Quotation of the Day…

by Don Boudreaux on July 19, 2013

in Complexity & Emergence, Hayek, Scientism, Seen and Unseen, State of Macro

… is from page 96 of F.A. Hayek’s 1983 essay “The Muddle of the Middle,” which is chapter 7 of the excellent 1983 collection, edited by Svetozar Pejovich, Philosophical and Economic Foundations of Capitalism:

The conception that there is some simple correlation between the volume of aggregate demand for final goods and the total volume of employment derives from the experience of the shopkeeper that a strong demand for his goods secures his prosperity.  The conception of such a relation as exists between the strength with which one may suck at one end of a pipe and the pull of the suction at the other end is of course the crudest possible misrepresentation that has been periodically reintroduced into scientific discussion, most recently with devastating effect by Lord Keynes.  The incredible crudity of this approach, congenial to the minds for whom scientific method exhausts itself in measuring the connection between changes of two observable magnitudes, ought to have been exposed long ago.  The volume of employment is not determined by the relation of total demand to the total supply of goods and services but by the correspondence or noncorrespondence between the distribution of demand among the different goods and services and the proportions in which these different things are offered.

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