Mill, McCracken and the Modern Interpretation of Say’s Law

Abstract

This article deals with three overlapping issues. The first is the enormous role played by the American economist, Harlan McCracken, in the development of the ideas underlying the General Theory and in particular his role as the source of the phrase ‘supply creates its own demand’. The paper then looks at the genealogy of this phrase, beginning with John Stuart Mill, and tracing its evolution from Mill to James Bonar to McCracken and then on to Keynes. Finally, the article looks at John Stuart Mill’s own short statement on Say’s Law, which has been overlooked in the economic literature until now. Mill’s short statement is used to develop a proper understanding of the law of markets, demonstrating, amongst other things, the inadequacies of the phrase ‘supply creates its own demand’ as a proper definition of this crucial classical concept.