Often principles are not well‑grasped because the reader does not want to attach to expressions, the sense that the author attaches to them. (Say 1828a, 122)
Jean-Baptiste Say stated that immutable, observable general facts exist in political economy. These general facts are able to be used to fashion general laws, which are “only the expression of what passes in all similar cases” (Say 1828a, 24). In turn, general laws when used as proofs and applied to everyday economic life are termed general principles. Accordingly, to Say, laws (definitions) were statements of facts. And facts are “always the result of one or several anterior facts which are the causes of them” (Say 1828a, 18). For example, value “constitutes a quality composed of many others” (Say 1828a, 125). So, for every definition, its lineage needs to be known or traced back through its anterior statements of facts. “A science is especially more complete relative to a certain order of facts, as we are more successful in stating the chain which unites them, to connect the effects to their true causes” (Say 1828a, 20). The current paper reconstructs the causal chain that connects to the Law of Markets of Say.
The main purpose of the authors is to establish what Say's own Law of Market is, not what it is not. What this paper proffers is a restatement of the Law of Markets with Say's own political economy, or, more properly said, of allowing Say to define the Law of Markets as he meant it. Consequently, definitions certainly play a large role in developing the present paper. The emphasis on definitions is not undue, it is in agreement with Say himself. In an effort to gain an acceptance, or at least an understanding, of his definitions Say published with later editions of the Traité d'économie politique and separately a small book of definitions titled: Épitome des principes fondamentaux de l'économie politique. In fact, Say reproached Charles Robert Prinsep (the English translator of the Traité) for “offering to the English public only an incomplete work” (Say 1833, 141) because Prinsep did not include the Épitome or the Discours préliminaire (Say’s discussion on method) in his translation.
Say’s Method, Utility, and Value
Say was a self-proclaimed inductivist, supposedly following the thought of Francis Bacon and the practice of Adam Smith. The modern reader is able to interpret Say's induction as his attempt to provide his definitions with empirical content; he did want to separate his political economy from the abstractions of David Ricardo (metaphysical economics as Say called it). Say's empiricism was composed of direct observations, which are open to everyone. The importance of observations in Say's political economy cannot be overstated because for economic science to be conducted correctly, the scientist must start with the observable. “Political economy, in the same manner as the exact sciences, is composed of a few fundamental principles, and of a great number of corollaries or conclusions, drawn from these principles. It is essential, therefore, for the advancement of this science that these principles should be strictly deduced from observation…” (Say 1971, xxvi).
Once Say had established (through direct induction) microeconomic truths or general laws such as his Law of Markets, he could and did expressly deduce macroeconomic general principles from them. To arrive at macroeconomic general principles from his Law of Markets, Say necessarily used deduction because the method of direct observation could not be used—inherently, macroeconomic concepts are not directly observable. “Hence the advantage enjoyed by everyone who, from distinct and accurate observation, can establish the existence of these general facts, demonstrate their connexion, and deduce their consequences. They as certainly proceed from the nature of things as the laws of the material world. We do not imagine them; they are the results disclosed to us by judicious observation and analysis” (Say 1971, xxv). “A treatise on political economy will then be confined to the enunciation of a few general principles, not requiring even the support of proofs or illustrations…” (Say 1971, xxvi).
“[Utility] is, in political economy, the faculty that things have of being able to serve man, whatever manner that may be” (Say 1831, 61). Utility is the foundation of Say's political economy—the ultimate cause of economic facts. “The want or desire [utility] of any particular object depends upon the physical and moral constitution of man, the climate he may live in, the laws, customs, and manners of the particular society, in which he may happen to be enrolled. He has wants, both corporeal and intellectual, social and individual; wants for himself and for his family¼” (Say 1971, 285). The existence of utility is an inductive truth; the effects of its existence can be observed everywhere. Yet, utility itself is subjective and unobservable. “He [Louis Say] lays down the maxim, that objects are items of wealth, solely in respect of their actual utility, and not their admitted or recognized utility. In the eye of reason, his position is certainly correct; but in this science relative value is the only guide. Unless the degree of utility be measured by the scale of comparison, it is left quite indefinite and vague, and, even at the same time and place, at the mercy of individual caprice” (Say 1971, 285).
Say's political economy, being congenitally derived with an inductive method, is not directly concerned with utility; it could not be. “It is not our business here to inquire, wherein these wants [utility] originate; we must take them as existing data, and reason upon them accordingly” (Say 1971, 285). Exchange opens utility up to being observed, to being examined scientifically by elevating utility (the subjective) to value (the objective). “The positive nature of value was to be established, before political economy could pretend to the character of a science, whose province it is to investigate its origin, and the consequences of its existence” (Say 1971, 285).
The science of political economy is a study of reality or, in Say's words, the nature of things—the production, consumption, and distribution of value (social wealth). Hence, to understand J.-B. Say's Law of Markets his definition of value must be acknowledged. Value is the quality of exchangeability and the faculty of being able to acquire other objects by means of exchange. The measure of the value of a thing is the quantity of other things which one can acquire in exchange for that thing. Any interpretation of the Law of Markets that does not adopt Say's definition of value, and the definitions which arise from it, will differ in meaning and conclusions from J.-B. Say's Law of Markets. “One understands political economy when the words value, production, capital, revenues, and others, arouse in the mind the totality of the ideas and of the connections which they comprise” (Say 1828a, 160).
