Sunday, April 14, 2013

Leisure, Bob Murphy and Say's Law

Someone by the name of Smiling Dave is having fun monitoring Bob Murphy's web site. As a follow up to a back and forth on Say's law, I found the below 2 observations by Smiling Dave quite insightful. It should be noted that I am not looking at this, as much about the back forth between Smiling Dave and Murphy as much as the interesting points raised by Smiling Dave that aren't generally thought about. Here's Smiling Dave:
Not as important a blunder [by Murphy], but a major one still, is misunderstanding what leisure is. When the great Austrians wrote that leisure is a consumer good, they did not mean that leisure is something people sell to other people. Nobody goes to a store and says, “I’ll have a gallon of milk, a loaf of bread, a haircut, and a bottle of leisure.” All Mises and the others meant was that in listing a person’s scale of values, first cow, second horse etc, that leisure has to be somewhere in that scale. But leisure is not not something sold in the supermarket.

When people complain about general gluts, or any kind of glut, they are complaining about too much of something that is for sale. And Say’s law, too, is only talking about things that are for sale in a store. What a mistake, to introduce leisure into a discussion of Say’s Law!

Finally, economics as a science has developed through time. In Say’s day, the ABCT was not understood. When Say wrote “too much A was made”, he could not explain why too much A was made. He just made the correct observation that it was too much A that was made, not too much of everything. He also knew what would fix the economy, namely, make less A. He did not go into detail about what market process will lead to less A being made[...]

As time went on, ABCT was discovered. It added to our understanding, by filling in the aforementioned blanks in Say’s understanding. We now know why too much A was made [inflation of money supply creating malinvestments] and how to fix it [do nothing].

The quote from Rothbard in Bob’s article is from a history book. It is describing Say’s thinking. That’s why it doesn’t go into the insight afforded by ABCT, because Say didn’t have it.

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