Economists have sometimes found themselves in the position of J.B. Say, who set out to explain the empirical phenomenon of “overproduction”, and discovered his “law” that it could not occur, his “law” so far as it had any clear sense being simply an analytical proposition or definition which does not say anything about what happens or could conceivably happen to anything, excluding simply the inconceivable. (Hutchison 1938, 70)
“The exchanges that they [producers] are able to make for their products with those of others, offer to these products that which one names markets [débouchés]” (Say 1803a, 152). This is the Law of Markets of Jean-Baptiste Say. Say defined a product as a commodity or service having sufficient value to cover its costs of production. “A product which does not reimburse its costs, is not a product” (Say 1829a, 28). Thus, it is supposed by political economists and historians of economic thought, Say transformed his Law of Markets into a tautology (at best). What is stunningly amazing about Say’s definition of a product is (it seems) no political economist or historian of economic thought has asked the question whether commodities sold below cost open markets or not. In reality, commodities sold below cost do not open markets; commodities sold below cost close markets. This is the same as stating unprofitable firms close markets. If this were otherwise, unprofitable firms would not have to shut down. It is understandable that the Classical economists did not ask this question, they had other reasons for rejecting Say’s definition of a product namely, Say’s product could be an immaterial product and it was not based on labor value. But it is perplexing that modern economists, knowing basic neoclassical price theory, have not asked this question.
The reason for this negligence most likely lies in the unquestioned untruth that Say’s own Law of Markets (in itself) is a macroeconomic principle. Say's own Law of Markets is a microeconomic principle. Say's own Law of Markets is an inductive law concerning what is fundamental and essential for an individual market to exist. This misinterpretation of Say's own Law of Markets as an aggregate statement, at least in part, is due to the rejection of induction (even its very possibility) by economists as a legitimate method of economics—and not just as it concerns Say’s inductive method. If one does not recognize or accept Say’s inductive method then one is unable to recognize or accept the very basis of Say’s own Law of Markets; one will not recognize or accept it as being a microeconomic principle and not a macroeconomic principle. This is of extreme importance because Say’s own Law of Markets has powerful and important consequences for political economy. For instance, if one accepts Say’s own Law of Markets almost every representation of John Maynard Keynes of the Law of Markets can be rejected.
The Inductive Methods of Francis Bacon and Say
For Say, method boiled down to a question of whether economics was to be founded on abstract principles and hypotheses or whether it was to be founded on principles derived from observation and experience—the nature of things. It was clear to Say, and he in turn made it clear to his readers, that for economics to achieve the status of science it has to practice the method of science. “One studies by analysis, by observation, by experience, what are things, their nature, their causes and their results, and by these means one discovers which are the bads that one is able to diminish, which are the goods that one is able to augment. It is this, which constitutes modern political economy. It is this, which makes of it a science…” (Say 1966, 165).
The essential truths of political economy “rest on the facts which are or which are not.... It is the method of Adam Smith, and it is the best…. It is the Experimental Method of BACON, applied to the moral and political sciences” (Say 1966, 271). Thus, the progress (as defined by modern economists) of economics toward becoming a science as a result of Ricardian efforts, through the use of deduction, abstraction and hypotheses, was viewed contemporaneously by Say as quite the opposite of progress. Ricardo's methods (metaphysical economics in Say’s terms) “cause to degenerate a science of facts, of things, into a series of abstractions which would have the harmful effect of decrying political economy in the detouring of applications, and causing it to degenerate into argumentations without utility, sometimes tiring to the reader” (Say 1966, 302).
