Chapter dzDz: Hutt and Keynes ȀȆȄFundamentally, then, there can be no deficiency of demand. Any appar-
ent problem of that sort traces to impediments to the exchange of goods
and services for each other. Impediments to exchange discourage the pro-
duction of goods and services destined for exchange and discourage the
employment of labour and other productive factors. Diagnosing these
impediments is Hutt’s overriding concern.
Say’s Law, as Hutt interprets and extends it, explains how cuts in
production in some sectors of the economy entail cuts in real demands
for the outputs of other sectors and so cuts in production in those other
sectors also. Ļe rot is cumulative; disequilibrium is infectious; a multi-
plier process operates, although not in the mechanistic way suggested by
Keynes’s spuriously precise formulas. In the opposite and more cheerful
direction, anything promoting recovery of production in some sectors pro-
motes recovery in other sectors also.
But what are the impediments to exchange and production that trig-
ger the downward movement and whose alleviation triggers cumulative
recovery? Hutt points to wrong prices. Prices too high to clear the mar-
kets for the outputs of some sectors cause cutbacks in their production
and in their demands for the outputs of other sectors. What might oth-
erwise have been equilibrium prices for the outputs of those other sectors
are now too high; and unless adjusted downwards, they impede exchanges
and production further. Hutt blames wrong pricing, not any inadequacy
of “spending.” Instead of determining the volume of exchanges, spending
gets determined: the flow of money transferred in lubricating transactions
depends on their physical volume and on the money prices at which those
real transactions are evaluated. It is fallacious to suppose, with the Keyne-
sians, that income is created by transfers of money (HuttȀȈȆȈ, pp.Ȉǿ,ȂȇȀ).
Hutt does not flatly assert that monetary disorder never plays any role at
all in frustrating exchanges and production. His view of the role of money
will require further attention later in this chapter. Meanwhile, we may
note his remark that “Money is relevant to ‘effective demand’ only because
unanticipatedinflation can, in a very crude way, cause certain prices which
have been forced above market-clearing levels (causing therefore nonuse
or underuse of men and assets) to become market-clearing values, thereby
releasing ‘withheld’ potential productive capacity and increasing ‘effective
demand’ in our senseandin Keynes’ sense” (HuttȀȈȆȆ, p.Ȃȅ, emphasis in
original).
Hutt scorns the fundamentalist Keynesianism that broods about ade-
quacy or inadequacy of demand, about the propensity to consume out of