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Say’s Law And The Keynesian Revolution

Say’s Law And The Keynesian Revolution

How Macroeconomic Theory Lost its Way

Steven Kates

Steven Kates, School of Economics, Finance and Marketing, RMIT University, Melbourne, Australia

1998 264 pp Hardback 978 1 85898 748 4
2009 Paperback 978 1 84844 826 1

Hardback £83.00 on-line price £74.70

Paperback £31.00 on-line price £24.80

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‘In this fascinating and well-researched book, Kates takes issue with the standard Keynesian interpretation of Say’s law of markets.’
– Thomas M. Humphrey, The Economic Journal

‘A first rate and scholarly study. Its discussion of the role, interpretation and misinterpretation of "Say’s Law" in the Keynesian and subsequent literature is particularly valuable. No other source throws as much light on these more-recent writings or examines them more systematically.’
– William J. Baumol, New York University and Princeton University, US

Contents
Contents: Introduction 1. Say’s Law in the Structure of the General Theory 2. J.-B. Say, James Mill and Robert Torrens 3. David Ricardo 4. John Stuart Mill 5. Say’s Law in English Classical Theory 6. Say’s Law in the Classical Theory of the Business Cycle 7. Keynes’s Discovery of Say’s Law 8. Influences Deepening Keynes’s Understanding of Say’s Law 9. The Early Post-General Theory Evolution of Say’s Law 10. Modern Interpretations of Say’s Law 11. Critics of the Modern Interpretation 12. Conclusion Appendix Bibliography Index

Further information

‘Say’s Law and the Keynesian Revolution is a book par excellence. I have never encountered a text that explains the business cycle so cogently and provides a thorough repudiation of Keynesian economics to boot. It is a great contribution to economic literature.’
– James Adams, author of Waffle Street: The Confession & Rehabilitation of a Financier

‘Steven Kates has written an important 250 page pamphlet on the history of Say’s Law and its misinterpretation in The General Theory. He argues that Keynes is responsible for a fundamental misunderstanding of classical – and in fact all pre-Keynesian – economics, which has disfigured mainstream macroeconomics since 1936. This is no small reproach, but Kates makes his point in a well-documented and convincing way. . . I consider this book required reading for macroeconomists as well as historians of economic thought and intellectual historians. . . A work of true scholarship and thought-provoking content. You may disagree with Kates, but you cannot easily dismiss him.’
– Evert Schoorl, De Economist

‘The original classical formulators of Say’s Law never said what Keynes claimed they said. On the contrary, far from dismissing slumps as impossibilities, they stressed their occurrence. They differed from Keynes only in denying that demand failure could be the cause. . . A convincing and authoritative account.’
– Thomas M. Humphrey, The Economic Journal

‘If Steven Kates is right about Maynard Keynes then Keynes was very wrong about Say’s Law – as understood and employed by most mainstream economists up to the writing of The General Theory itself. And not simply was Keynes wrong about the classics but in making legitimate the concept of aggregate demand failure – and quite parentless the law of markets – the consequence of Mr Keynes has been ruinous for theory and policy alike.’
– Bob Layson, Institute of Economic Affairs

‘A first rate and scholarly study. Its discussion of the role, interpretation and misinterpretation of “Say’s Law” in the Keynesian and subsequent literature is particularly valuable. No other source throws as much light on these more-recent writings or examines them more systematically.’
– William J. Baumol, New York University and Princeton University, US

‘Based on the comprehensive and well-written historically analytical chapters alone, this book is highly recommended for students interested in the history of economic thought, as well as for contemporary theorists and empiricists who are concerned with non-Keynesian research on business cycles and unemployment.’
– Roy Rotheim, Journal of Economic Literature

‘Steven Kates has written a book of considerable learning. He has written an animated and stimulating book. He has written a book that treats with fresh handsome well known materials. It is a pleasure to read, and a gift to its field.’
– William Coleman, History of Economics Review

This highly original contribution examines one of the most controversial concepts in the history of economics – the true meaning of the Law of Markets. This has been a contentious issue since the publication of Keynes’s General Theory, but has also divided economists since it first emerged almost two centuries ago in the writings of James Mill. This book discusses the change in the understanding of the nature of the business cycle wrought by the General Theory whose major innovation in overturning Say’s Law was to introduce demand deficiency into mainstream economic thought.

The volume provides a robust and innovative exposition of the crucial point of division between classical and Keynesian economics, demonstrating that the role of demand deficiency was the fundamental issue at stake. Steven Kates first discusses Keynes’s interpretation of Say’s Law before documenting its development within classical theory. He then charts the development of post-General Theory interpretations of Say’s Law, challenging Keynes’s definition which was captured in the phrase ‘supply creates its own demand’. The author also attempts to unravel the vast literature on the progress made by Keynes between his Treatise on Money published in 1930 and the General Theory, published six years later. He suggests that the crucial point in the origins of the General Theory was Keynes’s discovery of Malthus’s writings on Say’s Law at the very depths of the Great Depression in 1932.

This provocative book will be required reading for scholars and students interested in the history of economic thought, the history of macroeconomics and the Keynesian revolution.



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