The induction process commences with “experience duly ordered and digested” because “induction which proceeds by simple enumeration is childish; its conclusions are precarious and exposed to peril from a contradictory instance; and it generally decides on too small a number of facts, and on those only which are at hand” (Bacon 1960, 98). Likewise, Bacon rejected Aristotle's perfect induction, a type of induction that demands all particulars be observed. Indeed, little attention—ancient or modern—has been paid to this type of induction. Rightly so, because perfect induction, as a means of gaining knowledge, is an impossibility and useless. Hume's “problem of induction” appears to be more complex but just as skeptical in its conclusions with respect to induction. Hume's skepticism is that “all arguments concerning existence are founded on the relation of cause and effect, that our knowledge of that relation is derived entirely from experience, and that all our experimental conclusions proceed upon the supposition that the future will be conformable to the past. To endeavor, therefore, the proof of this last supposition by probable arguments, or arguments regarding existence, must be evidently going in a circle and taking that for granted which is the very point in question” (1955, 49-50).
In Bacon's view, there is a knowable reality; it is nature. Science is directed toward uncovering it and using this knowledge for “the discovery of many new things of service to the life and state of man...” (Bacon 1960, 97). Bacon's “course and method…is this—not to extract works from works or experiments from experiments (as an empiric), but from works and experiments to extract causes and axioms, and again from those causes and axioms new works and experiments, as a legitimate interpreter of nature” (Bacon 1960, 107). So, induction is a process that has as its aim the establishing of general knowledge (truth) but ultimately it has as its goal the being of practical use to man. This was also the ambition of Say's science—to learn the nature of things, to be of practical use to man. “It is insufficient to be able to dispose of the forces of nature, it is necessary to know how to employ them for profit, and for that, it is necessary to understand also the economy of society. At the time that there are material forces which are subject to certain laws, there are forces which hold to the nature of social things, which are on their side subject to other laws no less certain” (1966, 156). Only with, as a basis, the knowledge of the nature of things is man able to come to know his true interest. This is of inestimable practical use to man.
The induction process progresses by allowing observations to determine the direction of cause and effect relationships, their strength and their pervasiveness. Yet, the searcher for knowledge must be mindful not to leap from the observed particulars to the highest and most general principles.
The understanding must not, however, be allowed to jump and fly from particulars to axioms remote and of almost the highest generality (such as the first principles, as they are called, of arts and things), and taking stand upon them as truths that cannot be shaken, proceed to prove and frame the middle axioms by reference to them…But then, and then only, may we hope well of the sciences when in a just scale of assent, and by successive steps not interrupted or broken, we rise from particulars to lesser axioms; and then to middle axioms, one above the other; and last of all to the most general. For the lowest axioms differ but slightly from bare experience, while the highest and most general (which we now have) are notional and abstract and without solidity. But the middle are the true and solid and living axioms, on which depend the affairs and fortunes of men; and above them again, last of all, those which are indeed the most general; such, I mean, as are not abstract, but of which those intermediate axioms are really limitations. (Bacon 1960, 98)
“The understanding must not therefore be supplied with wings, but rather hung with weights, to keep it from leaping and flying. Now this has never yet been done; when it is done, we may entertain better hopes of the sciences” (Bacon 1960, 98).
Knowledge—truth—is gained by ascending from particulars observed, to more general intermediate principles. From these principles, eventually one arrives at the most general axioms or principles. “From the new light of axioms, which having been educed from those particulars by a certain method and rule, shall in their turn point out the way again to new particulars, greater things may be looked for” (Bacon 1960, 97). Say's method mirrors this statement. “Once that, by analysis and observation, a thing is well known, and by consequence also the kind of action that it is able to exert, it is permitted to lay down as principles, that is to say as true sources, of which one is able to regard the proof as established, and of which one is able with certainty to get new consequences” (1966, 140).
The Inductive Methods of Adam Smith and Say
What Say derived from Adam Smith was not the exposition of the inductive method (he derived that from Francis Bacon), but the practice of the inductive method. Bacon, in elucidating his method, was concerned primarily with understanding “the process of nature,” he “completely ignored that the same method would be applicable to the moral and political sciences, and that it would obtain successes of the same kind” (Say 1829, 372-373). It was left to Adam Smith to apply the inductive method to political economy. “[Adam Smith] elevated political economy to the rank of the positive sciences, by the care that he has taken of never founding a reasoning but on observation and experience” (Say 1829, 401).
