Quarterly Journal of Austrian Economics
Why Your Grandfather's Economics Was Better than Yours: On the Catastrophic Disappearance of Say's Law
Volume 13, Number 4 (Winter 2010)
Macroeconomics replaced the classical theory of the cycle in the 1930s and has been Keynesian ever since. No metaphorical statement on the death of Keynes or of Keynesian economics can be true so long as aggregate demand maintains its presence at the core of macroeconomic theory and policy. Macroeconomics, with its focus on aggregate demand, has been systematically misleading economists since the 1930s. Because of the near universal acceptance of Keynesian theory within the mainstream, economists have repeatedly formulated policies around the need to stimulate demand during periods of high unemployment. Keynesian economics has, however, not had a single peacetime success but has recorded many, many failures to which one more can now be added. It is the very concept of aggregate demand that must be removed from economic theory. Its pervasive presence has caused a blackout curtain to fall across the whole of macroeconomic theory making it all but impossible to understand the underlying workings of an economy or to provide useful advice when recessions occur. A return to an economic theory based around a proper understanding of Say’s Law and the classical theory of the cycle should be the direction in which economic theory now moves.
Cite This Article
Kates, Steven. "Why Your Grandfather's Economics Was Better than Yours: On the Catastrophic Disappearance of Say's Law." The Quarterly Journal of Austrian Economics 13, No. 4 (Winter 2010): 3–28.