The most widespread economic idea in society today is the Law of Supply and Demand. Whether they support it, oppose it, or are indifferent to it, almost every thinking person has heard of this law. In fact, it is the major positive contribution of economics to Western civilization.

What is the Law of Supply and Demand? Let us approach the answer by seeing some of the things that those who support it say about the law:
“You cannot violate the law with impunity.”
“You ignore the law at your peril.”
“The law is independent of the government’s laws and they have no effect on it.”
“The state cannot repeal the Law of Supply and Demand.”
“Violation of the law always yields bad consequences.”
Those who oppose the law usually do not deny it by explicit statement, but if their feelings were translated into words, these would be the words:
“The Law of Supply and Demand is a myth.”
“Forget the Law of Supply and Demand. The laws of the state take precedence over all such laws.”
“The state can do whatever it wants. The Law of Supply and Demand is helpless against it.”
“Every piece of progressive legislation has been objected to on the grounds that it contradicted the Law of Supply and Demand. They said the sky would fall if we passed it. But we passed it and the sky did not fall. So much for the Law of Supply and Demand.”

The deeper meaning of these statements by the supporters and the opponents of the Law of Supply and Demand is this: those who support the Law see it as a restraint on the power of the state and want the state restrained; those who oppose the law also see it as a restraint on the power of the state and want the state unrestrained. But remarkably, both sides agree that the practical implication of the law is to limit the power if the state? This is not normal. Usually people on opposite sides of an idea disagree on what the idea means. Exactly what is this law on whose import both its friends and its enemies agree? I will answer that question in my next post.