Many principles strictly correct had often been advanced prior to the time of Dr. Smith; he, however, was the first author who established their truth. Nor is this all. He has furnished us, also, with the true method of detecting errors; he has applied to political economy the new mode of scientific investigation, namely, of not looking for principles abstractedly, but by ascending from facts the most constantly observed, to the general laws which govern them. As every fact may be said to have a particular cause, it is in the spirit of system to determine the cause; it is in the spirit of analysis, to be solicitous to know why a particular cause has produced this effect, in order to be satisfied that it could not have been produced by any other cause. The work of Dr. Smith is a succession of demonstrations, which has elevated many propositions to the rank of indisputable principles, and plunged a still greater number into that imaginary gulph, into which extravagant hypotheses and vague opinions for a certain period struggle, before being forever swallowed up. (Say 1971, xxxviii-xxxix)
“[I]t is in those [writings] of Smith that I have learned not to search for the cause and effects of the phenomena of society other than in the nature of things¼” (Say 1833, 58-59; italics added). It is method that makes a science; the inductive method makes economics a science. Before Adam Smith, in the opinion of Say, the science of political economy did not exist.
Confusion with the true influence of Smith on Say is understandable. Say referred to The Wealth of Nations as an “immethodical assemblage” (1971, xix) and that “the work almost throughout is destitute of method” (1971, xliii). In fact, there is no statement of method by Smith in the Wealth of Nations. Moreover, Say appears to have thought Smith's The Wealth of Nations was too long on the enumeration of observations, and too short on the analysis of those observations. Adding evidential weight to these statements is the fact that Say seemingly spent as much space in his works criticizing or disagreeing with Smith as he did praising or agreeing with him. For instance, the disagreement between the two concerning immaterial products. Adam Smith, according to Say, was wrong about immaterial products. “He concluded they were not products because they have no duration and they are not susceptible to being accumulated” (1828, 186). This shows Say's disagreement with some of Smith's results, it does not show a disagreement with Smith's method. Any correct principle that Smith might have derived, Say could have derived with induction on his own. That same method—Smith's method—also would have allowed Say to uncover and pronounce on Smith's mistakes in results. “[W]hen the authority of Adam Smith is against the nature of things, it must cede; since the nature of things will end always by being the strongest…” (Say 1966, 514).
Rationale for Say’s Induction as a Method of Political Economy
“Both skeptics and inductivists are very much aware that the problem of induction is intimately bound up with the task of locating an exact boundary between methods of inquiry which produce genuine knowledge and those which issue in unsubstantial substitutes” (Katz 1962, 17-18). Economics, being a social science, has foreclosed to it much of experimentation. For this reason, economics is left with observations to establish the genuine knowledge in the realm of its study. And, it follows, that economics is restricted to the greatest degree to qualitative explanations of the actions of economic man, not quantitative predictions of the same. Economics does not have to infer whether the sun will rise tomorrow (Hume’s problem of induction), economics has to infer what opens markets.
Induction requires that one accept the existence of reality, for without this acceptance sensory observations themselves cannot be accepted as being valid (i.e., as having a reality). In fact, it is impossible for the rational human mind to approach the world otherwise than with an acceptance of reality. One is not able to deny reality without first accepting a reality. Now, having a rational mind does not disallow the possibility that this reality is created by the mind itself (or consciousness); idealism accepts a reality, though, it is located in the mind or consciousness. What sets epistemological idealism apart from epistemological realism is the concept there is no objective reality, no reality is able to be objectified. Idealism is the proposition that reality is constituted by the individual consciousness. Realism, contrariwise, is the proposition that reality exists independently from the observer. Reality is not constituted by the individual mind; an objective reality has primacy over consciousness. Man is a part of reality, not apart from reality.
