If We Want to Increase Demand in the Market, We Must First Increase Production

by Frank Shostak

Following the ideas of John Maynard Keynes and Milton Friedman, many commentators associate economic growth with increases in the demand for goods and services.

Both Keynes and Friedman held that the Great Depression of the 1930s was due to an insufficiency of aggregate demand and that thus the way to fix the problem was to boost aggregate demand.

For Keynes, this could be achieved by having the federal government borrow more money and spend it when the private sector would not. Friedman advocated that the Federal Reserve pump more money to revive demand.

But there is never such a thing as insufficient demand. An individual’s demand is constrained by his ability to produce goods. The more goods that an individual can produce, the more goods he can demand, i.e., acquire.

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