Re: Question about Say's Law

["Max B. Sawicky" <sawicky@xxxxxxxxxxx>]

A lot of people here know all this stuff, but what the hell.  In micro
shortages are impossible.

In macro, Keynes relates Say to constant, full employment.  Davidson extends
this to the (alleged) neutrality of money.  So yes, under naïve classical
theory if you have fewer workers you have less need for output.  No problem.

A response from the other side would be that it's nice to have a larger
economy, if not higher per capita output.  Another rebuttal, sectoral
shortages (sic) create bottlenecks and negative ripple effects.  If memory
serves, JK Galbraith was controversial for, among other things, showing that
the problem of bottlenecks was exaggerated.  His case study was the
strategic bombing of the Third Reich.  The idea of such flexibility is
itself consistent with the conservative habit of minimizing adjustment
costs.

So the business lobby is trashing mainstream theory in a variety of ways.



Subject: Question about Say's Law

Here's an odd thought. Tuesday I went to a public forum on immigration and
labour. The big issue, apparently -- especially for the speakers from the
business associations -- was the looming shortage of skilled workers.

Well hold on a minute, here, Chester. Doesn't the classic comix version of
Say's Law claim that "supply creates its own demand"? Can somebody please,
please explain to me why this would apply only to an INCREASE in labour
supply and not to a DECREASE in labour supply? Now I'm not saying I
subscribe to that interpretation of Say's Law but the business folks
avowedly do. Or are the business folks committing a "lump-of-laborers
fallacy"?

-- 
Sandwichman