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asked ago in General Economics Questions by (240 points)
Keynes has disapproved the say's law "supply creates its own demand" but I want to know if there is any empirical evidence that this law doesn't hold true? Theoretically, keynes successfully disapproved it by stating that if supply is there and no demand follows or demand doesn't rise in proportion to the supply then inventories will build up and producers will be forced to cut price and halt production and then we will have slowdown. But does this hold true?

The reason for my curiosity is if look at things whether in realm of society or business, supply does create its own demand. For eg - Every new invention or technological breakthrough ranging from Ipod to computers, e commerce to MOOCs, they are first supplied and then demands build up. If I may also put it in abstract terms also then it seems to hold valid. For eg - The more we love, the more generous we are, the more gratitude we supply from our own side the more we find we are capable to render. In my opinion only by consistently supplying goodwill or any good thing can we hope to increase the substantive over superficial in our individual lives and in the collective dream called culture.

1 Answer

+1 vote
answered ago by (2.3k points)
I recommend you to read my last work, which I uploaded here.

Supply creates its own demand. That's right. But what Keynes explains is that because of propensity to consume and other factors, demand created by supply is not enough to consume all output. So companies tend to halt production and cut prices. Both theorical approaches are valid. Supply creates demand and demand support supply.

Kind regards.