torsdag 6. desember 2012

Keen on Says Law & Austrians

Keen claims in Debunking Economics that Austrians believe in Says Law, wrongly, because they fail to consider credit in their analysis.

Quoting Keen:

"The Says Law/Walras Law fallacy of ignoring the role of credit is the foundations of the neoclassical (and Austrian) argument that general gluts and depressions are impossible, and that all crises are really sectoral imbalances which can be corrected by price adjustments alone. Once this fallacy is removed, depressions or "general gluts" (and general booms) are possible, and the contraction of credit plays a key role in them." p. 220 Debunking Economics(2011)

There are other references as well.

This is completely wrong.

Let me now quote "Money, Bank Credit and Economic Cycles" by Jesus Huerta de Soto (1997):

"John Maynard Keynes begins his book, The General Theory,
by condemning Say’s law as one of the fundamental principles
upon which the classical analysis rests. Nonetheless Keynes
overlooked the fact that the analysis carried out by Austrian
School theorists (Mises and Hayek) had already revealed that
processes of credit and monetary expansion ultimately distort
the productive structure and create a situation in which the
supply of capital goods and consumer goods and services no
longer corresponds with economic agents’ demand for them.
In other words a temporal maladjustment in the economic system results.53
In fact the entire Austrian theory of the economic cycle merely explains why,
under certain circumstances, and as a consequence of credit expansion, Say’s law
repeatedly fails to hold true."

1 kommentar:

  1. are you telling me that a 2011 book says something that has been refuted decades ago?

    Hazlitt in 1959: “No important economist, to my knowledge, ever made the absurd assumption (of which Keynes by implication accuses the whole classical school) that thanks to Say's Law depressions and unemployment were impossible, and that everything produced would automatically find a ready market at a profitable price. Say's Law, to repeat, was, contrary to the assertions of the Keynesians, not the cornerstone on which the great edifice of the positive doctrines of the classical economists was based. It was itself merely a refutation of an absurd belief prevailing prior to its formulation.” This (post)keynesians guys are amazing!