Each person's means for paying for the production of other people consists in those [commodities] that he himself possesses. All sellers are inevitably by the meaning of the word buyers . . . A general over-supply . . . of all commodities above the demand is . . . f an] impossibility . . . People must spend their . . . savings . . . productively; that is, i n employing labour.1
The founders of the neoclassical school had to accept that in practice the economy experienced a "trade cycle" or "business cycle" of booms and recessions, in which for some reason supply and demand did not always balance as their theory claimed. Their reaction was to blame these things on external factors that somehow led to temporary distortions in an otherwise fundamentally healthy system. So Jevons wrote that the business cycle was a result of sun spots which, he claimed, affected the climate and therefore the productivity of agriculture and the profitability of trade, while Walras saw crises as disturbances caused by the failure of prices to respond to supply and demand, comparable in effect to passing storms on a shallow lake. 2
Some later neoclassical economists did try to develop theories of the business cycle. Anwar Shaikh has summed up their approach:
the system is still viewed as being self-regulating; only now the adjustment is seen as being cyclical rather than smooth . . . In orthodox theory a cycle i s not a crisis . . . Cycles must be viewed as "small fluctuations" . . . which at first approximation one may justifiably neglect . . . Violent or prolonged expansions and contractions arise from external factors . . . Crises, therefore, remain outside the normal process o f capitalist reproduction.3
This view still persists in what is known as "real business cycle theories" . These hold that:
business cycles are the aggregate result of the optimum response of individuals to changes in the economic environment . . . The economic cycle is assumed to have a stochastic [irregular-CH] oscillation around a trend.4
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Understanding the System: Marx and Beyond