This question of primacy of an objective reality and consciousness is of great importance to Say's induction because his was a method of direct, personal sensory observations; observations, as Say said, “witnessed by ourselves” and “within the reach of every inquirer” (1971, xx and xlv). An objective reality open to being perceived by the senses of every individual must exist (i.e., realism) or Say's type of induction is composed of opinion or illusion created by each individual. In line with Bacon, Say was a subscriber to epistemological sensationalism—all knowledge is found through the senses. “I conceive that I perform the office of a true priest of the sense (from which all knowledge in nature must be sought, unless men mean to go mad)…” (Bacon 1960, 22). And it was certain and objective knowledge. Even the fact that utility is subjective was an objective fact to Say and, again, one discovered through sensory observations.
Accordingly, it is not so much that Say's induction process deals with the measurable or quantifiable (it does) that is of importance to the search for knowledge, the importance is that it deals with the observable. Measures and quantities are relative to time, to place, and even to individuals. For example, Say's views on value: “Value of a thing is positive but pertually variable. Nothing is able to fix it invariably, because it is based on needs and on the means of production which vary each minute” (1828, 145-146). In keeping with his views on political economy as emphasizing cause and effect, it was important for Say to objectify the direction and nature of changes but not the magnitudes of changes. In Say's political economy, no numerical relationships can be found, only causal relationships.
Consequently, induction demands an objective reality, not simply a reality, if it is to be taken as a rational method of science. Moreover, the acceptance of the existence of an objective reality must be a priori. That is, one must accept observation as observation, yet observation (experience) is unable to prove that observation exists; that experience is unable to, in large part, led Hume to his position of skepticism. To try to use such a proof would be circular, a tautology of the broadest nature. Indeed, the attempt at such a proof is the epitome of a recognition that reality exists and, hence, that experience exists. The conclusion has to be that the acceptance of the existence of an objective reality is an ultimate given; it has no proof nor can it have proof; it is a priori. What is, is.
With the acceptance of an objective reality comes the legitimizing of sensory experience as a means of acquiring knowledge; once the legitimization of sensory observation has been accomplished (recognized), then the search for and acquisition of knowledge can begin. However, the a priori acceptance of an objective reality does not necessarily imply anything about that objective reality. It might be viewed as chaotic, as mechanistic, as orderly, or otherwise. Although, for induction to be effective as a method of achieving knowledge, it is necessary there be order in reality.
Order can be defined as constancy in identity and constancy in change. Constancy in identity means that an object is that object and not another, at the same instant. By change it is meant causality. So, constancy in change denotes that “causes are always followed by the same effects” (Say 1828, 18). It is self-evident that if order is absent in reality, if the universe is chaos, then man is condemned to never-ending doubt or supernaturalism, ignorance, and impotency. Without order no scientific method, not simply induction, can possibly be pursued; there is nothing to learn except there is nothing to learn. “Man, being the servant and interpreter of Nature, can do and understand so much and so much only as he has observed in fact and thought of the course of Nature. Beyond this he neither knows anything nor can do anything” (Bacon 1960, 39). Likewise, Say believed strongly in the presence of order, in fact, the discovering and elucidating of order—“the nature of things”—is the raison d'etre of science.
The orderliness of reality imposes upon man categories by which it is incumbent on man to follow in studying that orderly reality—namely, the categories of identity and change. Categories are the most general principles (of explanation) used for organizing knowledge. Man's quest for knowledge of reality is organized as reality itself is organized; the order of man's search is dictated by reality's own order. For this reason, these categories are derived by induction. Furthermore, these categories—identity and change—are manifest in the science of Say.
