OWNERSHIP: Re: the theorem: SAY'S LAW

["William B. Ryan" <w_b_ryan@yahoo.com>]

> The conventional assumption - Say's Law - is that
the
> costs of production of what is being produced
> automatically equal the salaries, wages and
dividends
> being paid to final consumers.

"From the extract, below, I do not see the above 
assumption/presumption of Say's Law being so."
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Tim, the standard shorthand paraphrase is "supply 
creates its own demand."

Do you disagree with the standard paraphrase?  I 
mean, do you disagree that's what Say is saying in 
the cited excerpt?
http://www.geocities.com/socredus/say.txt
-

"Money is the means for transactions, being a 
temporary conversion of productive wealth. Wealth 
grows with increased production, not increased money 
ALONE."
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I would be tempted to say that nobody in the world 
believes in something as ridiculous as that, except 
I've seen the "magic theory of money" expressed 
frequently on the GJM list.  I would put it in the 
category of perpetual motion machines; I've seen one 
of those promoted also by the founder of the list: 
the motionless electromagnetic generator.  Its 
financial equivalents are "zero interest loans," 
"zero taxation" and "debt-free money."

Money and credit are merely tools among many other 
tools, physical and contractual, that contribute to 
the process of production.

It is within the broad category of society's 
"ultrastructure," in contrast to its infrastructure 
and superstructure.

Another way of putting it is that it is included in 
society's *social infrastructure.*
-

"If anything, it [Say's Law] does not disagree with 
A+B at all IMHO."
-------------------------
---------------------------
The difference is that Say's Law says that supply and 
demand equate automatically; A+B says that it does 
not, and demonstrates a mechanism as to why it does 
not: Labor Displacement.  It certainly would equate 
in a pure barter system, but the modern world cannot 
function in a pure barter system.  You might note 
that Say is imposing a barter model upon the economy 
of 1821 in his reply to the "adventurers in the 
different channels of industry."  It was an 
inappropriate model even for 1821.  That's what the 
"adventurers" were telling him and he wouldn't 
listen.

This is how Douglas put it in the Interim Report:
http://www.geocities.com/socredus/interim_report.txt

>From the Preamble:

"...Effective demand originated in the barter system, 
that is to say, individuals parted with a surplus of 
real wealth in their possession to obtain in exchange 
real wealth of a different variety for which they had 
a need...In the modern world, however, the 
preponderating feature in effective demand which is 
universally employed to carry on the world's business 
is what is technically called a 'credit instrument,' 
of which there are several forms. For the purposes of 
this preamble it is only necessary to consider the 
cheque...

"While it is clear that under a barter system there 
is always sufficient effective demand although it may 
be inequitably distributed, under a money or cheque 
system both inequitable and ineffective demand are 
certain unless production and demand are consciously 
and systematically related."
-

"What is missing explicitly from Say's Law is that 
additional money is needed to fill the gap, as 
opposed to more money 'creating' wealth on its own."
-------------------------
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Of course, Say denied there was a "gap," taking what 
we now call the "neutral money" position, his public 
conveyance metaphor.  It's not that money creates 
wealth "on its own," but that money is one of the 
tools that helps us create wealth.
-

"You say much money exists as accounting..."
-------------------------
---------------------------
It is an element of the accounting system.
-

"Does it need to exist as coin/silver/hard currency?"
-------------------------
---------------------------
No.  The creditary view is that precious metal 
coinage were creditary instruments printed on coins 
that carried along with them some intrinsic value, as 
collateral.  In those days copper was a precious and 
very useful metal commonly used in production.  
(Innes has demonstrated that coins of the same 
denomination varied greatly in terms of their 
intrinsic metal content, so he concludes the 
intrinsic metal content was secondary to their 
primary function.)
http://www.geocities.com/new_economics/innes/  In 
that way, metal coinage differed from alternative 
monetary forms, like tallies, which were commonly 
used in trade since Man emerged from the last ice 
age.  The record is skewed because most ancient 
tallies were on wood or leather, which did not 
survive, unlike metal coins which could survive for 
millennia.  The collateral backing money is no longer 
needed in modern societies with credible institutions 
to adjudicate contracts, including the implicit 
contract against the issuer, as well as against the 
immediately preceding holder in due course.  For that 
reason, tallies in their modern forms have supplanted 
intrinsic metal coinage.
-

I think we need to go several more rounds with Say 
before moving on.

Thanks for your continuing participation in the 
discussion.
-


                
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