Say's Law and the Keynesian Revolution: How Macroeconomics Lost Its Way.

• Author: Jonsson, Petur O.
• Position: Review

By Steven Kates. Cheltenham, UK: Edward Elgar Publishing, 1998. Pp. ix, 252. $80.00.

The meaning and the significance of Say's Law have spawned numerous controversies, and the issues at stake have shaped theoretical models and policy advice for generations of economists. Unfortunately, as explained by both Skinner (1967) and Clower and Leijonhufvud (1973), some of the bickering over Say's Law has been based on little more than obtuseness and misinterpretations. Most importantly, the misrepresentations of the past still haunt our conceptual framework and our textbooks. For one thing, incessant repetitions notwithstanding, the supply-creates-its-own-demand version of Say's Law had nothing to do with Say's actual arguments.

The title of Kates's book suggests that the book will examine the legacy of the Say's Law controversies. In fact, the book is mostly a series of short and somewhat disparate vignettes that summarize the arguments of various writers on Say's Law. The book is divided into twelve chapters, the first of which presents Kates's view of the role of Say's Law in Keynes's General Theory. Chapters 2-4 then condense the arguments of key classical economists (Say, Malthus, Torrens, Ricardo, and the Mills). Chapters 5 and 6 sum up various figures ranging from McCullogh through various neoclassical economists (here labeled "English Classical") to some of Keynes's own contemporaries. Chapters 7 and 8 then present Kates's view of how Keynes came to his conception of Say's Law. Chapters 9-11 summarize various writers after Keynes, and finally, Chapter 12 presents a short conclusion.

While the book is made up of summaries of many writers, for some reason it does not even mention Say's most boisterous critic, Karl Marx. This is curious in view of the fact that Kates actually reproduces Marx's (1929, 1952) famous commodity-money-commodity (or CM-C) transformation argument (pp. 23, 75). In any case, while Marx was certainly influential in deriding Say and while Marx's critique of Say does anticipate Keynes's naive supply-creates-its-own-demand version of Say's Law, the term "Say's Law" seems to have been first coined by Taylor (1909) when Say's Traite was about as old as Marshall's Principles are today.

As defined by Taylor, Say's Law was the proposition that "if we can assume that producers have directed production in true accord with one another's wants, total demand must in the long run coincide with the total product or output of goods produced for the market" (Taylor 1909, p. 94). This was the original definition of Say's Law and, while it postdated classical economics, it did capture one of Say's key insights, namely, that as long as sellers only offer those goods that buyers intend to buy, then it stands to reason that all goods will eventually be sold and that all markets will clear. Albeit, there was more to Say than this simple inference.

As...