Probably the greatest error in modern economics was the abandonment of Say’s law, otherwise known as the law of the markets. In a nutshell, it demonstrated that through the division of labour, production is firmly linked to consumption, and the former is tied to the latter through the medium of money and credit. While there are variations in production outputs of individual goods, in free markets there can never be a general glut. It was this that Keynes had to disprove in order to create a role for the state, intervening to make up for the supposed deficiencies of free markets. While reasoned analysis shows that Keynes failed to disprove Say’s law, he managed to convince the mainstream establishment that he had actually succeeded.
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