Say's law of markets as interpreted by Jenkin, Pareto, Einaudi and the Italian economists of the past
These days, deep as we are in a depression similar to that of 1929, it is worth looking again at Say’s law as interpreted by Jenkin, Pareto and Einaudi. What they have in common is the idea that the development of production is closely linked to the growth and fickleness of human wants. It follows that during a process of economic growth, there will always be businesses and sectors of production which age and disappear, although the take-off associated with the more innovative sectors can also lead to some opportunities for modernization within the declining sectors. The three economists named in the title of this paper shared an awareness of the fact that money not only serves as a numeraire and a means of exchange, but also as a store of value. While Gossen’s diminishing marginal utility is lacking in Jenkin, it holds the stage for the two Italian economists. In their turn, Pareto highlights the fact that the vastness and fickleness of wants prevents money’s marginal utility from descending below a certain threshold, whereas Einaudi proposes that the diminishing marginal utility of goods acts to hamper the reabsorption of unemployment generated by ‘mechanicism’, and, more generally, by technical and organizational innovations. The vast Italian literature on Einaudi has downplayed the originality of his theory; this gap has not been filled, not even by a polyglot and renowned Pareto’s scholar like Georgescu-Roegen. Among the Italian economists of the past, a special mention of Pantaleoni is finally made.
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