On the Basis of the Law of Markets, No Obstacle to Growth Exists on the Demand Side so long as Production Corresponds to the Demands of Buyers

Classical economists had a different and far more penetrating understanding of the nature of recession and the business cycle than Keynes, or indeed most modern interpreters of classical theory, give them credit for. And, in what may be the greatest irony of all, it will be shown that the theory of the cycle held by classical economists was based on an understanding of Say's Law. That is, far from being an impediment to understanding the causes of recession and unemployment, Say's Law was a fundamental part of the theory which explained their occurrence.

What will be shown is that the basis of the classical theory of the cycle was the structure of demand rather than the level of demand. Classical economists argued, on the basis of the law of markets, that no obstacle to growth existed on the demand side, so long as production corresponded to the demands of buyers. Classical theory explained recessions by showing how errors in production might arise during cyclical upturns which would cause some goods to remain unsold at cost-covering prices.

--Steven Kates, Say's Law and the Keynesian Revolution: How Macroeconomic Theory Lost its Way (Cheltenham, UK: Edward Elgar, 2009), 19.