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The point is that production is a derivative of consumption. Consumption doesn't adapt to production. So, if you want production to rise, you have to work on th
by Joeri 11y ago
The point is that production is a derivative of consumption. Consumption doesn't adapt to production. So, if you want production to rise, you have to work on the consumption side of things.
- NoPiece 11y agoThat is something economists have major disagreements about. Classical economists (see Say's law) would argue that the production of a product creates the market/demand for it.
- brational 11y agoYea and that makes sense for products that are actual necessities. It is bullshit if applied to an arbitrary "product".
- Joeri 11y agoThat's obviously false as plenty of goods are never sold but destroyed instead because nobody wanted them. Production follows demand, any businessman will tell you. Maybe if a few economists actually learned about business we wouldn't have so many recessions.
- the_why_of_y 11y agoIt's an interesting debate, and the position I find convincing is that Say's law usually holds... except (rarely) when it does not, such as in the recent financial crisis. Believing that it always holds automatically is a fallacy of Classical economics. It's interesting that Jean-Baptiste Say himself was willing to learn from history. http://delong.typepad.com/sdj/2010/07/after-the-british-financial-crisis-and-depression-of-1825-6-jean-baptiste-say-was-too-smart-to-believe-in-says-law.html http://delong.typepad.com/sdj/2010/07/after-the-british-fina...
- rahimnathwani 11y agoA rise in production doesn't have to coincide with a rise in consumption. The additional production could be driven by increases in investment or in net exports.