Brief Outline of Topics Covered in Lecture 8:
Bentham, Say, Senior, and Mill (ch. 6) pgs. 156-165 as emphasized in class
Bentham is on pgs. 169-170
Say is on pgs. 147-148 of chapter 5
Senior is on pgs. 159-161
Video:
Lecture 8 [Google video] - Fall 2007
Lecture 8 [Media Player] - Fall 2007
| Economics 493 Lecture 8 |
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Jeremy Bentham Auto-Icon
Jeremy Bentham: As requested in his will, his body was preserved and stored in a wooden cabinet, termed his "Auto-icon". Originally kept by his disciple Dr. Southwood Smith, it was acquired by University College London in 1850. The Auto-Icon is kept on public display at the end of the South Cloisters in the main building of the College. For the 100th and 150th anniversaries of the college, the Auto-Icon was brought to the meeting of the College Council, where he was listed as "present but not voting". Tradition holds that if the council's vote on any motion is tied, the auto-icon always breaks the tie by voting in favor of the motion.
The Auto-Icon has always had a wax head, as Bentham's head was badly damaged in the preservation process. The real head was displayed in the same case for many years, but became the target of repeated student pranks including being stolen on more than one occasion. It is now locked away securely.
on Say's Law and the Impossibility of Gluts
"It is worth
while to remark, that a product is no sooner created, than it, from that
instance, affords a market for other products to the full extent of its own
value. When the producer has put the finishing hand to his product, he is most
anxious to sell it immediately, lest its value should vanish in his hands. Nor
is he less anxious to dispose of the money he may get for it; for the value of
money is also perishable. But the only way of getting rid of money is in the
purchase of some product or other. Thus, the mere circumstance of the creation
of one product immediately opens a vent for other products ..."
"But it may be asked, if this be so, how does it happen, that there is at times
so great a glut of commodities in the market and so much difficulty in finding a
vent for them? Why cannot one of these 11 superabundant commodities be exchanged
for another? I answer that the glut of a particular commodity arises from its
having outrun the total demand for it in one or two ways; either because it has
been produced in excessive abundance, or because the production of other
commodities has fallen short."
on the Impossibility of Gluts
"No man produces, but with a view to consume or sell, and he never sells, but with an intention to purchase some other commodity, which may be immediately useful to him, or which may contribute to future production. By producing, then, he necessarily becomes either the consumer of his own goods, or the purchaser and consumer of the goods of some other person.
Productions are always bought by productions, or by services; money is only the medium by which the exchange is effected. Too much of a particular commodity may be produced, of which there may be such a glut in the market, as not to repay the capital expended on it; but this cannot be the case with respect to all commodities."
on Malthus and the Possibility of Glut
"The idea that we can safely neglect the aggregate demand function is fundamental to the Ricardian economics, which underlie what we have been taught for more than a century. Malthus, indeed, had vehemently opposed Ricardo?s doctrine that it was impossible for elective demand to be deficient; but vainly. For, since Malthus was unable to explain clearly (apart from an appeal to the facts of common observation) how and why effective demand could be deficient or excessive, he failed to furnish an alternative construction; and Ricardo conquered England as completely as the Holy Inquisition conquered Spain. Not only was his theory accepted by the city, by statesmen and by the academic world. But controversy ceased; the other point of view completely disappeared; it ceased to be discussed. The great puzzle of Effective Demand with which Malthus had wrestled vanished from economic literature. You will not find it mentioned even once in the whole works of Marshall, Edgeworth and Professor Pigou, from whose hands the classical theory has received its most mature embodiment. It could only live on furtively, below the surface, in the underworlds of Karl Marx, Silvio Gesell or Major Douglas.
But although the doctrine itself has remained unquestioned by orthodox economists up to a late date, its signal failure for purposes of scientific prediction has greatly impaired, in the course of time, the prestige of its practitioners. For professional economists, after Malthus, were apparently unmoved by the lack of correspondence between the results of their theory and the facts of observation;? a discrepancy which the ordinary man has not failed to observe, with the result of his growing unwillingness to accord to economists that measure of respect which he gives to other groups of scientists whose theoretical results are confirmed by observation when they are applied to the facts.
The celebrated optimism of traditional economic theory, which has led to economists being looked upon as Candides, who, having left this world for the cultivation of their gardens, teach that all is for the best in the best of all possible worlds provided we will let well alone, is also to be traced, I think, to their having neglected to take account of the drag on prosperity which can be exercised by an insufficiency of effective demand. For there would obviously be a natural tendency towards the optimum employment of resources in a Society which was functioning after the manner of the classical postulates. It may well be that the classical theory represents the way in which we should like our Economy to behave. But to assume that it actually does so is to assume our difficulties away."
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