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Arguably there is no real disincentive to encourage students to start grad programs — students who don't find much job success just sort of "disappear" from the view of their senior faculty, and that's that. It creates a perverse labor system IMO.
Anyway — that's my take on the numbers and the situation. Others will have different takes, for sure. To your original question —"demand" is a tricky term to use here. Whose demand? There is high demand for grad students in History. But there are not many tenure-track jobs in it.
There are some who don't like the language of "overproduction" because it implies that tenure-track jobs are the only reason to get a PhD, that it makes the job situation seem toxic, etc.
My sense is that only the people who already have secure jobs (often tenure-track ones!) tend to make that argument and find it compelling, though. I received my PhD in the dark year of 2010, for what it is worth, so that might bias my analysis.
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