Sayian Production and the Meaning of a Product
Production was the first subject discussed by Say in his trinity study of social wealth, but this preeminence in order should not be interpreted as preeminence in station. Each—distribution, consumption, production—is a process solely of exchange and in the nature of things, and all are essential to a full understanding of the truth as Say perceived it. “Knowledge¼is complete only for the person who possesses the theory of exchanges and markets [debouchés]¼” (Say 1829c, 315).
“Already you foresee that in giving utility to things, or in augmenting the utility they already have, one augments their value, and that in augmenting their value, one creates [social] wealth” (Say 1828a, 170). Production, then, is to confer value to or increase the value of an object or service. “Value is the measure of social wealth” (Say 1828a, 138). Production is the creation of value, not necessarily the creation of material things; products are necessarily objects of exchange and value, not necessarily objects of physical matter. “In order to create products, not being able to create matter, the action of industry is necessarily bound to separate, to transport, to combine, to transform the molecules of which they are composed. It changes the state of the bodies, that is all, and, by changing the state, it renders them proper to service us” (Say 1828a, 171).
“Industrious men¼have taken all their raw materials [matières premières] in a certain state, in order to render them in another state where these same materials have acquired a degree of utility and, it follows, a degree of value that they did not have before” (Say 1828a, 174-175). The industry of man (and production) can be classified into three basic types: agriculture, manufacturing, and commerce. “This classification is arbitrary and adopted solely for convenience” (Say 1828a, 213). Understandably, production, in its particulars, is able to take a great variety of forms. Also, any distinct product is able to be the result of all the different forms of industry.
Agriculture is the industry that extracts products from the hands of nature or “the bare collection of natural products” (Say 1971, 64). Included within the domain of natural products are fish, animals, minerals, etc., as well as the obvious agricultural crops. Agriculturists impart utility and value to natural products by making them available for use, by presenting them in a useful form. Examples are: fish swimming loose in the sea are of no use to man, they must be caught to be turned to use; coal resting in the earth is of no use to man—“it neither warms us nor heats the iron in the forge” (Say 1967b, 9), it must be brought to the surface to be of use.
Manufacturing is the industry that takes products out of the hands of their primary or first producer and subjects them to a chemical or mechanical transformation. “[Manufacturing industry] is employed in severing, compounding, or fashioning the products of nature, so as to fit them to the satisfaction of our various wants¼” (Say 1971, 64). Say gave the example of the buckle that is rendered of the iron procured from the miner. The iron in the form of the buckle has greater utility and value than the raw iron. Manufacturing runs the gamut from operations comprised of one individual (e.g., an artist) to operations comprised of thousands of individuals, greatly segmented by an extensive division of labor (of such, the concomitant benefits are to be had).
Commerce is the industry that takes products from one place to another or from one time to another. “[I]t is employed in placing within our reach objects of want which would otherwise be beyond reach¼” (Say 1971, 64). The fish catch is of no use stored on the fishing boats, the coal is of no use heaped in piles at the coal mines; for these objects to be of use to man they must be carried to the consumers, to other producers. “The locality of an object, if I am able to express myself thus, is a part of its properties: one modifies it in changing the place, and one modified it particularly in connection to its utility; since an object of which one would not know how to obtain is unable to serve” (Say 1966, 15). Say precisely delineated the final act of trade (circulation) from commerce (production). “When Spanish wine is bought at Paris, equal value is really given for equal value: the silver paid, and the wine received, are worth one the other; but the wine had not the same value before its export from Alicant: its value has really increased in the hands of the trader, by circumstance of transport, and not by the circumstance, or at the moment, of exchange” (1971, 67). “This modification [commerce] is anterior to the moment of exchange [trading], since the exchange modifies nothing¼. The fact of the sale and of the purchase has established the existence of this value, but it has not given it” (Say 1966, 15), production as commerce has given it.
A production process combines one or more of the aforementioned types of industry with the productive services of natural agents and capital. According to Say, natural agents are land, water, gravitation, magnetism, elasticity of metals, heat, and the like. “But the productive force of nature manifests itself otherwise [than in the soil] as in vegetation, one has sometimes been constrained in understanding the significance of this expression until designating the productive force of nature in general, such as the action of the sun on vegetation, as of the water in producing spontaneously the fish, or well as a motor, or simply as a vehicle” (Say 1831, 25).
What Say meant by capital was the “[s]um of values employed to make advances to production” (Say 1831, 5). He designated as capital such things as tools, buildings, education, means of subsistence, and so forth. All capital is composed of value; “capital consists not in this or that commodity or substance, but in its value” (Say 1971, 106). In the technical sense, capital is heterogeneous, although in the value sense it is homogeneous (in a money economy)—likewise, are industry and land. Capital is augmented by augmenting its value. “When the value produced is superior to the value advanced, it is capital which is accrued” (Say 1828a, 267). Accumulation of capital is, essentially, the magnification of the ability of productive funds—be it industry or natural agents or capital proper—to provide productive services.
