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This case teaches advanced business reasoning skills by focusing on the motivations for Wanda-Dalian’s Chairman Wang Jianlin’s conflict with Disney over Disney’s new Shanghai theme park. The case reviews Wanda’s development – from real estate up-start to national builder. From cinema operation to movie maker. And from its focus on global cultural industries to fighting with Disney for market share in China’s quickly growing real estate and entertainment businesses. At its heart, the decision to fight Disney pits the Wanda Way against the Disney Way, and tests whether Chinese companies need to develop local markets following the National Development Model and the Communist Party’s policies in order to succeed. Questioning canonical business school thinking, the case challenges readers to explore the limits of consumer value by thinking through the limits of Say’s Law (named after 18th century French philosopher Jean-Baptiste Say and his admonition that supply creates its own demand).

Coaching classes and private tuitions have become ubiquitous in the lives of Indian students. Every single school student who was interviewed was found to be taking tuitions for regular studies and 40% of these school students take coaching classes for courses outside the purview of regular studies. Out of 80 college students covered in this study, 56 took private tuitions for the college syllabus and 25 took coaching for professional examinations. Students who attend coaching class feel well prepared for the examinations as they are taught according to the examination pattern. Private coaching expenditures can be substantial for these students by Indian standards considering that the formal higher education in India is heavily subsidised. The rising trend towards taking private tuitions in India strongly reflects the poor quality of education being imparted in schools and colleges. One possible response could be making available remedial education in schools and colleges itself.

This article deals with three overlapping issues. The first is the enormous role played by the American economist, Harlan McCracken, in the development of the ideas underlying the General Theory and in particular his role as the source of the phrase ‘supply creates its own demand’. The paper then looks at the genealogy of this phrase, beginning with John Stuart Mill, and tracing its evolution from Mill to James Bonar to McCracken and then on to Keynes. Finally, the article looks at John Stuart Mill’s own short statement on Say’s Law, which has been overlooked in the economic literature until now. Mill’s short statement is used to develop a proper understanding of the law of markets, demonstrating, amongst other things, the inadequacies of the phrase ‘supply creates its own demand’ as a proper definition of this crucial classical concept.

Two issues are addressed in this paper. Firstly, the origins of the phrase ‘supply creates its own demand’ as a definition of Say’s Law are investigated. The paper argues that while there are a number of possible sources for these words within the classical literature, their most likely origin is in the writings of John Stuart Mill. The second more important issue is whether those words are an accurate summary statement of the conclusions classical economists wished to draw. The paper argues that the phrase is entirely inadequate as a definition of Say’s Law, not just failing to capture the full meaning classical economists had wished to convey but seriously misleading if one wishes to understand how classical economists understood the way economies actually work.

It seems difficult to exaggerate the importance of Say’s Law to Keynes as he wrote the General Theory. Much of the General Theory. is written as a criticism of classical economics, specifically classical economists’ beliefs about Say’s Law and its implications. The composition of the General Theory. for Keynes was a ‘long struggle of escape’: an escape from Say’s Law, which for Keynes characterised classical economics. In this paper the role of Say’s Law in Keynes’s development of the General Theory. is analysed. The various ways in which Keynes expressed Say’s Law are discussed. The many important and varied implications of Say’s Law for Keynes are mentioned. The evolution of Keynes’s thought about Say’s Law and its implications are discussed. Finally, two possible sources for Keynes of the phrase ‘supply creates its own demand’ that he used to characterize Say’s Law are suggested: James Bonar’s Malthus and his Work, second edition, and H.L. McCracken’s Value Theory and Business Cycles.

What is perhaps most curious about ‘Say's law’ is the continuing disagreement on its substance and to whom it should be credited. John Maynard Keynes summarized the law as ‘supply creates its own demand’ but it is now generally agreed that Keynes did not get it quite right. The author has been unable to ascertain who coined the term ‘Say's law’ but it appears to be a twentieth century appellation, preceding Keynes's use. John-Baptiste Say was certainly among the earlier writers to discuss the topic at length but so far as the author can determine, none of Say's contemporaries--including Say himself--credits him with having been first to enunciate its principles.

