The Arthurian — Say's Law and Say's Other Law

Say understood that supply and demand are reciprocal and mutually reinforcing.

The New Arthurian Economics
Say's Law and Say's Other Law
The Arthurian

Sandwichman — Here is a Little Economics Lesson

"Supply and demand."

Short.

Econospeak
Here is a Little Economics Lesson

Sandwichman

Ramanan — Effective Demand And The Labour Market

Noah Smith asks, “Why the 101 model doesn’t work for labor markets”.|

He realizes the answer but attributes it to Nick Hanauer.…

So Smith indeed concedes that the profession missed it out. But the attribution is incorrect. All this was figured out by Michal Kalecki in the 1930s....

The Case for Concerted Action
Effective Demand And The Labour Market
V. Ramanan

See also

Information Transfer Economics
It's a production input. No, it's a market good. Relax, it's both.
Jason Smith

Econospeak
Noah Smith: "Why the 101 model doesn't work for labor markets"

Sandwichman

Stephen Koukoulas — Economic growth more likely when wealth distributed to poor instead of rich

The idea that giving money to "job creators" is the answer to anything is discovered to be nonsense.

The Guardian
Economic growth more likely when wealth distributed to poor instead of rich

Stephen Koukoulas | Research Fellow at Per Capita, a progressive think tank

See also

Yellen lists four areas for research, but let’s look more closely at the first two groups of questions that she elevates.

The first is the influence of aggregate demand on aggregate supply. As Yellen notes, the traditional way of thinking about this relationship would be that demand, a short-run phenomenon, has no significant effect of aggregate supply, which determines long-run economic growth.

Demand is based on spending, which depends on income. Supply is based on investment, which is based on profit. and profit is based on sales. Sales constitute demand. The spending to saving ratio is much higher down the income curve. 

Less affluent people spend more and save less out of necessity, their necessary expenditure being much higher than discretionary, which little to nothing left for saving. I was just reading that 70% of Americans have less than a #1000 dollar cushion!

Now what was so hard about that? Economists are just figuring this out — after Keynes explained it decades ago and Post Keynesians have elaborated? We are deep doo-doo.

Yellen's second point:

Yellen points to research that increasingly finds so called hysteresis effects in the macroeconomy. Hysteresis, a term borrowed from physics, is the idea that short-run shocks to the economy can alter its long-term trend. One example of hysteresis is workers who lose jobs in recessions and then aren’t drawn back into the labor market bur rather are permanently locked out, therefore increasing the long-run unemployment rate. Interesting new research argues that hysteresis may affect not just the labor supply but also the rate of productivity growth.

If that is not a case for a job guarantee, I don't know what is.

Doh.

WCEG
Yellen poses important post-Great Recession macroeconomic questions
Nick Bunker

Miles Kimball — Supply and Demand: How to Get a Cheap Airfare, According to a Guy Who Sets the Prices for American Airlines

“The cheapest fares are on days when fewer people are traveling … ‘In the end, the seats are going to fly.’”

Confessions of a Supply Side Liberal
Supply and Demand: How to Get a Cheap Airfare, According to a Guy Who Sets the Prices for American Airlines
Miles Kimball | Professor of Economics and Survey Research at the University of Michigan

Bill Mitchell — Demand and supply interdependence – stimulus wins, austerity fails

My Phd research, was in part, exposing the myths in conventional or mainstream economics arguments that claim that structural imbalances in the labour market arise independently of the economic cycle and hence, aggregate spending. The mainstream used this assertion to draw the conclusion that government policy could little to bring unemployment down when mass unemployment was largely ‘structural’ in nature. Instead, they proposed that supply-side remedies were necesary, which included labour market deregulation (abandoning employment protection etc), minimum wage and income support cuts, and eroding the influence of trade unions. At the time, the econometric work I undertook showed that so-called structural imbalances were highly sensitive to the economic cycle – that is, the supply-side of the economy was not independent of the demand-side (the independence being an article of faith of mainstream analysis) and that supply imbalances (for example, skill mismatches) rather quickly disappeared when the economy operated at higher pressure. In other words, government fiscal policy was an effective way of not only reducing unemployment to some irreducible minimum but, in doing so, it increased the effectiveness of the labour force (via skill upgrading, higher participation rates etc) – that is, cleared away the so-called structural imbalances. A relatively recent paper from researchers at the Federal Reserve Board in Washington – Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy – finds new US evidence to support the supply-dependence on demand conditions. It is a case of stimulus wins whereas austerity fails....

Bill Mitchell – billy blog
Demand and supply interdependence – stimulus wins, austerity fails
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Brian Romanchuk — Should A Central Bank Care About Loanable Funds?

New Keynesian loanable funds and DSGE modeling following up on Lars Syll and Nick Rowe.

Bond Economics
Should A Central Bank Care About Loanable Funds?
Brian Romanchuk

Steve Keen — Is Capitalism Inherently Unstable? (3)

But it does seem to decide the case in favour of the classicals for the real world: prices must be set by a mark-up on costs, rather than by the ‘twin blades’ supply and demand.

That’s the opinion I held, until a crucial step in generalising my model of Minsky’s Financial Instability Hypothesis implied that, at a macro level, the two models are identical. I’ll get on to that – and the role of prices in economic instability – in the next post in this series.

Steve Keen's Debtwatch

Is Capitalism Inherently Unstable? (3)

Steve Keen | Associate Professor of Economics & Finance at the University of Western Sydney

James K. Galbraith — How the Economists Got It Wrong

An oldie but goodie from Jamie Galbraith, hat tip to Philip Pilkington.

The deeper problem is the nearly complete collapse of the prevailing economic theory--of the structure of thought that supports their policy ideas. It is a collapse so complete, so pervasive, that the profession can only deny it by refusing to discuss theoretical questions in the first place.


The prevailing theory is the idea that price and quantity are set in free competitive markets through the interaction of supply and demand. It is this idea, and no other, that lies at the core of the economist's way of thinking. And it is also the source of the profession's problem in getting almost anything important right.



The notion of supply and demand as the organizing principle for everything is a few decades more than a century old. (It was not so for Smith, Ricardo, Malthus, Marx, or Mill.) The key player in the Anglo-Saxon tradition is Alfred Marshall; in the continental tradition, no doubt, Leon Walras. In the twentieth century, great economists including Keynes, Joseph Schumpeter, and John Kenneth Galbraith have tried to break the grip of this notion on the professional imagination. But they have not succeeded.

The American Prospect (December 19, 2001)
How the Economists Got It Wrong
James K. Galbraith | Lloyd M. Bentsen Jr. Chair in government-business relations at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin, a senior scholar of the Levy Economics Institute, and chair of the Board of Economists for Peace and Security.

Nick Rowe — Artsie non-linearity, economics, and the concrete steppes

Nick works a rather clever narrative about teaching supply and demand in Econ 101 into an explanation of how expectations drive GDP expansion through using NGDP targeting instead of inflation targeting, and it does this, he believes, without bringing in a causal transmission mechanism.

Read it at Worthwhile Canadian Initiative
Artsie non-linearity, economics, and the concrete steppes

by Nick Rowe | Associate Professor, Carleton University

The explanation seems to me to be "stuff happens."

Good comments, by the way. I am partial to rsj, who argues against "stuff happens."