It appears to me, that this word [facts] at once designates objects that exist and events that take place; thus presenting two classes of facts: it is, for example, one fact, that such an object exists; another fact, that such an event takes place in such a matter. Objects that exist, in order to serve as the basis of certain reasoning, must be seen exactly as they are, under every point of view, with all their qualities. Otherwise, whilst supposing ourselves to be reasoning respecting the same thing, we may, under the same name, be treating of two different things. (Say 1971, xvii)
The second class of facts, namely, events that take place, consists of the phenomena exhibited, when we observe the manner in which things take place. It is, for instance, a fact, that metals, when exposed to a certain degree of heat, become fluid. (Say 1971, xvii)
These categories do not convey knowledge of any particular nature, but they do convey knowledge of nature in general. And, although these categories divide science into types, they also act to keep the types of science in contact, each with another. “The manner in which things exist and take place, constitutes what is called the nature of things; and a careful observation of the nature of things is the sole foundation of all truths” (Say 1971, xvii). According to Say, each of these categories has a particular type of science dedicated to it. Descriptive science “arranges and accurately designated the properties of certain objects” (Say 1971, xvii). Included in this type of science are botany, natural history, and statistics. Experimental science “unfolds the reciprocal action of substances on each other, or in other words, the connexion between cause and effect” (Say 1971, xvii-xviii). Included in this type of science are chemistry and natural philosophy. Political economy is also subsumed under this type of science, “showing the manner in which events take place in relation to [social] wealth” (Say 1971, xviii).
In an orderly reality, it was possible for Say to arrive at general facts through an inductive process. “General facts undoubtably are founded upon the observations of particular facts...” (Say 1971, xx). Each general fact could, in turn, form a basis for further inductive processes—resulting in particular facts and possibly general facts. “When the results of these facts have uniformly been the same, the cause of their having been so satisfactorily demonstrated, and the exceptions to them even confirming other principles equally well established, we are authorized to give them as ultimate general facts…” (Say 1971, xx). General facts are designated principles when applied.
No inductive process begins or operates in a void. Every definition, to some extent, has prior knowledge—general facts from previous inductions—to support it. Daniel Hausman proposes that Hume's problem of induction becomes a “far more tractable problem” if one allows prior knowledge (“purported scientific knowledge”) into ones inductive processes. “In learning more about the world we have to rely not only on the reports of observations and experiments, but also on the vast body of knowledge that we think we already have” (1984, 17-18). A principle has behind it other principles as well as its own inductive process. “A fact is always the result of one or several anterior facts which are the cause of it” (Say 1828, 18). It is the putting to use of these principles in on-going inductive processes that in large part constituted Say's analysis
This part of Say's analysis is the connecting of facts to their true causes; analysis is the “placing in order experiences, to render the facts, to study how happen their consequences” (1833, 399). “It is not sufficient to set out from facts; they must be brought together, steadily pursued, and the consequences drawn from them constantly compared with the effects observed…. It [political economy] must discover the chain which binds them [facts] together, and always, from observation, establish the existence of the two links at their point of connexion” (1971, xlvii). “All the facts are in nature; but they are like the words in the dictionary. They are not yet truths; it is necessary they connect…” (1829, 240).
Another part of Say's analysis, and one which has caused many to misunderstand Say methodologically, is his use of deduction. Once general facts (truths) have been distilled by induction, they subsequently can to be enlisted as principles from which deductive conclusions can be drawn. “Political economy, in the same manner as the exact sciences, is composed of a few fundamental principles, and a great number of corollaries, or conclusions, drawn from these principles” (Say 1971, xxvi). The misreading of such statements has lead to the mislabeling of Say methodologically as a deductivist and/or apriorist. Yet, it is the inductive uncovering and founding of these “few fundamental principles, not requiring even the support of proofs or illustrations” (Say 1971, xxvi) that defines Say methodologically, not the conclusions deductively drawn from these few principles. For example, “It is quite impossible that the purchase of one product can be affected, otherwise than by the value of another” (Say 1971, 137). This general principle is an induction just prior to the Law of Markets. “From this important truth may be deduced the following important conclusions…” (Say 1971, 137). And, no doubt, Say’s economics contains an abundance of deductive conclusions; which explains why the older Say had disagreements with the younger Say. But, Say never had reservations about or altered or recanted any of his few fundamental, inductive principles. A case in point is his Law of Markets.
