Keynes vs. Say

By Henry Hazlitt

Keynes's "greatest achievement," according to his admirers, was his famous "refutation" of Say's law of markets. All that it is necessary to say about this "refutation" has already been said by Benjamin M. Anderson, Jr., and Ludwig von Mises. Keynes himself takes the matter so cavalierly that all he requires to "refute" Say's Law to his own satisfaction is less than four pages.

Yet some of his admirers regard this as alone securing his title to fame:

Historians fifty years from now may record that Keynes' greatest achievement was the liberation of Anglo-American economics from a tyrannical dogma, and they may even conclude that this was essentially a work of negation unmatched by comparable positive achievements. Even, however, if Keynes were to receive credit for nothing else … his title to fame would be secure … [Yet] the Keynesian attacks, though they appear to be directed against a variety of specific theories, all fall to the ground if the validity of Say's Law is assumed.

It is important to realize, to begin with, as Mises has pointed out, that what is called Say's law was not originally designed as an integral part of classical economics but as a preliminary — as a refutation of a fallacy that long preceded the development of economics as a recognized special branch of knowledge. Whenever business was bad, the average merchant had two explanations at hand: the evil was caused by a scarcity of money and by general overproduction. Adam Smith, in a famous passage in The Wealth of Nations, exploded the first of these myths. Say devoted himself to a refutation of the second… (Read more)

Source: Mises.org