I also find curious the general belief in the Keynesian model of the economy that somehow results in the belief that demand drives the economy, rather than production.
Do you not believe that products once made will adjust to a market clearing price?Ē
I had a college prof who said there was a big debate in the 19th century between "Supply creates demand" and "Demand creates supply". He said that the answer turned out to be "both".
In the long run, supply creates demand. It appears that human wants are elastic enough that the more we can make the more we'll consume.
However, in the short run, producers only make what they can sell in the near term. If consumers decide to dial back consumption for a while, they set off a decreasing cycle.
Some will say "But in the long run, the Market will reverse that cycle, markets will eventually clear."
Others will say that it takes a long time for some markets to reach new equilibrium, especially labor markets. Or, in shorthand, "In the long run, we're all dead."
Like Wenzel says, he and the other side are simply starting from assumptions that are so far apart, it's hard to imagine a resolution.