate income, and production might overshoot that at times. But John Stuart Mill never bothered to read Malthus or Sismondi on this point (he thought his father and Say had decisively refuted them, so there was no need), and he falsely attributed to them the idea of the permanent glut.
"Hmm," I said to myself, "a vulgar, popular distortion of the ideas of economists who might appear to be market critics? I bet I know who gleefully repeated that!" So I pulled Rothbard's Classical Economics off of the shelf, and... man, I think I'm four-for-four in these bets now. Not only does Rothbard attribute the permanent glut idea to Say's critics, but he goes further in doing a little character assassination of Sismondi. He calls him a "socialist" -- Sowell, who has actually read Sismondi, reports, "While Sismondi accepted laissez-faire as a principle, he opposed it as a dogma" -- in other words, he was some sort of mild interventionist. Rothbard then relates a little tale to make Sismondi appear "dotty": he says that to guard against over-production he deliberately employed very incompetent workers on his farm. Now, that smells like the kind of tale a critic makes up to satirize an opponent's views, not like reality. So where did Rothbard discover this? There is no reference at all! As long as it makes Rothbard's target look bad, who needs references?
But I've saved the punchline for the end: Rothbard describes how Say's counter-arguments crushed Malthus and Sismondi, so that since that time, Say's Law has been "challenged only by cranks and crackpots." So, guess who one of those cranks (whom Rothbard does not mention) was?
J.B. Say! That's right: in his later works, as Sowell documents, Say admitted that Malthus and Sismondi were correct, and a general glut is a possibility.
I'm starting to think that, since Rothbard claims Adam Smith wrote The Wealth of Nations, I'd better double check that.
"Hmm," I said to myself, "a vulgar, popular distortion of the ideas of economists who might appear to be market critics? I bet I know who gleefully repeated that!" So I pulled Rothbard's Classical Economics off of the shelf, and... man, I think I'm four-for-four in these bets now. Not only does Rothbard attribute the permanent glut idea to Say's critics, but he goes further in doing a little character assassination of Sismondi. He calls him a "socialist" -- Sowell, who has actually read Sismondi, reports, "While Sismondi accepted laissez-faire as a principle, he opposed it as a dogma" -- in other words, he was some sort of mild interventionist. Rothbard then relates a little tale to make Sismondi appear "dotty": he says that to guard against over-production he deliberately employed very incompetent workers on his farm. Now, that smells like the kind of tale a critic makes up to satirize an opponent's views, not like reality. So where did Rothbard discover this? There is no reference at all! As long as it makes Rothbard's target look bad, who needs references?
But I've saved the punchline for the end: Rothbard describes how Say's counter-arguments crushed Malthus and Sismondi, so that since that time, Say's Law has been "challenged only by cranks and crackpots." So, guess who one of those cranks (whom Rothbard does not mention) was?
J.B. Say! That's right: in his later works, as Sowell documents, Say admitted that Malthus and Sismondi were correct, and a general glut is a possibility.
I'm starting to think that, since Rothbard claims Adam Smith wrote The Wealth of Nations, I'd better double check that.
I have always conceded that Rothbard could punch below the belt when taking on an opponent, but I think there is something fishy going on here, Gene.
ReplyDeleteIn the beginning I was confused by this:
Sowell notes that these critics of Say's Law never suggested the possibility of a "permanent glut," but merely that there is an equilibrium level of aggregate income, and production might overshoot that at times.
But then it was all cleared up for me when you explained at the end:
That's right: in his later works, as Sowell documents, Say admitted that Malthus and Sismondi were correct, and a general glut is a possibility.
So Rothbard's crime is accusing Malthus and Sismondi of believing in a permanent glut, when in fact they just believed in a general glut?
Yet if you had phrased it like that in the beginning, it wouldn't have seemed like such an outrage.
(Note to innocent bystanders: I have read Say and I have read Rothbard, but I don't think I've read Sowell on this, and I know I haven't read Sismondi and Malthus on this. So I'm neither confirming nor denying Gene's general take.)
Bob, wouldn't you think it a very different claim if someone said, "Markets occasionally fail to clear" than if they said "Markets always fail to clear?"
ReplyDeleteYes, but I don't think that's what Rothbard was accusing them of believing. After all, wouldn't it have been easy for Say to point out the window (or at an old newspaper clipping, if they were in the midst of a recession) if Malthus and Sismondi said that markets never clear?
ReplyDeleteI can't speak to this specific issue. I will point out, though, that Rothbard almost certainly misunderstood Say's methodological views.
ReplyDeleteNo, Bob, I was making an analogy. He really does (from Mill, I presume) accuse them of believing in a permanent glut, which is pretty radically different from thinking that once in a while there could be a general glut.
ReplyDeleteRegarding Say's later ideas, Baumol argues that
ReplyDelete“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, W. J. 1999. “Retrospectives: Say’s Law,” Journal of Economic Perspectives 13.1: p. 201.
Yes, most of the general glut theorists thought that gluts would be short-run phenomena.
ReplyDelete