Say has … most satisfactorily shown that there is no amount of capital which may not be employed in a country, because a demand is only limited by production. But a particular good may be over produced because the producer incorrectly estimates the quantity of the product which others want. Supply of shoes gives rise to demand for wheat, for silks, for automobiles, and for other things that the shoe producer wants. Could we suddenly double the productive powers of the country, we should double the supply of commodities in every market; but we should, by the same stroke, double the purchasing power. Those who forsake the law praise the wicked, but those who keep the law strive against them.
In a recession, there can be insufficient aggregate demand for goods produced. Unemployment results from the deficiency of effective demand because people do not spend the whole of their income on consumption. In other words, every output brings along with it the necessary purchasing power in circulation which will lead to its sale, so that there is no over-production. I, Edwin Cannon edition, 1904 , p. Money is merely a convenient medium of exchange avoiding the leakages of barter and nothing more. Notably, the debt owed does not change because the economy has changed. Banks businesses and consumers hoard cash in hard times and during , as we witnessed during the global financial crisis.
Say believes that money does not affect the economic activities of the markets. What he actually meant was that a good deal of production is always meant to be consumed and the rest which is saved is likely to be invested generally. At periods such as we have described. There is no ground to fear a break in the flow of income stream in the economy. All Scripture quotations, unless otherwise indicated, are taken from The Holy Bible, English Standard Version. You can't give what you don't have.
Purchases expenditures made in product markets flow to business firms. In other words, money is never hoarded. Unless otherwise indicated, all content is licensed under a. The work of James Mill, , , and others evolved Say's law into what is sometimes called law of markets, which was a key element of the framework of from the mid-19th century until the 1930s. There will be plenty of opportunity for that later. What this means is that money can be and must be hoarded: it may not re-enter the circulatory process for some time, and thus a general glut is not only possible but, to the extent that money is not rapidly turned over, probable. It's now more expensive and more technically difficult to double the number of transistors -- and thus the processing power -- for a given chip every two years.
Bring me a denarius and let me look at it. Say believed that people did not work for its own sake but to obtain other goods and services that go to satisfy their wants. According to Say's Law, supply creates demand. This is logically not supported if he actually meant it. Contradicting this view, , a self-proclaimed follower of Say's law, wrote a letter in 1932 signed by five other economists among them Keynes calling for more public spending to alleviate high levels of unemployment. Whenever someone works for charity and not for profit, they are doing so purely out of a desire to help. I think that when, for whatever reason, there is a shortage in one area, it causes a shortage in another, and you end up with an economic downturn.
. The second is the view which he chooses to support at this point. Decreasing demand consumption does not necessarily stimulate capital spending investment. It assumes the existence of competition and free and fluid markets by which these proportions, price relations, and other equilibria will be brought about. With one accord they stood up to cheer him.
Nevertheless, for some neoclassical economists, Say's law implies that economy is always at its full employment level. As he is baking bread, the baker is thinking of the goods and services he will obtain in exchange for it. Money, consequently, was in request, and all other commodities were in comparative disrepute. One use of the money is to buy goods and services. Thus, the mere circumstance of the creation of one product immediately opens a vent for other products.
However, we might argue that those who are not Jewish and therefore do not benefit from the knowledge of the Mosaic Law including the moral and ceremonial laws , should not be condemned in the same way. But it is a familiar economic axiom that a man purchases labor and commodities with that portion of his income which he saves just as much as he does with that he is said to spend. It is important to realize, to begin with, as Mises has pointed out, that what is called Say's law was not originally designed as an integral part of classical economics but as a preliminary — as a refutation of a fallacy that long preceded the development of economics as a recognized special branch of knowledge. The producer of X is able to buy Y, if his products are demanded. Pay to all what is owed to them: taxes to whom taxes are owed, revenue to whom revenue is owed, respect to whom respect is owed, honor to whom honor is owed. Some proponents of real business cycle theory maintain that high unemployment is due to a reduced labor supply rather than reduced demand.