Still, an upswing in the business cycle tends to build on itself, partly because a growing labor force that is finding jobs creates new incomes that increase demand for new goods and services, sparking a virtuous circle of rising jobs and incomes. This is the dynamic behind Say's Law, which as noted earlier, refers to the notion that supply creates its own demand. This dynamic works as long as the economy expands. Keynes' contribution was to highlight the need to support demand when confidence is low and this dynamic starts working in reverse. Say's Law seems to be asymmetric, working in good times and breaking down in bad (deflationary) times.
Sunday, October 14, 2018
Say's Intermittent Law
From Applied Financial Macroeconomics and Investment Strategy by Robert T. McGee, pages 37 and 38:
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