Skepticism about the viability of aggregate demand as an economic governing force long preceded John Maynard Keynes. Such skepticism, as for example in the long and fascinatitng debates Ricardo had with Malthus, usually proceeded from a belief in Say's Law, the notion that supply creates its own demand and therefore lack of aggregate demand cannot be a constraint on output and employment. The attack on Keynesian economics, launched by Friedman and Phelps in the late 1960s and turned into a steam roller in the 1970s when Robert Lucas, Thomas Sargent, and others created the rational expectation school, essentially was a variant of this long-held pre-Keynesian idea. In this view, the one that Keynes' himself attacked in the General Theory, the capitalist economy was at full employment virtually all the time. As a result, govenment policy designed to increase employment was not only useless, but, by distorting the price mechanism or leading to inflation, it was actually pernicious. Now, it is not on these grounds that Steven Cunningham and Jon Vilasuso intend to attack the viablity of Keynesian demand management policy in the 1990s. Indeed, by arguing that Keynesian demand management policy is now less effective than it once was, they implicitly accept the idea that aggregate demand can have an independent effect on output and employment and that the free market, left to its own devices, may not deliver full employment. Rather, according to Cunningham and Vilasuso, the supply of aggregate demand policy may not be sufficient to meet the demand for it. Because of structural changes in the economy and the polity in the postwarperiod, the two tools of aggregate demand policy, monetary and fiscal policy, can no longer be used to increase aggregate demand when

Grass roots methods of poverty alleviation will fail unless jobs are created or stimulated by governments (whether central or local). In the presence of high unemployment at all levels, improving the capabilities of job seekers (making them better fed and housed and educated) will only lead to more unemployment and not to more paid employment or self‐employment above the subsistence level (call this the ‘Kerala Effect’). To believe that improving only the supply side of the labor market is enough to reduce poverty without also improving the demand side, and investing in jobs, is logically flawed and subject to the same error as Say’s Law — that ‘supply creates its own demand’. Healthcare and other benefits provided through grass roots anti‐poverty programs may improve the quality of life (measured by rising life expectancy). But as population growth rises, diminishing returns sets in, in Malthusian fashion, and poverty does not fall, as shown by the data provided in the article.

When John Maynard Keynes recognized that Say’s Law, supply creates its own demand, may not always work, he shocked his classical economist colleagues. The classical school was one of permanent equilibrium, unless of course some irrational animal spirits plunges us, presumably temporarily, into disequilibrium. Keynes was the first to create a consistent theory that explains how an economy can be in a persistently bad state of affairs.

"[F]airly interpreted, 'Say’s law of markets' survives as the most fundamental 'economic law' in all economic theory. It enunciates the principle that 'demands in general' are 'supplies in general '— different aspects of one phenomenon." William H. Hutt, A Rehabilitation of Say’s Law, 1974. Facing economic downturns, politicians of both parties often seek to stimulate consumer demand — and some business investment — through political action. As in recent stimulus campaigns —- for example, during the first terms of presidents Bill Clinton and George W. Bush, and the early 2008 "stimulus package" that persisted into the Obama presidency — politicians almost uniformly accept the legitimacy of government stimulus and rarely ponder the future economic harm such intervention may cause. Genuine stimulus would entail liberalization of the economy from excessive regulations, interventions, and spending, and from political inflation of the money supply. It would maintain the conditions — legal order, minimal regulations, and stable institutions — within which wealth can be created while recognizing that governments do not themselves create wealth. “Say’s Law” in economics holds that supply creates its own demand. A relative overproduction of certain goods may occur, implying that too many scarce inputs have gone into the production of unwanted items relative to inputs for desired goods. But general overproduction — to which demand stimulus would allegedly provide relief — is not the core economic problem. Among the prerequisites for economic well being — along with negligible political interference — is low tolerance for special-interest pleadings for resource transfers, no political maintenance of wages or prices above market levels, and a rejection of government-granted monopolies. Indeed, there is a tendency for recession if government does not perform these classical functions of preventing the interest group manipulation that distorts smooth economic enterprise. However in today’s world, the opposite of Say’s Law — “demand creates supply” — dominates macroeconomics and politics generally. Political expediency induces policy makers to overlook the long run, and to support measures like short-term demand stimulus packages. Such artificial demand distorts the freely determined distribution between consumer and producer goods. Political stimulus sends resources in the wrong direction and the true adjustment that the market actually needs is further postponed. It may very well be that, while downturns and recessions can be effectively addressed through voluntary, market means — as Say’s Law implies and its non-interventionist adherents maintain — our current political framework does not allow for non-governmental resolution as an policy option. We rarely open the newspaper to read the headline, “Government Decides to Do Nothing about Economic Downturn.” Policy prescriptions like the 2008 election-year stimulus package may foster political ends that have little to do with actual economic recovery. A real test of Say’s Law will require changes in what most people expect from government, and in what representatives in government are able — constitutionally — to do in the name of public service. Once it moves beyond performing its “classical” functions of maintaining order and thwarting contrived scarcity, government becomes a transfer mechanism, one inherently limited in what it can contribute to the real economy. It can add little, and subtract much. One example of supply-side form of “stimulus” is to cut marginal tax rates to facilitate economic activity via increased supply. With returns to enterprise increased and workers and investors certain that present efforts will be penalized less, the economy will begin expanding owing to reduced effective tariffs on the creation of supply. Similarly, a sustained program of reducing governmental regulatory interventions in the economy, and invigorating institutions to keep such interventions minimal, point the way toward prosperity and wealth creation, and to an economy that can finally eschew damaging appeals to political stimulus.

