One Can Certainly Formulate Say's Law So That It Always Holds

1) Say's Law was not, in the early 1800s, any specific idea. Say never gave us one sentence that states "his" law. The idea that there was a law here only coalesced slowly, and it did so around a cluster of ideas, not a single idea. (I believe Thomas Sowell counted nine different notions related to "Say's Law.") So anybody who tells you "Say's Law means X, and if you think otherwise you are ignorant"... is ignorant.

2) Given the above, there is nothing suspect about formulating Say's Law in this way or that way. Some ways of formulating it will hold no matter what. For instance, if, in this example, one could say, "As I formulate Say's Law, this conforms to it: Bob, Silas, and you overproduced fish, and underproduced leisure, so that's a sectoral imbalance!"

Fair enough, but that isn't what Say meant, since when Malthus presented examples like this, Say at first rejected them. Economists at that time thought of goods the way the ordinary person still thinks of goods, and production the way the ordinary person still thinks of production. Telling Say that the three of us had "underproduced" the "good" called leisure would have seemed bizarre to him, I think.

3) Similarly, one can protect a tautological version of Say's Law from monetary disequilibrium since, when too little money and too many goods to be sold for money exist, that can be called a sectoral imbalance. Once again, that is a matter of definition, but it is pretty clear that this was not the way Say was thinking of this at first: "Nor is he less anxious to dispose of the money he may get for it; for the value of money is also perishable." No sane businessman would want to build up cash balances: he wants to be rid of any money he gets ASAP. But Say did come to accept money hoarding, by at least 1829.

So if you want a version of Say's Law that is a tautology, that is OK by me. Just realize it will allow some situations that Say would not initially have understood as falling under "his law," for instance, everybody bringing goods to market but going home after having "purchased" unintended inventories of their own products with their production.


  1. (1) I recommend these works on the definitions and development of Say's law:

    Baumol, William J. 1977. “Say’s (at Least) Eight Laws, or What Say and James Mill May Really Have Meant,” Economica n.s. 44.174: 145–161.

    Blaug, Mark. 1997. “Say’s Law of Markets: What did it mean and Why should We Care?,” Eastern Economic Journal 23.2: 231–235.

    Sowell, T. 1994. Classical Economics Reconsidered (2nd ed.). Princeton University Press, Princeton, N.J. pp. 39–41.

    (2) by invoking the concept of "reservation demand", Rothbard also re-defined Say's law in a manner utterly contrary to the way it was understood in Classical economics, as I noted in my appendix here:

  2. Anonymous9:40 AM

    Is rejection of Say's Law the primary reason Keynesians choose to view the economy as a circular flow?

    1. I'm not sure there's anything particularly Keynesian about a circular flow model: Say's Law could hold in one, or not.

  3. Yeah, for what it's worth, in my History of Economic Thought classes at Hillsdale, we'd read the relevant section on this, and I'd say, "Now does anybody think Say wasted our time by walking through this stuff?"

    So my point was, if you have never thought about the things he is saying (the cool examples of people from centuries earlier showing up with ships full of treasure or whatever) then this is really important stuff. But by itself, it doesn't tell you whether the multiplier on government spending is above 1.

  4. Like I said here, I don't have a problem believing there are cases of "whoa, we produced too much of everything". I do, however, have a problem that people always following up such claims with, "so let's see what we can do to keep prices from falling!" (or any of the other typical punchlines I listed)


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