[This term paper was originally written for ECON 2110 W - History of Economic Thought]

The “Duality” of Say’s Law

A Restoration of J.B. Say’s Original Intentions

I. INTRODUCTION

The concept known as “Say’s Law of Markets” has been challenged many times over the centuries but the actual theory remains to be disproven.  During every economic depression, businessmen and economists proclaim it null due to “underconsumption,” “overproduction,” and the presence of “general gluts.”  Jean-Baptiste Say, a laissez-faire economist who wrote on the subject of gluts casually and without revolutionary intentions, is traditionally understood to have proved these phenomena impossible.  In turn, history is supposed to have proved Say wrong, and his law is now widely considered refuted.  The alleged law, however, has only been attacked on the terms of its hecklers, and has always been straw-manned as a vulgar apologia.  Economists act as if there are two Say’s Laws; the first, (Say’s original insight) arguing that, provided a functional free market with sound money, general gluts will not occur; the second (a vulgar creation considered to be the “disproven” Say’s Law) declaring that general gluts are always and everywhere impossible.

Say’s Law has been challenged, among others, in two famous episodes, first by Reverend Thomas Malthus in 1820, and more famously by John Maynard Keynes in 1936.  There can be no denying that general gluts did appear in 1816-1823 and in 1929-1941; doing so would be to advocate the vulgar Say’s Law.  The crucial point is that prolonged gluts were not caused by the free market, but by the rampant government interventions in the market during these historic episodes, acquitting Say by default.  Both detractors observed largely circumstantial evidence which provided the impetus for them to attempt pure “theories of underconsumption” contra Say’s Law.  They observed that there were gluts, but failed to fully comprehend what had caused them.  Both Malthus and Keynes were attacking a straw man, blaming the free market for the problems of government, and ironically appealing to the latter to fix the former.

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