Say’s Law

The following article by Dr. Richard M. Ebeling was published by The Future of Freedom Foundation on 6/19/17:

https://www.fff.org/explore-freedom/article/economic-ideas-jean-baptiste-say-law-markets/

This is the most important part of the article:

What Jean-Baptiste Say is, perhaps, most famous for is what has become known as “Say’s Law,” the fundamental idea being that market demand is dependent on market-based supply. He argued that money, most certainly, is an extremely valuable medium through which goods and services may be traded, and without which many potentially mutually beneficial exchanges might be impossible to consummate.

However, it is, ultimately produced goods that trade for other produced goods. Thus, our ability to demand any particular goods from others in the market is dependent upon our ability to supply some specific good that those others may be willing to take in payment for what we desire to purchase from them.

Say's Law disputes the sacred premise that consumption drives economic growth.  In fact it is production that is necessary for economic growth.  This explains why government intervention into economic activity to stimulate consumption always creates distortions that result in sever economic downturns.  This section of the article will help to make this point clear:

The shoemaker makes shoes and sells them for money to those who desire footwear. The shoemaker then uses the money he has earned from selling shoes to buy the food he wants to eat.

But he cannot buy that food unless he has first earned a certain sum of money by selling a particular quantity of shoes on the market. It is his supply of shoes that has been the means for him to demand a certain amount of food.

This is, in essence, the meaning of “Say’s Law,” or what Jean-Baptiste Say called the “law of markets”: unless we first produce, we cannot consume; unless we first supply, we cannot demand.