Say divided capital into three distinct classes. “Fixed or engaged capital is that which the value resides in instruments occupied in production in a permanent form” (Say, 1828a, pp. 290-291). “One names circulating capital that which changes form necessarily in the production itself; that which the material form perishes and is reborn in the course of the productive operations; that which the advance and the return replace themselves in order to recommence anew” (Say, 1828a, p. 294). “Finally in order to achieve the classification of productive capital, we have capital immediately productive of utility and of pleasure; productive of immaterial products, of products which are not attached to and are not embodied in any material substance” (Say, 1828a, p. 295).
Say personified all productive services—industry, natural agents, capital—as productive fund owners. “I said that in order to see how industry, capital, and land respectively act in productive operations, I personified them, and observed them in the services they rendered. But this is not a gratuitous fiction; it is a fact” (Say 1967a, 15). To produce, productive services (value) must be consumed. In order to acquire productive services, capital (value) has to be advanced as revenue to productive fund owners in exchange for these services. Productive fund owners of land, capital, and industry are paid (earn), respectively, rent, interest, and salaries in exchange for their productive services; the value of these payments is the costs of production. This exchange is distribution. Distribution is an exchange of value for value.
The productive fund owners must be paid for the use of their productive services. It is the entrepreneur (a productive fund owner of industry) who purchases the productive services and turns them to production. “He is called upon to estimate, with tolerable accuracy, the importance of the specific product, the probable amount of demand, and the means of production [hence, the necessary productive funds and the costs of production of the product]¼” (Say 1971, 330). Each productive service is liable to return a value greater than its own—this is profit. In effect, the entrepreneur exchanges the productive services for products. “[P]roduction is able to be considered as a great exchange in which the producers (who all are able to be represented to our eyes by the entrepreneur of industry) give their productive services (which all can be represented to our eyes by the costs of production which the entrepreneur pays), and where they receive in return the products, that is to say some quantity whatever of the utility produced” (Say 1828a, 244). For this exchange called production to be consummated, a product must be the outcome. Production is an exchange of value for value.
One precondition for the existence of a product is that a thing or a service have utility, more precisely created and acknowledged utility. Value promises the supposed presence of utility and exchange establishes the value of a thing or a service. “A certain sign that the value of a thing that I possess, is recognized and appreciated by other men, in order to become possessors of it, they consent to give to me another value in exchange” (Say 1828a, 141). A product must have value; this precondition is necessary but not sufficient for the existence of a product. Most commentators on Say have had little trouble in accepting this precondition as valid, although they might have held a different theory of value. After all, most theories of value would subscribe to the idea—“value begets value” (Say 1966, 85).
A second precondition for the existence of a product, which presupposes the first condition, is that its costs of production be fully repaid by the value produced. “A product which does not reimburse its costs, is not a product” (Say 1829b, 28: italics added). This precondition is necessary and sufficient for the existence of a product. “We have as a measure of production only the value of the things produced; and, from the moment that the consumer attaches to a product a value sufficient, not only for reestablishing the capital, but in order that the capitalist might be paid his interest, and the owner for his rent, we come to regard these last values as effectively products” (Say 1829c, 292). Say defined a product as a commodity, merchandise, or service having enough value to cover its costs of production. The current writers have found no commentator, contemporary of Say or since, who has accepted the validity of this precondition. It has been labeled a tautology or just a definition or a meaningless definition; more often than not, it simply has been ignored.
The One and Only Law of Markets of J.-B. Say
The purpose of this section is twofold. First, it is to finish the development of the definitions that are intrinsic parts of the Law of Markets of Say. This purpose is essentially achieved with Say's observation that productions can only be purchased with productions. The second purpose is to coalesce all the relevant definitions into a single statement of Say's one and only Law of Markets. Say thought the Law of Markets, too, was derived from observing reality—“and a careful observation of the nature of things is the sole foundation of all truth” (Say 1971, xvii). So, quite naturally he called it a truth.
It is man's nature to live in society. Say appears to have accepted this as being inductively proven. “The nature of man opens him to live in society. Whatever be the cause, it makes itself manifest in every occasion. Everywhere one has encountered, they live in troops, in hordes, in bodies of nation. Perhaps it is in order to unite their forces for their common safety; perhaps in order to provide more easily their needs; always it is true that it is in the nature of man to unite in society¼” (1829c, 284). When man lives in isolation, he lives as a savage, enjoying such wealth as nature is inclined to give him—“the liberality of nature” (Say 1829c, 288). This is what Say defined as natural wealth.
When man enters into social organization with others, he procures an opportunity of enjoying wealth beyond that of nature, that is, social wealth. Say refers to this as a “common characteristic of all societies, necessary for their existence” (Say 1829c, 285). Social wealth can be procured in three ways: production, expropriation, and trading. Production, the first alternative was discussed in the previous section; therefore, it will wait to be taken up anew. However, it should be noted at this point that production is the only font of social wealth. Expropriation and trading are predicated on the existence of social wealth, namely, on production.
