Michael Reed
ECON 350
Marlo Chavarria
Critical Thinking 3
Say’s law is the core of the classical theory. In the early 19th century a French economist, J.B.
Say, propose that “supply creates its own demand”. This meant in lament term that there can
never be any overproduction. “If the production process is continued under normal conditions,
then there will be no difficulty for the producers to sell their products in the market. According to
Say, work being unpleasant, no person will work to make a product unless he wants to exchange
it for some other product which he desires. Therefore, the very act of supplying goods implies a
demand for them (The Say’s Law).” No one can demand for something that has never been
created. That statement alone would be a lie. The reason we even have supply is due to someone
thought or complaint. We have the thought of things we desire, and someone invented that
product. Which in turn now lead to a demand for that product. For instance, cell phone
inventions were a way to better communicate with someone over a distance as oppose to writing
a letter that may never make it to the destination. Once cell phones were created people
demanded the product. Today cell phone has continued to be everything we need in our hand.
Due to how advance cell phones are there is barely anyone without one. And due to cell phone
improvements people are still buying the latest models. This in turn lead to the circle of life J.B.
Say was alluding to. Samsung is one of the best at creating and designing newer model phones
and because of the supply of Samsung phones, leads to more jobs, more job requires a bigger
building and land, bigger building requires a loan. The bank can give a loan due to the employees
making and saving more money. Samsung can afford the loan because the employees can now
afford to purchase phones. Say’s law is nothing more than the circle of life, only its not life but
the economy we are talking about. “In Say’s words, “It is production which creates markets for
goods. A product is no sooner created than it, from that instant, affords a market for other
products to the full extent of its own value. Nothing is more favorable to the demand of one
product, than the supply of another (The Say’s Law).”
John Mills was a utilitarianism, he believes everyone should experience happiness. John Mill
thought of all humans as being equal. He believes the only way to determine what is right or
wrong was from the action. Meaning if your actions cause someone to feel bad then your actions
were obviously wrong. Mill was obviously a great man that not only look out for himself but
others as well. Mill Supported Say’s law which stated supply will create its own demands and
money was only a medium. This mean that good and services will be paid by other people with
good and services. Say’s law also states because production creates its on demand there will be
no overproductions. John Stuart supported Says law, but he did question the idea gluts cannot
occur. “There is no question that Mill actually did recognize that agents might, on occasion,
prefer to retain money in hand rather than part with it in exchange for commodities. Thus in his
essay Of the Influence of Consumption on Production ( 1844 , p. 276) Mill clearly accepted that
income receipts may be reserved unspent, retained in hand until “a year hence, or whenever it
shall be most convenient (Grieve).” Mill recognition of a glut lead to his argument, when there is
inadequate demand for goods there is an excess demand for money.
Saving rate is the money a person chooses to save out of their income to set aside for
retirement. These funds are typically put away in some type of mutual funds or low risk account.
A country saving rate is determine how the economy is set up. In the United states the economy
is set up based on consumption. This in turn yield a low saving rate. If you wanted to have a shift
in the saving rate, there will need to be higher paying jobs and higher interest rate. This will
allow people to make more money, focus on their saving, and will allows banks to loan more
money. Also, saving rate is affected by the population that is using their retirement funds. In
America the biggest age group is the baby boomers and they are all aging out of the work force.
This will result in a decline in the country saving rate as well because baby boomers will be
spending their retirement money.
..
References
1. Ahiakpor, J. (2018). Keynes, Mill, and Say’s Law: A Comment on Roy Grieve’s Mistaken
Criticisms of Mill. Journal of the History of Economic Thought., 40(2), 267–273.
https://doi.org/10.1017/S1053837217000281
2. Beraud, A., & Numa, G. (2018). Beyond Say’s Law: The Significance of J.-B. Say’s
Monetary Views. Journal of the History of Economic Thought., 40(2), 217–241.
https://doi.org/10.1017/S1053837217000098
3. Grieve, R. H. (2016). Keynes, Mill, And Say’S Law: The Legitimate Case Keynes Didn’T
Make Against J. S. Mill. Journal of the History of Economic Thought,38(3), 329-349.
doi:10.1017/s1053837216000031
4. The Say's Law of Market: Proposition, Implication and Criticism. (2014, March 23). Retrieved
from http://www.yourarticlelibrary.com/macro-economics/theories-macro-economics/the-says-
law-of-market-proposition-implication-and-criticism/30838
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