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Refutations of Say’s Law and Dynamics of a Monetary Economy of Production

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  • Edouard Cottin-Euziol
  • Nicolas Piluso

Abstract

In a monetary economy of production, Say’s law is invalid for several reasons. Based on some refutations, it is possible to state that revenues generated by the production process are structurally lower than the supply price of production, which means that firms create insufficient purchasing power to buy what they produce. Herein, we study the dynamics of such an economy and obtain two main results. First, the long-term debt level of that economy must increase during a growth phase to enable demand to grow at the same pace as supply. Second, because of the repayment of this debt, the gap between supply and net revenues generated by the production process widens along a growth phase. JEL Classification: E12, E2, E30, E42, G21

Suggested Citation

  • Edouard Cottin-Euziol & Nicolas Piluso, 2024. "Refutations of Say’s Law and Dynamics of a Monetary Economy of Production," Review of Radical Political Economics, Union for Radical Political Economics, vol. 56(1), pages 101-115, March.
    • Handle: RePEc:sae:reorpe:v:56:y:2024:i:1:p:101-115
    DOI: 10.1177/04866134231179758
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    References listed on IDEAS

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    1. Jean-Francois Renaud, 2000. "The Problem of the Monetary Realization of Profits in a Post Keynesian Sequential Financing Model: Two solutions of the Kaleckian option," Review of Political Economy, Taylor & Francis Journals, vol. 12(3), pages 285-303.
    2. Louis-Philippe Rochon, 1999. "The Creation and Circulation of Endogenous Money: A Circuit Dynamique Approach," Journal of Economic Issues, Taylor & Francis Journals, vol. 33(1), pages 1-21, March.
    3. Marc Lavoie, 2014. "Post-Keynesian Economics: New Foundations," Post-Print hal-01343652, HAL.
    4. Edouard Cottin-Euziol & Nicolas Piluso, 2023. "Stock-Flow Consistent Model with Repayment of Bank Loans Used to Finance Past Investments," Review of Political Economy, Taylor & Francis Journals, vol. 35(2), pages 454-475, April.
    5. Edouard Cottin-Euziol & Louis-Philippe Rochon, 2013. "Circuit with Multi-period Credit," Review of Political Economy, Taylor & Francis Journals, vol. 25(3), pages 461-475, July.
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    More about this item

    Keywords

    Say’s law; monetary economy of production; growth phase; bank credit; bank debt; monetary circuit theory;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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