Monday, April 27, 2015

The Myth of Global Gluts and the Reality of Market Change

Richard Ebeling emails:

Dear Bob,

I have a new article on the news and commentary website, “EpicTimes,” on, “The Myth of Global Gluts and the Reality of Market Change.”

News reports claim that the world is suffering from economic gluts of resource commodities, and capital and labor, which are languishing unused because of insufficient “aggregate demand.”

There are few worse fallacies that the notion of general gluts due to a lack of demand. All of this was refuted by economists of a much earlier time under the heading of “Say’s Law.”

As long as there are unsatisfied wants of any kind, there is always more work to be done, and thus there cannot be too much of everything relative to people’s demands. There can be too much of some goods compared to the greater demand for other desired goods, at the prices at which various goods are offered on the market.

If we see “excess supplies” of a number of commodities and types of labor and capital it is more do with distortions and imbalances between supplies and demands, and the misuse and misallocation of capital and labor caused by government interventions, monetary manipulation and taxing policies that have been and are preventing competitive markets and the price system from setting things right through appropriate market-guided rebalancing of supplies and demands.

In our new and ever-increasingly interdependent global market system, change and needed adjustments are inevitable and inescapable. But these will be prevented or made more difficult and delayed for as long as government policies get in the way.


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