Douglas Carswell's Blog

Say's Law says we're wrong

We’re in this economic mess, they tell us, because there’s not enough demand. What we need, agree the experts and the politicians, is stimulus to increased demand. 

They might bicker over how to stoke up demand. “Fiscal stimulus”, say some.  “Monetary activism”, cry others. "More conservatories", insist yet others. But they all share the same basic presumption that the way to raise economic output is to increase demand.

But what if they’re wrong?

According to Say’s Law, “supply creates its own demand”. 

We keep being told that an economy grows because demand increases. But what if it is instead the case that demand increases because an economy grows?

If so, the then much of the Western world’s response to this economic downturn has been based on a false premise. Which might also help explain why after six years of stimulus solutions, the economy is still in the doldrums.

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