Expropriation is, virtually, the redistribution and consumption of existing value. One of the benefits for society of having a government is the protection it provides its citizens from expropriation—both foreign and domestic. “[T]o what degree of civilization that the society might reach, it is necessary that it recognize, that it guarantee to each, the exclusive faculty of disposing of what he produces, that is to say the right of property; otherwise each man would run with his prey, in order not to be plundered by other men, and society would be destroyed” (Say 1829c, 289). If demarcated and enforced property rights do not exist in a society then property does not exist in that society; “and we say that without property there is no [social] wealth, since [social] wealth is the things that one possesses; and that where there are no recognized properties, there are no things possessed” (Say 1828c, 174). Furthermore, “it must be that one be able to possess for one is animated by the desire to acquire” (Say 1828c, 179). “Happily that in a society, even corrupt, the number of men who look for their revenue in a true production, is infinitely more considerable than the number of those who look for it in abusive gains; without that there is no political society which would be able to maintain itself” (Say 1829c, 301).
The last road to social riches is trading. Social man gives birth to new wants and, as a result, economic problems become more complex and varied; choices are multiplied. “Each person is unable to create the totality of the products that their wants make them desire to consume¼. [E]ven if they had all the elements of production: the talents, the land, the capital; but they would make with such a large disadvantage, the quantity of things produced would be so mediocre proportionately to the means employed¼” (Say 1828b, 274). “Indeed, if I give my care to the production of food which is necessary to me, I neglect the production of cloth which dresses me” (Say 1828b, 274). “[O]ne conceives the impossibility where one would be owner of the means of production vast enough to procure the multitude of things which satisfy the wants of the most modest families, in social and civilized life” (Say 1828b, 275). In pace with social man's increasing wealth, are his opportunity costs for any particular action.
In the effort to acquire more goods for the same costs (sacrifices), or equivalently, equal amounts of goods for smaller costs, man learns to specialize and work more productively. The division of labor arises from human action, becoming more pronounced and more widely spread. “Each person is only occupied with one product, or even occupied with only one part of one product¼” (Say 1828b, 275). Everyone must find a mode of exchanging their one product, or portion of one product, for all their wants. Money makes its appearance through human action and trading becomes pandemic. “By the facility of exchange [trading], each is able to push further than permitted their means of production, the fabrication of a sole kind of product; and he acquires, with this product, all that is necessary to the support of his family¼. It is necessary then that they rid themselves by exchange [trading] the totality of the things that they make, in order to obtain the things that they have need of” (Say 1828b, 276). But, as noted, exchange as trading does not create value, social wealth; trading does not make products of products; trading circulates existing products.
Returning to the subject of production, every producer must produce or cooperate in producing something of value—an object of exchange; otherwise, their sacrifices would be unrewarded. Every producer must produce or cooperate in producing a product; if others were not disposed to give the necessary value (i.e., the costs of production) for the value created by the producers, their sacrifices would go for naught. For example, if a worker requires two cups of rice a day to maintain his existence, he will die if others will give him only one cup of rice a day for his labor. Likewise, with the entrepreneur, if he does not recoup his costs of production, his business concern dies.
The persons engaged in such an undertaking would have made a bad business of it: they would have expended a value which the utility of their produce would not suffice to reimburse; whoever should be silly enough to create another production sufficient to purchase the former, would have to contend with the same disadvantages, and would involve himself in the same difficulties. The benefit which he might derive from his production would not indemnify him for its expenses; and whatever he might buy with this production would be of no greater value. Then, indeed, the workman would no longer be able to live by his labour, and would become burthensome to his parish; then the manufacturer, unable to live on his profits, would renounce his business. (Say 1967a, 49)
Only production can sustain production.
“Of every manner, the purchase of one product is able to be made only with the value of another” (Say 1876, 150). Unquestionably, products exchange for other things—utility, for one. Say defined the exchange of value for final (not Say's term) utility by consumers as unproductive consumption. This destruction of products is the raison d'être of products. Products even exchange for commodities sold below their costs of production, a point Malthus was trying to make in a letter to Say (dated 1827): “You must agree that in regard of those who having been accustomed to purchasing them, they are satisfied with the same needs as before, and as the portions which form the excess are able to serve for other persons, and conserve some value, even though insufficient as it is for reimbursing the costs of production. Being the results of human industry, having utility and value, I do not see how we are able to refuse them the name of products¼” (Say 1966, 508).
Malthus was not properly identifying what has happened to existing value, the flow of value; he was in want of changing unprofitable consumption into production. Unprofitable consumption is reproductive consumption, which destroys a value, replacing it with an inferior value. Production requires profitable consumption, which Say defined as reproductive consumption that destroys a value, replacing it with an equal or superior value. Contrary to Malthus (and others) a created commodity, in and of itself, does not constitute an ability to purchase productions. Say's political economy is not about commodities. Commodities are “merchandise placed on sale, not in order to be resold, but in order to be consumed, whether it be destined to subsistence or every other kind of consumption. So long as it is purchased in order to be resold, it conserves the name of merchandise” (Say 1831, 16). Commodities are final consumer goods (not services); in the sense that Say (and classical economists in general) uses the term, a commodity is a material thing. Say’s entire political economy is about value. Productions can only be purchased by productions.