A, perhaps the, major difference between schools of thought in macro-economic analysis arises from the relationship between the demand side and the supply side. Say’s Law is, of course, often summarized as ‘supply creates its own demand’ and the view that the level of economic activity is determined by the supply potential, and that demand has to adjust to underpin that level of supply. There have been long debates over whether this is a feature of the short run as well as the long run. The separation between demand and supply, and the view that there is a predetermined growth of supply, is reflected in the following quote from the now Governor of the Bank of England: ‘if one believes that, in the long-run, there is no trade-off between inflation and output then there is no point in using monetary policy to target output.… [You only have to adhere to] the view that printing money cannot raise long-run productivity growth, in order to believe that inflation rather than output is the only sensible objective of monetary policy in the long-run’ (King, 1997, p. 6). Similar sentiments are often expressed with respect to fiscal policy, and the more general view that the level of demand has no long-run effects on the levels of output and employment in an economy. The vertical aggregate supply curve is a regular feature of macroeconomic analysis, and is an embodiment of the view that the level of economic activity (in the long term) is supply-determined (with the implicit assumption being made that the vertical aggregate supply curve is not influenced by the time path of aggregate demand.

One of the oldest issues in the history of economic thoughts is the question whether supply determines demand or demand determines supply. The supply-side argument, known as Say’s Law, is based on the idea that the motive behind supply is always the suppliers’ desire to earn income for being able to satisfy their wants. Thus, supply eo ipso implies demand, or as it was also formulated: Supply creates its own demand. The demand-side argument, central to the theory of Kalecki and Keynes, says that not the desire to purchase (i.e. notional demand) but effective demand is relevant. Since it cannot be taken for granted that the level of effective demand is high enough to absorb any volume of supply, firms base their production and employment decisions on the level of effective demand that they expect. Thus, expected demand determines supply i.e. the level of production and employment.

Austerity is now ’in fashion,” as governments respond to the revenue shortfalls of the crisis through deficit reduction plans and fiscal stability pacts, and economists blame it on the profligate spending of households and countries. Consumers, they say, bought houses they could not afford and countries consumed more than they produced, while loose monetary policies made this spending possible. Governments ’got prices wrong,” keeping interest rates too low for too long, and while increases in government spending might alleviate current employment problems, this deficit spending is inflationary, and in any case will not help in the long run as budget deficits raise interest rates, ’crowding out” business and household spending. It is as if we have stepped back in time, to the depression years of the 1930s, when monetary theories of the cycle were dominant, the ’overinvestment” of the boom blamed for the downturn, and effective fiscal actions proposed by Keynes and others blocked by preoccupation with the public debt and its burdens.… The analysis here is concerned with the systematic rejection of Keynes’s and Kalecki’s revolution in economics and the resurrection of Say’s Law (supply creates its own demand) of pre-Keynesian economics in all but name—a view that underlies today’s austerity economics. This article can also be found at the Monthly Review website, where most recent articles are published in full.Click here to purchase a PDF version of this article at the Monthly Review website.

In this chapter I consider various aspects of Ricardo's mature analysis of distribution and accumulation. In the first section, I show that Ricardo's later theoretical objective (after the Essay ) remained one of demonstrating a falling rate of profit in consequence of progressively diminishing agricultural returns; I argue that there is no mystery surrounding his retention of the (developed) ‘agricultural’ model; and I investigate the connection between the falling rate of profit analysis and Ricardo's case against agricultural protection. In the second section, devoted to Ricardo's treatment of wages, I establish that the Principles contains evidence of two conflicting doctrines, namely the natural wage analysis and the ‘new view’ analysis; I argue that it is only the natural wage analysis which is consistent with Ricardo's central thesis on ‘permanent’ changes in profitability, and with his characteristically ‘discrete’ style of analysis; I speculate on the reasons for the inclusion of the ‘new view’ passages in the Principles; and I consider whether Ricardo's position changed in later years. The ‘law of markets’, commonly interpreted as the doctrine that ‘supply creates its own demand’, provides the subject matter for the third section. It was this powerful doctrine, incorporating Ricardo's vision of real economic behaviour, which supported his ‘prediction’ of virtually unlimited economic growth, without any ‘permanent’ fall in profitability, in a British economy open to the free importation of corn. I recount the story of Ricardo's quite remarkable attachment to the ‘law’; I comment on the implications for his reputation as an ‘applied’ economist; and I tender an explanation as to why the doctrine came to hold such a powerful attraction for him. A brief conclusion follows.

