A Rehabilitation of Say’s Law (W. H. Hutt)
- Highlight Loc. 1077-84 | Added on Sunday, March 25, 2012, 07:11 PM
It will help to clarify the issue if we consider the significance of spending. Given any “money supply,” it is the demand for money to hold (not to spend) which determines the value of the money unit; and given the demand for money to hold, it is monetary policy which, in determining the “money supply,” determines the value of the unit. Spending is incidental. If prices in general rise, then in such transactions as must be made through spending, an increased number of money units must be offered for any quantum of non-money. Each price established represents what must be spent if a good is to be sold and purchased. The increased spending is, then, a consequence not a cause. It is the valuing process, not the spending (which follows the valuing) that determines prices. The truth of this proposition is established by the fact that all present prices are influenced by expectations of future prices. Another proof is that the prices of goods often change in a market which is closed for a period during which no spending on the goods could have occurred!
