The law of supply and demand… is it really a law, or are those crazy economists throwing words around again?
Refresh my memory, what is the difference between a theory and a law. And if supply and demand are indeed laws, how did who prove them?
There is no “law of supply and demand.”
There is a law of demand and a law of supply, but they are not laws in the same sense of, say, thermodynamics. Where they are violated, the situation is notworthy and well studied. One example would be Giffen goods, where it is alleged that rising price has caused an increase in quantity demanded. This is controversial.
Generally speaking, they are mathematical results from the assumptions of the models rather than something inherent in the universe like, AFAIK, entropy.
Well, let’s see . . . breaking laws leads to penalties. If you over-Supply something that isn’t in Demand you are penalized by losing your investment. Conversly, if you Supply a unique object (one of a kind) that is high in Demand and don’t sell it to the highest bidder you lose a potental windfall on your investment.
By this definition it is a Law because it has “real world” consequences. A theory is just a theory until it has a “real world” application. Einstiens “Theory of Relativity” was just a theory until they split that atom.
While it is not a law in the sense of the Laws of Thermodynamics, the “law” of Supply and Demand does have remarkably good predictive power.
As someone or other once said, economists don’t know much, but they do know two things: Legislating a price below the market price for an item will cause a shortage; legislative a price above the market price for an item will cause a surplus.
Examples of the first are the gasoline shortages of the '70s and rent control every single time and place it has been implemented. Examples of the second is the set price for milk and other agricultural products, where the government has had to buy out producers in an ultimately unsuccessful attempt to limit the surpluses.
It is possible to find counter-examples, but they are few and far between, and generally involve some third party muddying the waters – pricing for medical services may fall into this category.
The use of the word “Law” in science goes back hundreds of years, and is only used today as a historic carryover.
The original understanding in the harder sciences were of absolute systems. There was a Law of Conservation of Mass and a Law of Conservation of Energy, because as far as physicists before the 20th century could see, these were indeed absolute with no known or even possible exceptions.
Then Einstein came along, showed that mass and energy were equivalent, and from then on mass/energy as a combined system was conserved, but energy could be converted into mass and vice versa. I believe that every conservation “law” in physics is now considered instead to be an example of a gauge symmetry, but I may be in over my head.
Other physical Laws, like those of Thermodynamics, have suffered from similar problems.
Laws in the social sciences are metaphoric only. They are descriptors of behavior that are rarely violated in a pure system, but they only describe theoretical situations and are routinely violated by outside influences, like governments.
The greater understanding of science over the years has decreased scientific hubris. You’ll find that historically the use of the word “Law” virtually disappeared after the latter part of the 19th century. Since then, really since Darwin and Maxwell, a firmly established overarching view of the way a system works is referred to as a capital T Theory.
A small t theory is not a proper scientific term. Scientists use hypothesis instead because of the obvious chance of confusion.
Einstein’s theory of relativity is still just a theory.
The way I always heard it, a law is a description of what happens, and a theory is a guess as to how and why.
No, economists just have everyone brain-washed into believing it is a law. It is merely the result of the system they have devised. Just like saying it is a law that jobs lag behind economic recovery. This IS NOT written in stone, but rather it is the fact that those with the money make the rules, and they are too greedy to start hiring once they disciver how to operate leaner to max profits.
The best is how, in college, they’ll try to dazzle you with BS formulas abotu why their “laws” must be so. In science, the laws exist even without man. In economics, it’s all fixed by the ones who have the gold make all the rules.
The first thing they teach you in economics is how money can flow from business to the people, or from the people to business. It’ll be a fine day when government starts with the people and let the effects trickle down to corporate.
- Jinx
Sorry for my typos above…I’m pooped!
And not all that accurate. I would guess you would argue that speed limits on the highways are not laws because they were created by The MAN. 
Actually, Jinxed is completely correct. Trade is obviously a social convention – “I’ll give you two chickens for that duck.” It works however the people who practice it want it to work. I mean, ask yourself – can you bargain with gravity? Thermodynamics?
Free-market conservatives have adopted the pose that these social conventions are the product of fixed, immutable “laws” of supply and demand which only an ignorant person woud ever challenge.
So economic laws are laws of nature in the same sense that creation science is sicence, and for much the same reasons.
Economics is a social science. Explaining how sociey works on a human level. Not a physical science like thermaldynamics where something can be proved as either true or flase. This is exactly the reason engineers (and I am an engineer by the way) come across as being nerds when they don’t realize that social interactions deal with shades of gray.
Even the former communist nations are starting to realize that free market concepts of supply and demand are a natural state of being. Perhaps you should too.
There’s no science where any statement can be proven true. All you can do is fail to prove it false for a really long time.
To be fair, the laws of supply and demand as usually stated are too simplistic to describe a wide variety of systems. There’s definitely something to them, but you need a lot of special cases to describe everything.
No doubt. And this thread has turned into more of a debate over what is a “Law” than about wheter “Supply and Demand” actually desribes human economic behavior. I am out of here. :wally