“I think I have proven in my first letter that productions can only be purchased with productions: I do not therefore yet see any reason to abandon the doctrine, that it is production which opens a market to production” (Say 1967a, 24). This is the Law of Markets as enunciated by Jean-Baptiste Say: production opens a market to production. Say's own statement of the Law of Markets, a statement combining all the relevant definitions is:
A man who applies his labour to the investing of objects with value by the creation of utility of some sort, can not expect such a value to be appreciated and paid for, unless where other men have the means of purchasing it. Now, of what do these means consist? Of other values of other products, likewise the fruits of industry, capital, and land. Which leads us to a conclusion that may at first sight appear paradoxical, namely, that it is production which opens a demand for products. (1876, 147)
The causal chain begins with utility, which links to value, value links to products, products link to markets.
Markets result from human action. Say's own Law of Markets is a condensation into a single statement of what is imperative for the existence of a market. What is required are two parties, each having a want (a use) for something the other has. This something can be a good or service, material or immaterial. Moreover, both bodies must consider the sacrifice necessary as not being too great to gain this something of the other. In other words, the costs of production are not more than the utility expected to be acquired; this must be true for the one as well as the other. The terms of these comparable comparisons are objectified for both respective parties by a single value; this is the selling price and the buying price (i.e., the market price). Say crystallized all the above ideas into the word product. Exchange between the two sides is an acknowledgment of the existence of two products—product exchanges for product. Finally, by Say's definitions, for a body to effectively demand a product it must possess the wherewithal to purchase that product. A product is the means by which another product can be purchased; so it follows, products open a demand or market for products.
In a monetary economy with a well-developed division of labor, since revenue is made up of value, it only remains for consumers—the owners of that revenue—to decide whether or not there exists a product on the entrepreneur's side. The reality is that consumers qua consumers stand on both sides of the market, though the appearance is that of the entrepreneur and consumers standing opposite of one another in the market. In the market, on the consumers' side there exists a product in the form of money—as determined by the consumers at some previous time. “And when one wants to compare the value of two products, one compares the quantities of a third product that each are capable of acquiring¼” (Say 1828b, 278). “Money being a product, and its value (that is to say, the quantity of things that a certain quantity of money is able to acquire) being well known, it is eminently proper for these sorts of evaluations” (Say 1828b, 278: italics added). In the market, on the entrepreneur's side there also exists a product—as determined by consumers at the time of the purchase or exchange of product (money) for product.
With the correct and complete Law of Markets in mind, the reason for Say's insistence on his definition of product emerges. A necessary, but not sufficient, condition for establishing a market is that value exchanges for value. Unproductive consumption cannot open a market because value is exchanged for utility—a destruction of value; this type of consumption closes a market. Unsold commodities are, in effect, an exchange of value for nothing. In the process of making them, much value (represented by productive services and capital) has been destroyed and it might be said that this type of unprofitable consumption lacks even the necessary condition for a market—value exchanging for value. In the nature of things, though, the value of capital has been exchanged for the value of productive services. The value of both has been destroyed, with no resulting product; unprofitable consumption, in the form of unsold commodities, closes a market.
A second condition, which is necessary and sufficient for the establishing of a market, is that products exchange for products; this condition presupposes that value exchanges for value. Distribution is an exchange of value for value but it does not bring into existence any new value. It is mere circulation; it cannot open new markets. Besides, distribution—which productive fund owner gets what share of the produced value—responds to the needs of production, as decided by the entrepreneur and, ultimately, the consumers.
Consumption resulting in commodities sold below their costs of production is an exchange of value for value, yet it destroys a greater sum of value than it creates. In this most opaque of cases, capital that has gone into the manufacture of these commodities has been exchanged for these very same commodities. This kind of unprofitable consumption terminates products; it does not produce new products (i.e., it does not replenish the value consumed). There can be no confusion here, capital (the power to create products) is being put to death—no matter the number of production periods executed, in the end, the capital is dead. There are no new products, no markets opened.
The industry of man, which consists in general in the faculty of creating social wealth, succeeds by ways prodigiously varied; but its end is always the same: it looks to provide to the need of men in such manner that the use of its products present to the consumers enough enjoyment in order that they consent to pay for them what they have cost. If the enjoyment that they are capable of procuring to the consumers, does not bear the price of a product at the level of its costs of production, not only is there no production, there is a loss” (Say 1829c, 297-298).
Production (profitable consumption) is the only process or exchange that enlarges and perpetuates itself, in the value of products and through markets. Production opens a market for production.
Some General Principles of Sayian Economics
Production is an exchange of value for value. An entrepreneur buys productive services with his own or borrowed capital, he in turn exchanges these acquired productive services for a product; this last exchange is production. Revenue, according to Say, is the amount of value given by an entrepreneur to a productive fund owner for the use of his productive service. Consumers (productive fund owners) determine production to be effective by exchanging their revenue, in requisite amounts to cover costs, for the product. If consumers choose not to do this, then a product does not exist and production has been ineffective. “[I]n order that the exchange be effective, it must be that the value of all the services destroyed be found balanced by the value of the thing produced. If this condition has not been fulfilled, the exchange has been unequal; the producer has given more than he has received” (Say 1828a, 245). In Say's political economy there can be no excess supply of products.
