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Wednesday, May 10, 2017

Jean-Baptiste Say and markets


Photo source: Wikimedia Commons


Jean-Baptiste Say (1767-1832) is an influential economist best known for Say's Law. Economist John Kenneth Galbraith said,


"Say's major, and for a full 130 years his lasting and exceedingly influential, contribution was his law of markets. To this day reference survives in the textbooks to Say's Law... Say's Law held that out of the production of goods came an effective (that is to say, actually expended aggregate of demand sufficient to purchase the total supply of goods. No more, no less. There could, in consequence, be no such thing as general overproduction in the economic system." (A History of Economics, 1987)


Economist Robert Heilbroner said,


"[Say believed] for every good that was produced cost something - and every cost was some man's income. Whether that cost was wages, rent or profits, its sale price accrued as someone's income. And so how could a general glut ever occur? The demand for goods existed and the incomes to buy them existed as well." (The Worldly Philosophers, 1953)


The rest of this post is some quotes from Say.


Demand and supply


"A man who applies his labour to the investing of objects with value by the creation of utility of some sort, can not expect such a value to be appreciated and paid for, unless where other men have the means of purchasing it. Now, of what do these means consist? Of other values of other products, likewise the fruits of industry, capital, and land. Which leads us to a conclusion that may at first appear paradoxical, namely, that it is production which opens a demand for products." (A Treatise On Political Economy 4th edition, 1832)


"Demand and supply are the opposite extremes of the beam, whence depend the scales of dearness and cheapness; the price is the point of equilibrium, where the momentum of the one ceases, and that of the other begins." (A Treatise On Political Economy 4th edition, 1832)


"I have made no distinction between the circulation of goods and of money, because there really is none." (A Treatise On Political Economy 4th edition, 1832)


Critique of mathematical economics


"It is, perhaps, a well founded objection to Mr. Ricardo, that he sometimes reasons upon abstract principles to which he gives too great a generalization." (A Treatise On Political Economy 4th edition, 1832)


"Some writers maintain arithmetic to be only the only sure guide in political economy; for my part, I see so many detestable systems built upon arithmetical statements, that I am rather inclined to regard that science as the instrument of national calamity." (A Treatise On Political Economy 4th edition, 1832)


Philosophy of science


"A science only advances with certainty, when the plan of inquiry and the object of our researches have been clearly defined; otherwise a small number of truths are loosely laid hold of, without their connection being perceived, and numerous errors, without being enabled to detect their fallacy." (A Treatise On Political Economy 4th edition, 1832)