Money, Banks and Finance in Economic Thought

Torrens, the Quantitative Approach to Economic Theory and Say's Law

Arthmar Rogerio, UFES, CNPq
Hisamatsu Taro , Doshisha University

This paper analyses Robert Torrens’s personal statement of Say’s Law, based on the concept of a proportionate demand, and connects it with other aspects of his work. Initially, we exam Torrens’s thoughts on the best way of doing economics, showing how he opted for a full-blown deductive method to conduct his inquiries into political economy, but always anchored on a quantitative approach. Following that, his basic aggregate model for equilibrium prices and the profit rate is presented. Next, his proportional theory of Say’s Law is spelt out and articulated with a numerical illustration to make clear how the correct supply of the ingredients of capital is assumed by him as a necessary condition for the equilibrium of markets under full competition. On this issue, the subsequent section considers the possible causes of a shortage in effectual demand and how it can quickly engulf the whole economy. The quantitative illustration developed by Torrens is tracked down through its effects on the transactions of the different economic sectors and synthesized in a disequilibrium matrix of exchanges. The final remarks stress the originality of Torrens’s theoretical contribution, marked by a peculiar numerical approach to economic theory.

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Keywords: classical methodology, quantitative approach, competitive equilibrium, effectual demand, general glut

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