Products purchase products, for this reason, the ability to demand products is products. The question remains whether the ability to demand products will be matched by actual demand for products. In the situation where consumers refuse to exchange their revenue for a particular commodity made by an entrepreneur (i.e., demand the commodity), consumers have purchased a product from another entrepreneur and have unproductively consumed it outright or consumers have hoarded their revenue or consumers have saved their revenue. Savings may be consumed either unproductively or, through accumulation, reproductively. Saving does not open a market, “[b]esides, I never said that a product saved was a market opened; I said that a product made was a market opened for another product; and that is true, whether the value of it be unproductively consumed, or whether it be added to the savings of its proprietor, that is to say, to the reproductive expenditure which he intends to make” (Say 1967a, 39).
“One accumulates when one adds the one to the other savings in order to form of it a capital, or in order to augment a capital which exists already” (Say 1831, 1). “As long as the accumulations are not employed in production, they are yet only savings; when one has commenced to employ them in production (or to place them in the hands which employs them), they become capital, and are able to procure profits that one gets from productive capital” (Say 1831, 1). Accumulation may, at some future time, aid in the opening of a new market by increasing capital: “the endeavor to employ capital causes an augmentation of productions—new sources of accumulation—whence new productions arise¼” (Say 1967a, 34-35). Profits of entrepreneurs (i.e., the surplus created value accruing from the use of all the productive services) along with the savings of productive fund owners are the sources of accumulation. “[A]ccumulation is not non-consumption; it is the substitution of reproductive consumption for that which is unproductive” (Say 1967a, 39). “Products saved and accumulated are necessarily consumed from the moment that one employs them in production” (Say 1831, 1).
“Credit is the faculty that a man, an association, a nation has of finding lenders” (Say 1831, 14). Credit is not money. Money is value, a product; credit is a representative sign of value. “[A representative sign], a promise to pay a sum, does not get its value from the need one has for the bill, but from the need that one has for the sum which it guarantees payment” (Say 1828c, 75-76). Credit is not the creation of capital; “originally it [capital] has been able to form in one manner alone: by the application that one has made of a new product to a reproductive consumption” (Say 1828a, 307). Credit is the mere circulation of existing capital. “Credit does not cause to be born one sou of capital value; but it causes often to pass an idle capital value, into the hands where it bears fruit. It is there its unique, its great advantage” (Say 1966, 313). Savings can be transformed into accumulation, present value into possible future value, by the vehicle of credit.
“[I]t is the sums of values saved and capitalized, that make the difference between a rich nation and another which is not” (Say 1828a, 334). If savings are not lent, if they are left idle, then these savings are being consumed unproductively. As a result of credit not being extended, accumulation does not take place and new markets will not be opened. Credit not being offered is analogous to unproductive capital, this malady “more often happens where security, liberty, and comfort do not live” (Say 1828a, 303). On the other hand, when there is no real capital backing for credit—“a great number of speculators spreading their business beyond the scope of their capital”—a commercial crisis such as the one “which tormented England in 1825 and 1826” (Say 1828b, 444) can be initiated. Over-extended credit (malinvestment) results in unprofitable reproductive consumption and markets being closed.
Unsold commodities and commodities sold below costs constitute unprofitable consumption, and unprofitable consumption is not production; no product results, no market is opened—in fact, a market has been closed. The entrepreneur has destroyed the value of the productive services (capital) with the result of no created value or insufficient created value to replace it. There are three important points: one, no revenue remains unconsumed, meaning that the ability to demand products is equal to the actual demand for products—“[i]t is then only by accident, by false calculations, by the exceptions in a word, that production is able to be in excess over consumption” (Say 1829c, 325); two, there exists an excess supply of commodities, but not of products—Say did not define away overproduction as charged by most commentators on his Law of Markets; three, the unprofitable consumption shrinks the real economy by reducing the amount of existing value and weakens the ability of the real economy to create value by dissipating capital.
The individual consumers’ decisions determine which exchanges are unproductive consumption, which are unprofitable consumption, and which are profitable consumption. With unproductive consumption and unprofitable consumption the circular flow of value, that is, the real economy, contracts; with profitable consumption (production) the circular flow of value expands. “In the course of things, every product is consumed; since it is a product only especially as its value equals its costs; its value arises from the demand that one makes of it, of the real demand accompanied with the purchase; and the purchase would be a loss if it would not be followed with consumption” (Say 1829c, 325). It is the type of consumption that is the pulse of the real business cycle and the consumer sovereigns determine the type of consumption.
Say was aware of the existence of wide-spread gluts of particular commodities (i.e., unsold commodities and commodities sold below costs) and explicitly made reference to them. This circumstance is not a disproof of Say's own Law of Markets. “[T]he glut of a particular commodity arises from its having outrun the total demand for it in one or two ways; either because it has been produced in excessive abundance, or because the production of other commodities has fallen short” (Say 1971, 135: italics added). With some abstraction, one might conclude that aggregate demand and aggregate supply are equal and are always so, it being (seemingly) that the excess aggregate supply for certain commodities is equal to the excess aggregate demand for other commodities. In appearance, Say agreed—“one is able to remark that the times when certain commodities do not sell well, are precisely those when other commodities rise to excessive prices¼” (Say 1876, 151: italics added).
