tag:blogger.com,1999:blog-1740670447258719504.post8181994119920039722..comments2024-03-27T03:00:27.024-04:00Comments on Facts & other stubborn things: Keynes and Say's LawEvanhttp://www.blogger.com/profile/12259004160963531720noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-1740670447258719504.post-10323238742310645722010-09-23T10:30:45.498-04:002010-09-23T10:30:45.498-04:001. Waiting for me to say what? I've been sayi...1. Waiting for me to say what? I've been saying the same thing over and over :) I think you just want me to vehemently disagree with me.<br /><br />2. It's not a sin to theorize a perfectly functioning economy. It's problematic (still not a sin) to act like those conditions hold all the time.<br /><br /><i>"It's certainly no worse than constructing a "general theory" while assuming an insoluble link between output and homogeneous labour units in addition to a constant real wage."</i><br /><br />Keynes called this a "first approximation", and before even getting into his employment function he went into all the details that all his detractors always bring up anyway. In other words, people aren't really bringing anything new to the table by critiquing the employment function with the exact same arguments that Keynes himself critiqued it with!<br /><br />I've said in the past (not sure if you've seen these posts), that that output-employment link is the most fruitful one for economists to look into now (not that they haven't been looking into it for decades), and it's one I'm interested in looking into more closely personally.dkuehnhttps://www.blogger.com/profile/10136690886858186981noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-81033405161817616982010-09-23T10:24:52.064-04:002010-09-23T10:24:52.064-04:00Thank God. After all this time, that's all I r...Thank God. After all this time, that's all I really wanted to hear you say. By the way, it's hardly a sin on the part of the classicals to discuss the theory of a perfectly functioning economy - as Hayek said, "Before we can meaningfully ask what might go wrong, we should first understand how things could ever go right." It's certainly no worse than constructing a "general theory" while assuming an insoluble link between output and homogeneous labour units in addition to a constant real wage.<br /><br />I too need to read Hutt. That reference comes from Steven Horwitz's essay on Say's Law - Hutt is also extensively referenced in Horwitz's "Macroeconomics and Microfoundations".Unknownhttps://www.blogger.com/profile/00289445360820713067noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-79718039040931377032010-09-23T08:59:22.898-04:002010-09-23T08:59:22.898-04:00Thanks - I'll look at that and I really need t...Thanks - I'll look at that and I really need to read Hutt too.<br /><br />Do you have any thoughts on Sowell's book that Hutt references in his preface?dkuehnhttps://www.blogger.com/profile/10136690886858186981noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-23964451352964107112010-09-23T08:57:08.880-04:002010-09-23T08:57:08.880-04:00Sebastian you're still missing the point. Key...Sebastian you're still missing the point. Keynes said and I've said that nobody strictly believes Say's Law, however conceived. It's rarely a conscious thing. I have said this at least twice now so please stop repeating that point. But some of the most important departures between the proto-Keynesian/Keynesian and the classical position (I assume this terminology is clear even if it's probably a little haphazard) come up when the classics ACT LIKE all those assumptions hold.<br /><br />As Keynes said:<br />"It is true that it would not be easy to quote comparable passages from Marshall’s later work or from Edgeworth or Professor Pigou. The doctrine is never stated today in this crude form. Nevertheless it still underlies the whole classical theory, which would collapse without it. Contemporary economists, who might hesitate to agree with Mill, do not hesitate to accept conclusions which require Mill’s doctrine as their premise."<br /><br />Nobody is saying they don't recognize the details and the caveats (although certainly some truly don't recognize the details and the caveats) - the point is simply that for the most part, people reject Keynesianism an embrace classicism when they act as if all those assumptions held. I doubt many people consciously do it.dkuehnhttps://www.blogger.com/profile/10136690886858186981noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-41504569650417682742010-09-23T08:57:00.442-04:002010-09-23T08:57:00.442-04:00BTW, you might find this of interest, it is an int...BTW, you might find this of interest, it is an interview with R Garrison, with a question relating to the supposed similarities between Menger and Keynes on the question of money:<br /><br />http://www.auburn.edu/~garriro/a1interview.htmUnknownhttps://www.blogger.com/profile/00289445360820713067noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-69937567823481013902010-09-23T08:50:53.787-04:002010-09-23T08:50:53.787-04:00I only devote so much time to clearing up misconce...I only devote so much time to clearing up misconceptions about Say's Law because, to a Keynesian, it "underlies the whole classical theory, which would collapse without it". This is not so. Say's Law is subject to a large number of qualifications, and in the words of Hutt "all power to demand is derived from production and supply" - but there is no guarantee that this will result in "effective demand". While Say did not have a satisfactory theory of recessions, that they can occur is entirely congruent with the "Law" of Markets. <br /><br />If the classicals ever assumed a fully-coordinated and correctly proportioned market, it was subject to a large number of theoretical qualifications that would all have to be met to keep the economy sitting at the maximum production boundary point of the PPF. It is almost pointless to debate such a quaint assertion that the power to demand stems from production, but for the Keynesian insistence that the validity (or lack thereof) of Say's Law belies the ability of the laissez faire economy to reach equilibrium.Unknownhttps://www.blogger.com/profile/00289445360820713067noreply@blogger.com