In accordance with Say, hypotheses can be used but “a hypothesis is unable to be given as a proof, but only as a means of making understood a truth which rests on other foundations” (Say 1828, 28). There is no need to resort to abstract principles or imaginary constructs or gratuitous assumptions to frame hypotheses or to reach deductive conclusions, political economy has available to it indisputable general principles (truths). “They as certainly proceed from the nature of things as the laws of the material world. We do not imagine them; they are results disclosed to us by judicious observation and analysis” (Say 1971, xxv). Deductive conclusions are able to be tested against new inductive processes; in effect, “if the test is successful, a bridge, a logical bridge, has been built between two inductions” (Hicks 1979, 29).
Only in those cases where order is not discernible through the senses (i.e., observation), in other words, only when identity and change are not able to be separated and isolated from the complexities of the real world, then abstraction, hypothesis-forming, experimentation, reduction, etc. have a role to play in the acquisition of knowledge. That is, deduction becomes more acceptable as a method of science. The area of macroeconomics proper is a notable case. To arrive at macroeconomic general principles from the Law of Markets, Say necessarily used deduction because the method of direct observation cannot be used—inherently, macroeconomic concepts are not directly observable. However, it is necessary to stress, according to Say, the surest way to conduct a deductive process is on general principles established by inductive processes. Induction provides more certain knowledge than deduction. Say’s induction provided a microeconomic base for his macroeconomic deductions.
Say's focus was on a real, orderly world; whence came his application of Baconian induction, whence came his concentration on observation. “The laws of nature, no more than those of human society, are not in our thought: they are in the nature of things…” (1829, 347-348). “[T]here is in societies a nature of things that does not depend on any whims of man, and that we do not know how to regulate arbitrarily” (1828, 3). “So it is the knowledge of these natural and constant laws without which human societies would not know how to subsist, that constitutes this new science that one has designated by the name of political economy. It is a science because it is not composed of invented systems, of plans of organization arbitrarily conceived, of hypotheses stripped of proofs; but of knowledge of what is, of the knowledge of facts which reality is able to be established” (1828, 5). “It is, in other words, an exposition of the general facts observed in relation to this subject. With respect to wealth, it is the knowledge of effects and their causes” (1971, xviii).
Through observation of and analysis of particular facts (what is and what takes place), general facts can be uncovered inductively. “General facts are the results of the nature of things in all analogous cases; particular facts as truly result from the nature of things, but they are the result of several operations modified by each other in a particular case” (Say 1971, xviii). General principles based on these general facts are truths, truths about reality or the nature of things. “The basis of all truth, is then the reality of things, and the commencement of all instruction is to ascertain this reality by all the means that nature has given to us” (Say 1828, 14).
Since a general fact is a truth that has been uncovered, there is no possible way to test it, no way to falsify it. “A new particular fact, when insulated, and the connection between its antecedents and consequents not established by reasoning, is not sufficient to shake our confidence in a general fact…” (Say 1971, xx). After all, if an inductive investigation resulting in a general fact has been carried out correctly, the particular facts “most carefully observed, best established, and witnessed by ourselves” (Say 1971, xx) have been taken account of. “If one consults experience and observations repeated, many moral facts are able to acquire equal certitude to that of many physical facts. One sees them; they renew themselves thousands of times; one submits them to analysis; one knows their nature, their formation, their results; it is not permitted to place in doubt their reality” (Say 1828, 17).
A general fact is such that it is verifiable (verified) in all times, in all places. From an established truth one is able to proceed to other, yet unknown or unestablished truths.