A general principle from Say's one Law of Markets is: a way to clear the economy of excess supplies of commodities is to, in effect, turn commodities into products. This is done by making commodities that are effectively demanded, meaning commodities thought to have utility sufficiently great to justify the sacrifice necessary to acquire them. Also requisite is that individuals have the means of purchasing the prospective product. “So, these means, in what do they consist” (Say 1828b, 281)? Commodities are not the means; products are the means. “The man who wants to buy, must commence by selling, and he is only able to sell that which he has produced, or that which one has produced for him” (Say 1828b, 281-282). Products open a demand for products.
The abstraction of equality between excess aggregate demand for commodities and excess aggregate supply of commodities has to be rejected for the reason that some commodities cannot be turned into products. Entrepreneurs are not perfect beings; they commit errors. It is possible, and probable, that entrepreneurs will manufacture commodities in which there is no utility or so little utility that consumers will not purchase them—no matter how low the price placed on them. Quite simply, entrepreneurs might not bring forth “an article necessary or agreeable to man” (Say 1967a, 30), thus a supply of commodities exists for which there is no corresponding demand, even if the means of purchasing them exists. Nor does it necessarily follow that there is an excess demand for other commodities; there are simply commodities that have gone unsold or sold below their costs of production. “Permit me to remark, in the first place, that I never said, commodities are always exchanged for commodities; but that productions can only be purchased by productions” (Say 1967a, 13).
Say did state that a glut of a particular commodity will disappear over time—except where “there be some violent means, or some extraordinary cause, a political or natural convulsion, or the avarice or ignorance of authority,” or production is not “left entirely free” (Say 1971, 135). “It (the quantity offered) tends to constantly proportion itself to the quantity demanded; since when the producers offer more of a certain product than is demanded, they are obliged to cede it for a price inferior to that of its costs of production; this brings the producers to reduce the quantity produced¼” (Say 1831, 50). The entrepreneur's survival, as an entrepreneur, depends on correctly responding to the consumer sovereigns. Those who do not, “are unsuccessful in their undertakings; their concerns soon fall to the ground, and their labor is quickly withdrawn from the stock in circulation; leaving such only, as are successfully, that is to say, skillfully directed” (Say 1971, 331).
Extrapolating on Say's political economy, one would have to deduce that all gluts of particular commodities will never disappear as long as changeable consumers have freedom of choice, new markets (products) come into being, and the entrepreneur has a functioning existence. “This superabundance, as I have already remarked, is also occasioned in part by the ignorance of producers or traders on the nature and extent of the demand in the places to which goods are consigned” (Say 1967a, 59). A market economy is always in disequilibrium and will ever be so because markets are dynamic. Markets do not work in the aggregate, therefore, the abstract concept of aggregate equilibrium is not a useful one in Sayian economics.
It follows from the nature of things, with disequilibrium in an interconnected market economy there will be some accompanying unemployment among productive fund owners of technically non-homogeneous industry, capital, and land. Productive services are not “equally proper to all products” (Say 1828b, 327-328). “[T]here are [productive] services rarer and dearer than others¼” (Say 1828b, 328). Fund owners who can adapt their productive services to new or existing productions will move to those productions; fund owners who cannot adapt to other productions, their productive services have been fully destroyed. “The economists who reason on the metaphysical principles much more than after experience, do not grasp the diversity of profits, because they believe that the means of producing go always toward the productions most profitable. It is an abstraction. In practice, one produces in general that which one is able and not that which one wants” (Say 1829a, 104).
"There is not any revenue in society, which is not based on a production…. To pretend that it is possible to have a revenue which is not based on a production, would be to pretend that one is able to consume a value which has not been created" (Say 1829a, 7). It follows, for a nonproducer to consume a value, that value must first be taken from a producer; this expropriation does not increase consumption, it only changes possible reproductive consumption into definite unproductive consumption. "[Value] cannot be more than once consumed; value once destroyed cannot be destroyed a second time" (Say 1971, 387). Hence, when one consumes a value, it is necessarily to the exclusion of others consuming that same value. When government redistributes value from producers to nonproducers, consumption of that value by nonproducers is necessarily to the exclusion of producers consuming that same value; this expropriation simply redistributes consumption, it does not increase consumption. Moreover, the idea that the more one consumes, the more one produces is the inverse of the truth; the truth is that the more one produces, the more one consumes. "Opulent, civilised, and industrious nations, are greater consumers than poor ones, because they are infinitely greater producers. They annually, and in some cases, several times in the course of the year, re-consume their productive capital, which is thus continually renovated; and consume unproductively, the greater part of their revenues, whether derived from industry, from capital, or from land" (Say 1971, 391).
