May/June 1998 | Volume 49, Issue 3
By far the most overrated economist in the American tradition was not of this country but of France. It was Jean Baptiste Say, who dominated macroeconomic thought (as it is now called) until the 1930s. Before then, it has been said, one could not get an advanced degree at Harvard if one did not believe in Say’s Law. The law held that the production of goods and the rendering of services systemically provided all the revenues by which they would be purchased. Thus there could not be a shortage of purchasing power—aggregate demand —with adverse and depressive effects.
In 1936, with the work of John Maynard Keynes, there came a general realization that while Say’s Law undoubtedly paid out in wages, profits, rents, or whatever the wherewithal to buy the products, it might not be spent. The result could be a rather disagreeable recession or depression, however denoted. The circumstances of the time and John Maynard Keynes destroyed Say’s Law.
The most underrated economist was a native-born American of solid Norwegian stock, Thorstein Veblen. He has now, alas, disappeared from most scholarly discussions; his great book The Theory of the Leisure Class , published just at the end of the last century, now goes unread. It was Veblen who looked at the rich and the merely affluent as superb anthropological specimens and gave to the world conspicuous consumption and conspicuous leisure . He told us that consumption by the rich and their use and nonuse of time were not for their comfort or enjoyment but as marks of their position in the world. But his larger service was seeing economic behavior not as something compelled by traditional forces of need, original or acquired, but as, to repeat, an anthropological exercise, at least for the socially eminent.
Along with all else, Veblen was an engaging, wonderfully amusing writer. In his time, and still, there is much to be learned from him, and from no economist was or is the learning process more delightful. It is sad indeed that he has gone out of sight.