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Friday, September 14, 2012

What Do You Say: Say Changed His Mind

One of the most remarkable things about the modern debate on the validity of "Say's Law" -- the key topic in macroeconomics, says me -- is that the defenders of the law never seem to address or even acknowledge the fact that, in the debate between Malthus and Say, Say acknowledged that Malthus was right. That is right, folks, by in the end, J.B. Say was no longer an advocate of Say's Law:

"Yet Say changed his mind. By 1829, in his analysis of the British financial panic and recession of 1825-6, Jean-Baptiste Say was writing that there could indeed be such a thing as a general glut of commodities after all..."

Even a conservative economist like Thomas Sowell points out that, per Say, Malthus won their debate. But then John Stuart Mill came along and wrote up the history of this argument as if sensible economists like his father, Ricardo, and Say had crushed the cranky argument of Malthus. Mill's towering reputation made this false history accepted truth, and the ideas of Sismondi and Malthus were lost for several generations.

And history repeats itself. One day, a future Sowell will write a book noting, "In the end, Callahan convinced Murphy that a general glut is possible, but this fact was neglected for decades."

3 comments:

  1. If you look at Mises' defense of Say's Law, he focuses in overproduction. He 'hand waves' away the possibility of a shortage of money by referring to Adam Smith (with no more specific reference).

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    1. We don't even need money to have over-production, however: link back through the Murphy post to my original one on the topic.

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  2. This was one of the weird things about those Hayek/Keynes videos. In the second video, it shows Hayek with Say in his corner and Malthus in Keynes' corner. Yet, as you note, Say himself later recanted. And while Hayek never conceded that Keynes had been right in their dispute in the 1930s, he did later concede that his position had been wrong.

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