Nick Rowe and Tom Brown on Say's Law

     I figured I'd give Tom another plug in the title-he deserves it. He's been prolific later and I think it's been very illuminating. I feel I've learned something and apparently others have too. Tom has turned out to be quite a crowd pleaser as I have more links to the recent post about him getting his proof Sumner is anti RBC then for any post here in a few weeks.

       http://diaryofarepublicanhater.blogspot.com/2014/02/tom-brown-gets-his-proof-sumner-is-anti.html?showComment=1392225028996#c2713154183301434009

       It also had the virtue of engaging Nick Rowe-always a great thing. I'm glad that Nick still clearly reads me regularly. I know I've kind of been on an anti Sumner rampage later-which-won't abate for now if ever. However, it's never been personal at least with Nick who I continue to admire.

       In all honestly, I admire Sumner too but I don't trust him. There's a difference. My main quarrel with him isn't personal either-though he has been very rude to me on any number of occasions which certainly doesn't help his case as far as I'm concerned-Nick clarified his comment-in answer to Tom-about the goal of making Say's Law true.

      "It's not just Nick's idea it's the MM idea."

      "I stole it from Brad DeLong. Brad was saying it before MM even existed. You can find something a bit similar in Keynes' General Theory. Keynes wanted good monetary policy to ensure "full employment" and make "classical economics" true."

       I did think of Keynes there as I am familiar with that quote. Mark Sadowski, not surprisingly jumped on what Keynes said about once we get full employment the classical theory holding goo
    
      "So does this mean you think that Keynes wanted to "drown the government in the bathtub" and dance on his own grave?"

       Well I doubt Keynes would agree with Sumner about drivng a stake through the heart of Keynesianism and the 'death of Keynesianism' he keeps claiming is happening.  As to what Keynes said there, it's arguable that he's mistaken there. Of course, he thought that fiscal policy would get us there not just a monetary policy rule. I mean post Keynesians argue that the real insight of Keynes is that a capitalist economy can never be totally stable once and for all. 

       Greg quoted Tom from antoher post where he described Say's Law this way:

       "My concept of SL is that it would normally require a barter type economy: it's the "you don't produce, then you don't eat" kind of philosophy... and moreover, you'd better produce stuff that other people are interested in having if you hope to obtain some of their stuff in return: i.e. you'd better make yourself useful. That's my concept of Say's Law. To think that things are like that now is a bit crazy, so I'm with Nick on that part of it. But I also have to admit that the concept sounds fair enough... I don't see a huge problem with it. Of course it should be modified to make it more humane, but the general concept doesn't sound that objectionable to me. But maybe that's because I'm not understanding SL correctly!"

     "I think that's pretty much true 'you don't produce don't eat' is the point of SL. I guess in a way the argument is between someone who claims that the human body is invincible-we can't get sick as long as we pray every day-and someone who says we can be healthy with proper medical treatment. I don't know that with successful medical treatment we then say 'Well now we have the world that the quack believed in.'

    Tom then came up with a new definition of SL that's supposedly more accurate:

     "Hi Greg, well I finally did go re-read the wiki article on Say's Law (most of it anyway... it's not long), so now after skimming a wiki article let me pontificate on my expertise :D

      "It seems Say's Law has many interpretations, not all of which really correspond to Say's original formulation of it. It seems one common denominator though amounts to the following:

      "There can be no global glut"

       "Meaning that one good or service can be overproduced (which I think implies underproduction in other goods), but the total supply of goods and services cannot all be overproduced. Perhaps "overproduced" is the wrong word... but I'll stick with it for now. Well this is precisely the MM (and maybe Keynesian too) description for how a recession can happen: there's excess demand for money (the MOA), and since money is the other side of the trade for every other good in the economy, that means there's a lack of demand (a glut) for everything else. Say thought this could never happen because he considered that an excess demand for money wasn't rational. Say basically didn't see money as altering the basic idea of barter any. Nick says that Say later changed his mind on this."

       "So maybe my first attempt at interpreting Say's Law above fits into somebody's concept of it (there are many), but I'm going to go with the "no global glut" synopsis from now on I think. :D"

       "But thanks"

       See I don't agree. No matter what monetary or fiscal policy we have and how well it works I don't think it will ever be true that 'there can be no global glut.'

     Again, though, I love the great discussions this has led to and for this reason maybe I got to have more titles with Tom Brown in the title-LOL. 

       Nick Rowe doesn't seem to have been right here:

        "Tom: I read your exchange with David Glasner. Yep. The rest of the MMs don't really say much about Say's Law, IIRC. They don't think in those terms. My guess is you would get a similar "huh?" reaction from Scott. I write about it a lot. Brad DeLong writes about it a fair bit. AFAIK, other econobloggers rarely mention it, except to say it's wrong. Writing about Say's Law is more of a keynesian thing, and only those very few of us (like me and Brad) who have read up on old "keynesian" disequilibrium macro in monetary exchange economies really want to get into it."

  http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/tiff-macklem-retail-competition-flexible-it-vs-ngdplt.html

    Say's Law was the belief of mainstream economics prior to Keynes. Sumner actually didn't say 'huh'-he actually agrees. I don't think SL is quite as idiosyncratic an idea as Nick makes it sound here. The entire Republican party believes in SL. Here's Scott:

     "Tom, I agree with Nick, indeed I made a similar argument in a recent post at Econlog."

     On the other hand I did see that Sumner added this other comment after I pointed out to Tom that I had called that Sumner would say this:

     "Tom did I not tell you he agrees with Nick?"

      I got to admit this was an interesting reply by Sumner:

     "Tom, Your friend is wrong, as you’d still have NGDP shocks and sticky wages."

     OK, so is he saying then that we'll never have SL?  If so then I-kind of-agree with Scott Sumner. That is my point-we would never have Say's world no matter what-all markets clearing, no global glut, etc-even if we have the monetary policy Scott wants or the fiscal policy I want. 

      UPDATE: Tom points out to me that I misunderstood Scott-the friend in question wasn't me but Vincent Cate. Like Carly Simon said 'You probably think this song is about you, don't you, don't you, don't you?'