An increase in the size of the stock of game or fish generally leads to an increase in the number of predators: supply creates its own demand, as the economists remark. As in nature so it is in the NHS, although as ever ministers seem nicely naïve in asserting continually that the service has lots of dosh to fund everything that can be possible done, even though they have no idea of the full cost of the NHS modernisation’ - sorry, ‘system reform’.

Revisionism usually supplies whatever excitement there is to be found in writings on dogmengeschichte. Here, achievement often consists in showing that a writer had been badly misinterpreted, or that his contribution is far greater than is generally supposed. This paper can, however, pretend to propose no more than a modest revision of our ideas on the early writings on Say's Law. It will be argued that J. B. Say and his contemporary James Mill, who is also sometimes credited with the notion that "supply creates its own demand", really seem to have had in mind a set of ideas rather more complex than that and, moreover, that the main policy implications they drew from their discussion went well beyond the comforting thought that fears of universal glut are baseless. Certainly, their discussion was not Panglossian in spirit, for one of their main points was the superiority, from the point of view of growth in economic welfare, of investment outlays over idle consumption (either in the form of luxurious living by wealthy individuals or the military and other unproductive outlays of prodigal governments). Moreover, these authors maintained that only production can create real purchasing power, so that an impecunious community is in no position to provide effective demand in abundance. Restriction in output must necessarily limit effective demand and is certainly not a way to promote it, particularly in the long run. These are ideas, it will be noted, that the modern literature does not reject, at least not with the universality with which it denies the notion that supply creates its own demand. Indeed, they are thoughts that may still be of some pertinence, particularly for development theory and policy. Moreover, for the time in which these authors were writing, these ideas can certainly not be considered a manifestation of conservatism. Rather, they can be interpreted as a reply to the defenders of the landed aristocracy and their consumption patterns, and as support for the expanding spirit of capitalist enterprise that accompanied the young industrial revolution. Obviously, there is no limit to the extent to which one can subdivide the notions composing Say's discussion of markets or exchanges (debouches), his related remarks on consumption, or the parallel materials in Mill. I will confine myself to those relationships that have played a substantial role in later discussions, particularly in recent literature, and to those observations that seem clearly to have been uppermost in the minds of the authors as indicated by the degree of emphasis devoted to them. But before getting to that, it is appropriate first to recapitulate the contents of Say's Law, as it is understood nowadays, and as contrasted with the main proposition espoused by Say himself.

University libraries, especially in the Indian context, have been functioning as if they have adopted the age old “laissez-faire capitalism” as their guiding principle. The simplest embodiment of the laissez-faire capitalist “principle” can be found in the famous “Say’s Law”’ that “supply creates its own demand”. The predominant reason for John Maynard Keynes 2 to become a severe critic of it and to develop an alternative approach was its unreal theoretical foundations and nonintegrative approach to solve practical problems. Like the laissez-faire economists, university librarians have been laying the foundations of all their library operations on unreal assumptions. University libraries have as a result been facing depression in the use of libraries by the user community especially in the Indian context. The real solution lies, either in adopting a Keynesian approach to university library management and services, or in implementing “socialist planning techniques”3 in university library and information services. However, it is necessary to examine the implication, of both laissez-faire and Keynesian approaches to University library operations.

Publisher Summary This chapter describes aggregate demand as a catalyst of the Keynesian model. Until full employment is attained, supply is accommodative. An increase in aggregate demand leads to an increase in output and real income. The pre-Keynesian view was that supply creates its own demand. However, the Keynesian view turns it around. Until the full-employment capacity of an economy is reached, demand creates its own supply. This chapter discusses the concept of equilibrium introduced by the Keynesian model. Equilibrium within the Keynesian model is not dependent on full employment. It is not expected that full employment would be associated with the equilibrium income level. When unemployment is present, falling wages would not restore full employment because wage cuts would serve to reduce income, thereby reducing aggregate demand. The interest rate would not be able to equate saving and investment. The level of saving would be determined by income, and investment would be determined by the prospect for profit. When an economy is slipping into a recession, falling interest rates may fail to bring saving and investment to equality.