In Sayian economics, all production is consumed in some fashion. Ultimately, consumers decide the fashion—unproductive consumption, unprofitable reproductive consumption, or profitable reproductive consumption. Investment, in Sayian economics, is akin to reproductive consumption. And, in a market economy, consumers decide whether investors have backed investment that is unprofitable or profitable. It is ignorance of the nature of things in a market economy that allows government officials to think they are able to assume the role of consumers in investment for a market economy. A society sanctioning by force high levels of unprofitable consumption of government and unproductive consumption of nonproducers will bankrupt itself and decay. For a society, through government, to continue such consumptions would be to despoil its land, exterminate its capital, and starve its labor.
Government policies that do not create goods and services individuals will freely, willingly exchange for, will not give rise to products. Increases in government spending do not necessarily stimulate a market economy at less than full employment.
[I]t has been explained that the only effectual demand is created by the possession wherewithal to purchase,—of something to give in exchange; and what can that be, except a product, which, before the act of exchange and consumption, must have been an item, either of revenue or of capital? The existence and intensity of the demand must invariably depend upon the amount of revenue and of capital: the bare existence of revenue and of capital is all that is necessary for the stimulus of production, which nothing else can stimulate. (Say 1971, 396)
In other words, government aggregate demand management policies do not necessarily generate effectual demand. Sayian economics classifies these types of spending as unproductive consumption, the destruction of products. And, Sayian economics establishes that “for the same reason that the creation of a new product is the opening of a new market for other products, the consumption or destruction of a product is the stoppage of a vent for them” (Say 1971, 139).
The Law of Markets of Sayian economics “leads to the conclusion, that the encouragement of mere consumption is no benefit to commerce; for the difficulty lies in supplying the means, not in stimulating the desire of consumption; and we have seen that production alone, furnishes those means. Thus, it is the aim of good government to stimulate production, of bad government to encourage consumption” (Say 1971, 139). It is only with a tautological definition of aggregate demand that increases in consumption and government spending conclusively stimulate an economy which is defined to be at less than full employment. Sayian economics is based on direct, personal, and pervasive observations of reality; Sayian economics is the observation and analysis of human action. “Public spending and private spending are exactly of the same nature¼” (Say 1829c, 527). “Economy is for the state as it is for the individual¼” (Say 1829b, 116). Moreover, “[p]olitical economy has its laws equally [with the physical sciences], founded on the nature of things and which are the same for all” (Say 1829b, 116).
In the nature of things, if markets (be they housing markets, financial markets, or any other type of market) are left free then individuals through them will adjust and determine value; consequently, a market system left free will achieve real, sustainable economic growth to the greatest extent possible given the limited productive funds available. It is absurd to have to state the obvious, but stated it must be—a market economy depends on sustaining existing markets and creating new markets. What is necessary for the existence of a market is a product (as defined by Sayian economics) on both sides of the market; this is the essence of Jean-Baptiste Say's one and only Law of Markets.
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 The Discours préliminaire was translated by Clement C. Biddle and included in the American edition of the Treatise.
 This is the actual footnote of Say. “The workman can only labour constantly whilst his work pays for his subsistence; and when his subsistence becomes too dear, it no longer suits the master to employ him. It may then be said, in the language of political economy, that the workman no longer offers (or supplies) his productive services, although in fact he is most anxious for employment; but his offer is not acceptable on the lasting condition on which it can be made” (Say 1967a, 49).
 Another form that unprofitable consumption can possibly take is unproductive capital—capital “in a state of inactivity” (Say 1971, 118). “These two terms unproductive capital seem contradictory; they become exclusive of one another, since unproductive values are not capital. Thus has one designed under this name of values which, if they are not actually producing, will have been able, or will have yet to be devoted to production. They are not dedicated to sterile consumption, this is to say to destruction; they are very often destined to produce later: that is what merits them the denomination of capital” (Say 1828a, 301).
 This statement first appeared in Say's second edition of the Traité (1814) and did not change in subsequent editions.
 Clearly, Say considered hoarding to be unproductive consumption. “As to riches accumulated, without being reproductively consumed, such as the sums amassed in the miser’s coffers, neither Smith nor I, nor anyone, undertakes their defense; but they cause very little alarm; first, because they are always very inconsiderable, compared with the productive capital of a nation; and secondly, because their consumption is only suspended. All treasures get spent at last, productively or otherwise” (Say 1967a, 37-38).
 Such statements by Say have steered some commentators to an associated mistaken view that Say thought there was some abstract counter set of unmade commodities matching the existing excess commodities.
 “¼and, when they offer less of it, the price of the thing rises above its costs of production: which brings them to augment production” (Say 1831, 50). If the market is free, over time the price of the particular product gravitates toward the product's costs of production. “There is this difference between a real and a relative variation of price: that the former is a change of value, arising from an alteration of the charges of production; the latter, a change, arising from an alteration of the ratio of value of one particular commodity to other commodities. Real variations are beneficial to buyers, without injury to sellers; and vice versa; but in relative ones, what is gained by the seller is lost by the purchaser, and vice versa” (Say 1971, 304).
 Other conclusions or general principles from the Law of Markets are explicitly given by Say on pages 137-140 of the Treatise (1971).