Say It Isn’t So

Few economists openly admit to believing in Say’s Law anymore. It is generally considered a relic of the past, a once dominant theory that had faded away. Although it was prominent in the 19th century, it was swept away in the Keynesian revolution like so much of Classical economics. However, economic theories never die. Say’s Law lives on in conservatives think tanks like the Heritage Foundation and when Marco Rubio (who many favour as the next Republican candidate for President) rose to reply to Obama’s State of the Union address, it was Say’s Law he invoked. Even in the world of economics, some economists unconsciously channel the spirit of Say when they preach about the worries of crowding out and through Walras’ Law which is just a weak version of Say’s. This year’s joint winner of the (pretend) Nobel Prize in Economics Eugene Fama constructed an argument against government stimulus (unconsciously) based more or less on Say’s Law. Continue reading “Say It Isn’t So”