But after a fact has been well-observed, after the analysis we have made known all what one is able to find in it and nothing more, if then we see the link which connects it to all the others, we are able to deduce a general law which is only the expression of what passes in all the similar cases. (Say 1828, 24)
“A general law well-established, becomes a principle when one invokes it as a proof, or as the base of a plan of conduct” (Say 1828, 24).
These methods [Baconian induction]…political economy, has gotten from the region of hypotheses, from the doctrines systematic and purely conjectural; they have made of it a positive science. Its laws being no more of the imaginary systems, but of truths founded on the facts that all the world is able to establish, it has been possible to coordinate them, of developing them in an order which elucidates the ones by the others… (Say 1828, 25-26)
The Economic Induction of Say
Now, through a process of regression—back from wealth, past value—it is possible to derive a body of Say's inductions and to discover the root from which all of Say's economic induction sprang. The root is utility. Utility is the end toward which all economic action is directed at obtaining. Within this definition—utility—is captured every want and need of man, every end, be it the most basic requirement for life itself or some grandiloquence bauble.
The value that mankind attach to objects originates in the use it can make of them. Some afford sustenance; others serve for clothing; some defend them from the inclemencies of the season, as houses; others gratify their taste, or, at all events, their vanity, both of which are species of wants; of this class are all mere ornaments and decorations. It is universally true, that, when men attribute value to any thing, it is in consideration of its useful properties; what is good for nothing they set no price upon. To this inherent fitness or capability of certain things to satisfy the various wants of mankind. I shall take leave to affix the name of utility. (Say 1971, 62)
Obviously, for Say and his political economics, utility was an ultimate given and the ultimate end (i.e., all ends). Yet, as will be discussed, Say's political economy is not concerned with utility per se.
The regression process cannot be carried any farther back and remain in the proper domain of the study of political economy; the induction of the existence of utility is founded on observations alone, on particular facts solely. The observations of the existence of utility are pervasive and direct—within oneself and the individuals around one. Most observers would acquiesce that there are objects of use to man. It is generally agreed that man has wants. “He has wants, both corporeal and intellectual, social and individual; wants for himself and for his family” (Say 1971, 285). Therefore, the existence of utility is an objective fact; utility is real. But to what extent any particular object is of use will find far less of a consensus. “The want or desire 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” (Say 1971, 285). For this reason, utility (itself) is subjective; utility is relative to the observer. “It is not our business here to inquire, wherein these wants originate; we must take them as existing data, and reason upon them accordingly” (Say 1971, 285). To expound or pronounce on utility is to practice the arts of moralist or sociologist or psychologist or otherwise, not economist. Only that utility which is objectified or acknowledged by exchange (i.e., value) is capable of being studied within political economy. It can only be concluded, in accordance with Say, utility is not open to being studied by the science of economics.
However, utility is not worthless information to be disregarded by economists; the existence of utility is a truth. Indeed, utility is “the first cause of value” (Say in Ricardo 1952, 271) and, hence, the first cause or first principle in the study of Say's economics. With one eye always fixed upon utility, all inductions which are possible in economics are so made; no definition in Say's economics is absent of a reference (direct or indirect) to utility. From the existence of utility (one principle), through the use of induction, other principles are arrived at. Each newly discovered principle is able to provide the basis for continued inductive processes. “[T]he science must conduct us from one link to another, so that every intelligent understanding may clearly comprehend in what manner the chain is united” (Say 1971, xviii-xix). So it goes until, “[a] perfect knowledge of the principles of political economy may be obtained, inasmuch as all the general facts which compose this science may be discovered” (Say 1971, xix).
