Saturday, August 11, 2012

Say's Law

Say's law is a fundamental law of economics, which Lord John M. Keynes claims to have refuted. In his work, The General Theory of Employment, Interest and Money, he states Say's law as "supply creates it's own demand". This statement however, leads to a wrong interpretation of the law. The true law is not that "supply creates it's own demand", but rather that to demand, one must supply, for how would one trade if one did not  have anything to trade with? So a true statement of the law would be "one's own supply creates one's own demand", for what you can demand in trade is a function of what you can supply to trade with.

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