As politicos bandy about the notion of another round of economic stimulus, the following excerpt from the latest edition of Carolina Journal Radio comes to mind.
Economist Paul Cwik of Mount Olive College discusses the key element of a concept labeled Say’s Law. If you’ve ever heard of that law, it’s likely that you’ve heard it defined as “supply creates its own demand.” Cwik contends that’s a poor distillation of Jean-Baptiste Say’s true message, which was more along the lines of “we produce in order to consume.” In other words, if we want to consume (or act on our demand) we have to produce (supply) something else first.
Government artificially stoking demand doesn’t address the true economic problem: the need for us to produce more stuff that people want.
