Re: Question about Say's Law

[Michael Perelman <michael@xxxxxxxxxxxxxxxxx>]

Max, then a shortage of labor would reduce demand which would eliminate the shortage of 
labor?  Like gluts, shortages are impossible in the wonderful world of the free market.

Where did Galbraith move from the bombing study to a question about bottlenecks in general?

On Thu, May 25, 2006 at 05:34:00PM -0400, Max B. Sawicky wrote:
> 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 

-- 
Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321
E-Mail michael at ecst.csuchico.edu