[A-List] FW: Say's "Law"

["Craven, Jim" <jcraven@xxxxxxxxx>]

> Anytime some economist labels their pet theory or ideology masquerading as
> a theory a "Law" you know you are dealing with some presumptuous
> megalomaniac looking to corner a niche in the bourgeois theory market. The
> so-called Say's "Law" is a perfect example of taking an accounting
> "identity" or tautology and turning it into a full-blown theory/apology of
> capitalism and its supposed equilibrating dynamics.
>
> It starts with a supposed identity between the current dollar "value" of
> aggregate expenditures on gross output being necessarily identical to the
> supposed dollar "value" of the various types of "incomes" "earned"
> producing the "goods and services" making up gross output: Supply (dollar
> value of output) must necessarily create "incomes" sufficient to "demand"
> the goods and services that make up the gross output.
>
> Since gross output is made up of C Personal Consumption Expenditures) + I
> (Gross Private Domestic Investment) + G (Government) + NX (Net Exports or
> X - M) and since Aggregate Incomes are either Consumed, Taxed or Saved We
> get this magical "identity" of:
>
> C + I + G + X - M = C + S + T or rearranged algebraically:
>
> I + G + X (injections) = S + T + M (leakages)
>
> What if S > I? No problem according to Say; the "magic" of the markets
> will take care of that: If S > I, then real interest rates are simply "too
> high" and "competition" will force real interest rates down causing an
> increase in quantitites demanded of loanable funds for purposes of
> "Investment" and a decrease in quantities supplied of loanable funds until
> S decreases and I increases and then voila" S + I (assuming interest rates
> are as free to fall as to rise).
>
> Well what if T > G? No problem: This will cause real GDP, Employment and
> Incomes to fall, and as they fall, the bad news is you are unemployed, the
> good news is you are in a lower tax bracket, plus government "transfers"
> (unemployment, welfare etc)--to keep you from thinking about why the
> system isn't working for you and keep you from  turning into a
> commie--will increase and T falls and G increases until T = G;
>
> Well what if M > X? No problem. Assuming the "Quantity Theory of Money"
> (MV = PQ or another identity formed into a whole bourgeois apologetic
> theory) and that General Price level moves proportionately with/caused by
> increases or decreases in  Money Supply (M2), then if M > X, then outflows
> of money > inflows, thus M2 will fall, causing the general price level to
> fall, causing prices of exports to fall and be more "competitive", causing
> relative prices of imports to rise (less competitive) and then X increases
> and M decreases until, voila M = X (again "assuming" prices are free to
> fall as to rise and that relative prices of  exports and imports are al
> that really govern Net Export balances).
>
> What about unemployment? No problem. Anyone unemployed is simply
> "voluntarily" unemployed: There is a job for anyone willing to get off
> their asses and work harder for less (the prevailing equilibrium real
> wage) and therefore anyone unemployed is some kind of voluntarily
> unemployed prima donna trying to get more than the "market" will bear.
>
> Just let markets do what markets do and the system will self-equilibrate;
> keep Government to a minimum (only invasions of the bedroom and personal
> morality, managing/mitigating contradictions, socializing costs of
> increasingly centralized/privatized returns)
> and voila the magic and equilibrating dynamics of "Lord of the Flies"
> monopoly capitalism (nothing like the "pure competition" models and
> assumptions on which this whole bullshit is based but what the hell, got
> to ABSTRACT and ASSUME to build models eh?)
>
> This shit is still featured in the texts of economics and is a core
> assumption (implicit if not explicit) in the NIPA accounting and
> theories/"laws" of bourgeois theory/apologetics.
>
> Jim C.
>
>