Reply To: Steven Kates on Say's Law


Sorry in turn for my late response. My understanding of Say’s Law owes a huge debt to Kates, and I am reasonably confident that he would agree with everything I have written here. But I should acknowledge that he is in fact much less explicit about the ex ante/ex post distinction than I would like – ironically, despite having (in my view) a far inferior understanding of the subject, Sowell is much clearer on this front.

I certainly recommend Kates’s book to you without reservation – I think you will find his scholarship impressive, and perhaps he may even convince you on the question of Mill! Nonetheless, I do have a couple of caveats:

1) He is very unfair to Keynes, essentially blaming him for all of the modern misunderstandings of Say’s Law. In my view, Keynes was in fact the last major economist to understand Say’s Law correctly (!) and the “villains” in the story are clearly Lange, Becker and Baumol.

2) Despite (correctly) pointing out that Say’s own articulation/defense of the law is inferior to that of either Mill, he still seems content to base his defense of Say’s Law on reasoning that goes “supply constitutes demand, and wants are unlimited, so willingness to demand is not an issue”, which is essentially what you get from Say. He does not seem to fully appreciate the superior logical force of J.S. Mill’s “supply constitutes demand, and supply also implies demand”.