Total Demand Stock Analysis

JW Rich
5 min readMay 29, 2022


The most widely known product of the science of economics is the traditional supply-demand graph:

Almost everyone has seen a graph like this at some point, and most can also give an interpretation of the meaning of the graph as well. The supply curve represents the amount of a good that will be brought to market at various prices, and the demand curve represents the amount of a good that will be bought at various prices. Where the two graphs meet is the equilibrium. If the curves start to shift, then the price that equilibrium will be achieved at will shift as well. All very straightforward and More than economics, one might say it is common sense.

However — and you may want to brace yourself — what if I told you that from a certain perspective, supply does not exist. The only operative factor in a market economy is demand. All exchanges, transactions, and purchases are solely the result of demand.

Don’t worry, I will take plenty of space to explain my apparent heresy.

This peculiar method of demand-focused analysis is known as Total Demand Stock Analysis. It was originally formulated by the English economist Phillip Wicksteed, but is best known for its appearance in Murray Rothbard’s “Man, Economy, and State”. In recent years, it has become increasingly obscure, and regrettable so. It provides a fascinating and wholly alternative viewpoint of market exchanges, as illustrated by the graph below:

First off, we can see some familiar faces. We have the usual supply and demand curves (even though here it is labeled as “demand-via-exchange”, which will make sense shortly). However, we also see “Total Demand” and “Stock” curves as well. What are these supposed to mean, and how exactly do they relate to the normal supply-and-demand graph?

Total Demand Stock Analysis is built on the insight that goods are demanded not only by buyers, but by sellers as well. For instance, if I were to walk into my local electronic goods store and offer to buy a new laptop computer for $10, they would undoubtedly decline my offer. Sellers are not willing to sell their goods at just any price. In this case, we can say that the electronics store is demanding their laptop computers, and would rather keep them than part with them for my measly $10. Thus, there is a seller demand to hold on to the products, just as there is a buyers demand to purchase the products from them.

From this perspective, demand exists in two different forms. The graph labels them as “Demand-via-Exchange” and “Reservation Demand”. Demand-via-Exchange is just the normal demand curve; it is the demand of those that do not possess the good that wish to purchase it. Reservation Demand is the demand of those that already hold the good to continue holding it. The combined demand of these two results in the “Total Demand” curve. The point at which Total Demand intersects the Stock is the market-clearing price for the good, which also corresponds to the intersection of the Demand and Supply curves.

In case this is still unclear, an example will help to illustrate both of these types of demand. Imagine that a businessman owns a very luxurious beach-house on a popular beach, and wishes to earn an income from it by renting it out to beach-going guests. However, he also wishes to stay in the house himself and enjoy his property for part of the year as well. As a result, for ten months of the year, he rents the house out to vacationers, and for the remaining two months of the year, he stays in the house himself. Applied to Total Demand Stock Analysis, the ten months of the year he rents the house out are the Demand-via-Exchange and the two months of the year he stays in the house himself are the Reservation Demand.

Of course, this perspective does not literally lead us to the conclusion that supply does not exist. What is tells us is that there are two ways of looking at the supply curve. We can look at it as the increased willingness to sell because of higher prices, or as the reluctance to sell because of the opportunity cost in keeping the good. These two are the inverse of the same phenomenon, which is the cost-benefit analysis inherent in all forms of action. In practice, even those economists who are familiar with Total Demand Stock Analysis still utilize the traditionally demand and supply curves for the sake of convenience. This just provides an alternative mode of thinking to help further understand the nature of interpersonal exchange.

Total Demand Stock Analysis emphasizes an important point which often goes unnoticed — the simple fact that goods are always in the possession of someone. They are owned by someone at all times. Demand corresponds to that ownership. If demand-via-exchange is higher, consumers will be in possession of more of the good. If the Reservation Demand is higher, than the suppliers will remain in possession of more of the good. This simple but crucial insight is very similar to that made by Ludwig von Mises in Human Action concerning the concept of the “velocity of money”. Money is not something that is ever “in circulation”, as some economists will claim, but is always in someone’s possession. It doesn’t just move around aimlessly in the ether, but is traded and held by individuals. The same logic applies to goods as well. Goods are not just traded aimlessly without cause, but are owned by individuals are there is always an opportunity cost for that ownership to be transferred. As such, they are demanded by not just the buyers, but the sellers as well. Again, its all the result of demand.

As novel and intriguing as it might be, how ultimately useful is this framework of Total Demand Stock Analysis? As a mental tool, it helps one to further understand and clarify the meaning behind the notion of the supply of a good. As a practical tool, not much. As stated above, even those minority of economists that are aware of it don’t employ its use very often. There is undoubtedly a reason why it has only appeared in two major works, Wicksteed and Rothbard. But even so, those works are made all the better for its inclusion. Concepts construct the instruments of our analysis. Enhancing those concepts that we hold will serve to deepen our analysis. Even though Total Demand Stock Analysis might appear as nothing but an anachronistic curiosity, it provides us with a greater understanding of the economic building blocks of supply and demand. As a result, it grants to us a more thorough and clear vision of the nature of the market economy.

> It’s all demand, all the way down <