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Say's law


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Typically summarized as the proposition that ‘supply creates its own demand’. The argument behind Say's law is that the supplier of a product will spend the income received, thus the supply creates a demand. In the words of Jean-Baptiste Say (1767–1832), ‘It is worthwhile to remark that 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. When the producer has put the finishing hand to his product, he is most anxious to sell it immediately, lest its value should diminish in his hands. Nor is he less anxious to dispose of the money he may get for it; for the value of money is also perishable. But the only way of getting rid of money is in the purchase of some product or other. Thus the mere circumstance of creation of one product immediately opens a vent for other products’ (J. B. Say, 1803, A Treatise on Political Economy, or the Production, Distribution and Consumption of Wealth, pp. 138–9).

Subjects: Economics.


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