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Friday, September 21, 2012

Just to Be Clear...

The understanding of "Say's Law" being propounded here in a number of posts does not imply some particular view on good economic policy, as Silas and B-Murph have noted in the comments. One could admit that Say's Law, if viewed as an empirical rather than a tautological statement, has exceptions, and think:

1) So what? The government will just make things worse if it tries to intervene.

2) The government might be able to improve things, but the means it uses would be immoral, e.g., inflation or taxation (needed to pay back money for stimulus later).

3) The government can and should intervene to shorten or prevent downturns.

1 comment:

  1. Naturally, I hold 1), and, frustratingly, hold it because people promoting "general glut" explanations fail to characterize the problem correctly.

    In the example of the picnic general glut (where everyone brings more food than anyone else wants to eat), the solution is obvious: update your predictions for future picnics about what to bring, and dump the excess food at the next-best non-eat-now outlet.

    Yet if we're to listen to those most commonly associated with the view, their reaction is analogous to saying, "Oh no, we better pay people to over-eat, because obviously the quantity to maximize here is food consumed."

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