Total demand = exchange demand + reservation demand.
Or demand the chairs for his own personal use; consumption or speculative. If there was really no demand for the chair, then by definition, it would seize to be a good and is no longer part of the supply of goods. Do you understand what a good is? You can’t have a good without demand.
That you are holding a chair in your living room (or warehouse) is proof that you have a demand for it. Otherwise, you would exchange it or discard it.
From Wikipedia on Demand:
In economics, demand is the desire to own anything, the ability to pay for it, and the willingness to pay[1] (see also supply and demand). The term demand signifies the ability or the willingness to buy a particular commodity at a given point of time.
There you have it. If I already own a chair, I do not, by the standard economic definition, have a demand for it. My demand for that chair disappeared when the chair became mine.
It is still a good, of course. from wikipedia on Good (Economic):
a good is a product that can be used to satisfy some desire or need.
Even if no one can afford it [=lack of demand as defined in economcs] and/or I already own it [=lack of demand on my part because I am not going to buy it ever, since that chair is already mine and I cannot buy it from myself], it nevertheless remains a good because it can be used to satisfy some desire or need. The owner can certainly use it. Other people cannot, but they would love to have it and use it for free. So it is a good for them too.
..then you are paying for it when you decide to forgo the next highest rank alternative use for it; exchange for money or for another commodity.
It did not disappear because you are still paying for it. I hope that is clear now.
Let me ask you this. If you already own some money, then “by standard economic definition”, you have no demand for it? Can I have it then?
DD5, I agree that the concept you describe exists. Owning A means foregoing some other possible pleasure.
However, that is not the standard usage of “paying” and certainly not of “buying”.
Look at supply and demand curves. Do you think they are talking about people who already own the chair, and what they have to forego?
I dunno, DD5, you have introduced a world where people are constantly and eternally “paying” for what they own.
And indeed, should the outside world agree someday to redefine “pay” to conform with your new definintion of it, we would be in agreement. Until then, pay means what you give someone else in exchange for what he gives you. Not what you have to forego because you own something.
Do you think wikipedia, when it wrote "the ability or the willingness to buy" that it did not mean buy from someone else?
As for giving you my dollars because I do not have a demand for them, that is a non sequitor. Because I do not wish to buy [=from someone else] the dollars I already own [because I don’t need to buy them, I already own them] does not imply I have no use for them.
This means there is cost to owning A, which means you are paying for A, which means you have a demand for it.
It’s not. See logic above.
Do you want to argue semantics or economics?
I don’t know who “they” are. Most “they” understand very little.
Total demand= exchange demand + reservation demand. It is just easy sometimes to forget the latter because most supply curves on the money based market are assumed vertical. (no reservation demand). Of course, even there, if you go more ‘micro’, say ‘nano’, then there is reservation demand. Otherwise, there would be no stock ever sitting on the shelves and back in the warehouse.
If you could learn economics from just wikipedia, then why read Human Action, MES, or anything else for that matter?
DD5,
I certainly do think our disagreement is about the definition of words like “demand”, “pay”, “buy”, and “purchase”.
So yes, it is about semantics. I think our positions are clear to each other. So this is my last post on the subject.
Semantics or not, if you don’t take into account all the components of demand (exchange + reservation) then the result will be flawed economic reasoning (such as the misunderstanding of Says law upthread…)
Please explain how Dave’s explanation of Say’s Law was a “misunderstood” one.
…if you don’t take into account all the components of demand (exchange + reservation) then the result will be flawed economic reasoning
DD5,
Time has passed and with it comes increased understanding to the fortunate.
I found that Rothbard talks about reservation demand, uses it in a different sense than the wikipedia article I quoted earlier in this thread, indeed, the very way you use it. So I stand corrected.
However, he does not go anywhere near as far as you do and say that not using all the components of demand will result in flawed economic reasoning.
What he does say is:
There is another way of treating supply and demand sched-
ules, which, for some problems of analysis, is more useful than
the schedules presented above.
He then goes on to explain reservation demand as you did.
So we see two things from that little quote:
He has just finished writing over 30 pages about suply and demand using exchange demand exclusively. He did not rip those pages out of his book and replace them with alternate pages using exchange plus reservation demand.
He says explicitly that at times using exchange demand is more useful than total demand, and at times the reverse is true.
Bottom line, he doesn’t say that flawed economic reasoning will arise from not using total demand, quite the contrary.
Here’s another quote:
The total demand-stock analysis is a useful twin companion
to the supply-demand analysis. Each has advantages for use in
different spheres. One relative defect of the total demand-stock
analysis is…[bla bla bla]
Useful twin companions. Not one a source of correctness and the other a source of error.
such as the misunderstanding of Says law upthread…
Here’s Say speaking:
the only real consumers are those who produce on their part,
because they alone can buy the produce of others,
And Rothbard’s explanation of Say’s law [from page 44 of the pdf and on] is that there will never be overproduction and underconsumption, because all you have to do is lower the price until someone is willing to buy and consume.
He doesn’t explain it by saying that the very existence of any production creates its own demand, either to sell [=exchange demand] or to hold [=reservation demand], because that would not answer the problem. The problem was that merchants are stuck with goods they want to sell [not hold in reserve] and cannot find buyers. The whole problem, and therefore its solution, must be stated in terms of exchange demand, not total demand.