Monday, June 19, 2017

What You Need to Know About Jean-Baptiste Say and the ‘Law of Markets’ (To Refute Keynesians)

Richard Ebeling emails:

Dear Bob,

I have a new article on the website of the Future of Freedom Foundation on, “Economic Ideas: Jean-Baptiste Say and the ‘Law of Markets’.”
Keynesian economists have been arguing for over 80 years that markets, when left on their own, are subject to “aggregate demand failures” that require government deficit spending to restore “full employment” and economic growth. But more than a century before Keynes, the French classical liberal economist, Jean-Baptiste Say, demonstrated, in his “laws of markets,” why there are no such “demand failures” and it is government that causes the problems of unemployment and recession.

At the end of the day, it is market production and supplies that are the basis of any and all market demands. None of us can demand unless we first supply something on the market that others are willing to buy, enabling us to earn the financial wherewithal (the money income) with which we can then demand what others are interested in and willing to sell.

This also requires that every seller, including those offering their labor services for hire, to price their products and services at prices and wages that others think them to be worth and are able to pay. Wrong pricing of goods and labor only result in unsold products and unemployed segments of the labor force.

But might not people sometimes “hoard” or hold more money out of their earned revenues and income, thus diminishing the demand for other goods in the market – an “aggregate demand failure”?

The British classical economist, John Stuart Mill, who admitted that “hoarding” of earned money might occasionally occur, answered this. The market uncertainties that may result in this are themselves the product of government mismanagement and abuse of the monetary printing press that creates the booms and busts of the business cycle.

Furthermore, the supposed “aggregate demand failure” reflects the fact that given people’s greater demand to hold more money the prices of many other goods are now less in demand in comparison, and are, accordingly, too highly priced. A market-based and adjusted rebalancing of prices for these goods and services to now “clear” the market in the post, artificial inflationary boon, soon returns markets to full employment and sustainable growth.



  1. YES! YES! YES!

    At last! Someone mentions J B Say!

    "One can only consume from the value that one has produced."

    Where can I get the Bumper Sticker?


  2. I think this analysis misses the serious but surreptitious fraud committed by the Keynesians. Authentic, morally based "demand" for each person is nothing more than the property they ethically own and control and their skills. "Aggregate demand" is more amorphous and is an attempt to equate "authentic, morally based demand" with subsidized, stimulated and funny money based wealth shifting that also provides the recipient with the ability to "demand". The Keynesians lump the two quite different concepts together as one at a point in the debate where the Austrian should be screaming FRAUD.

    Since the market does not fail, make the statist prove it that it does. Since the market does not fail, there is no need to juice up "authentic, morally based demand" with subsidized, stimulated and funny money based wealth shifting.