Lord Keynes — Lachmann and Menger on the Law of Demand

Lachman: Menger uses the ‘law of demand’ as an example for this distinction. According to him the exact law tells us not merely that a rise in demand will lead to a rise in price, but that, under certain conditions, the extent of this price rise is quantitatively exactly determinable (‘dem Masse nach genau bestimmbar’). But he goes on to warn us that these conditions require not only that all participants maximize their satisfaction in the pursuit of which they must be free of all external coercion, but also the absence of error and ignorance. Hence we must not expect to find instances of the exact law in the real world.

Lord Keynes: That Menger could seriously believe and write those words demonstrates that he formulated the law of demand at a level so abstract that it could only be true in that almost imaginary world. It is as if we were to formulate a law that must be necessarily true in the Land of Oz, admit that such a law is not universally true in our world, but nevertheless contend that such a law is always and universally true in Oz, the world of our imagination.

That all this bespeaks a deeply flawed, even deluded, approach to the social sciences goes without saying.

Menger conceded that when related to the empirical real world of experience, the law of demand” arrives at contradictions.” That is quite clearly a continuing problem with the law of demand even in neoclassical economics.

Social Democracy for the 21st Century
Lachmann and Menger on the Law of Demand
Lord Keynes