Say's Law, Savings and Economic Growth
Overview
This paper examines Say's Law and its relationship to economic growth and savings. It discusses how Say's Law claims that production creates demand, explores the law's historical influence on classical economics and laissez-faire ideology, and analyzes critiques by later economists like Mill who questioned whether general gluts and insufficient demand could occur.
What this essay covers
- Introduction to economic theories and Say's Law definition
- Say's Law principles: production as source of demand and the law of markets
- Say's Law as foundation for laissez-faire economics and full employment
- Criticisms and alternatives: Mill's questioning of the doctrine and treatment of money
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Say’s Law, Savings and Economic Growth
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Say’s Law, Savings and Economic Growth
Economics is a significant field that illustrates the economic problems and how they are addressed. Economists have come up with theories and models to interpret the various economies of different countries. These theories and models have, over time, been corrected by contemporary economists in the attempt to solve the global economic issues. In this regard, various economic determinants are discussed, such as savings as a function of GDP and the likes.
Say’s Law claims that the production of a given product creates demand for another product by providing something of value that can be exchanged for that other product. According to the definition, Keynes implied that production is a source of demand. When a product is created, it affords a market for other products to maximize its value. Also, individuals can only purchase the productions of others with their productions. The value they can purchase equals to the value they can produce (Traité, 1803). This means the more men can purchase, the more they are capable of producing.
Further, Say notes that the Law of Markets meant that an unlimited supply over demand cannot occur. For instance, if there is a surplus of one good, then there must be unmet demand for another. Also, if certain goods remain unsold, it is because other goods are not produced.