Value is simply acknowledged utility; utility is acknowledged by human action. Value is revealed reality, so to speak, not revealed preference. Human actions are the facts always carefully observed [which] make known to us the nature of wealth. These human actions, for Say, were of one category of action—exchange. He further divided this category into three distinct types of exchange—production, consumption, and distribution. Exchange objectifies the amounts of utility created (production), the amounts of utility destroyed (consumption), and the amounts of utility circulated (distribution). Of course, utility is attached to material objects and physical actions, but how much utility is attached to a particular object or service? Only through exchange does one know how much one must receive of other objects to be willing to surrender an object that one possesses or how much of other objects others are willing to surrender to possess that object. Only through exchange is utility measured in amounts of things (e.g., commodities), which are known. Only through exchange are subjective benefits (i.e., utility) quantified by objective sacrifices (i.e., value).
In Say's political economics utility is more real than value. Value is the reflection of utility, not vice versa. Plato philosophized that man dwells in a cave, with the real world existing outside the cave. Man's only perceptions (certainly imperfect) of the real world are shadows thrown on the cave wall by the light of the sun streaming through. In Say's political economy, the shadows on the cave wall are value, it is utility which casts those shadows and the sun, which makes possible those shadows, is exchange. With his method, Say got past utility to value, past natural wealth to social wealth, past the subjective to the objective, past opinion to science. “The gulf between the mental and the real, outside, physical world is bridged…For it is through actions that the mind and reality make contact” (Hoppe 1988, 18). Say's economics is primarily interested in exchange; Say's political economy is essentially catallactics.
Emanating from the recognition that there are objects of use to man, the causal chains gleaned from economic inductions form a chain mesh (as is reality). For example, Say induced the general fact that some useful objects are abundant in relation to man's need of them; these objects “are the spontaneous gifts of nature, and require no exertion of man” (Say 1971, 63). These objects Say named natural wealth. Yet other objects of use can only be peacefully procured by indirect exchange (production) or direct exchange (trade); these things can be “obtained only with sacrifices” (Say 1828, 133). These things Say named social wealth. Things that are the object of exchange are things of value. Again, political economy “submits to scientific estimation of goods only the goods capable of having a value of exchange, because they are the only ones to which men attach, in the proper sense, the name [social] wealth; the only ones of which the quantity may be rigorously assignable, and of which the increase or decline may be subjected to determined laws” (Say 1828, 99).
“[Social] wealth does not depend on the species of things, nor on their physical nature, but on a moral quality that each names their value. Value alone transforms a thing into [social] wealth…” (Say 1828, 139). “The value that mankind attaches to objects originates in the use it can make of them” (Say 1971, 62). The ability of an object to serve is its utility. Utility is subjectively determined; utility has no existence apart from the human mind.
Objects, however, cannot be created by human means; nor is the mass of matter, of which this globe consists, capable of increase or diminution. All that man can do is, to reproduce existing materials under another form, which may give them a utility they did not before possess, or merely enlarge one they may have before presented. Production is the creation, not of matter, but of utility. It is not to be estimated by the length, the bulk, or the weight of the product, but by the utility it presents. (Say 1971, 62)
Consumption and distribution are likewise to be understood in terms of utility, the immaterial, and not of matter, the material. Utility is manifested to the world outside of the mind as value.
How things of value or social wealth are produced, distributed, and consumed make the subject of further economic inductions of Say. Of course, connected to this subject are other general facts, applied as general principles (definitions). “One will understand 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 1828, 160). And, finally, there is Say’s own Law of Markets.
The man whose industry is applied by him to give value to things creating in them some use, is able to hope only this will be appreciated and paid for, as there where other men will have the means of making acquisition of them. These means, in what do they consist? In other values, of other products, fruits of their industry, of their capital, of their land: from where it results, what at first glimpse seems a paradox, that it is production which opens the market to products. (Say 1814, 144)
The inductive causal chain begins with utility, which links to value, value links to products. “We have as a measure of production only the value of the things produced; and, from the moment that the consumer attaches 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 values as effectively products” (Say 1829, 292). Products can only be purchased with products; products link to markets.
Say more than “paid lip service to the Baconian method of ‘direct induction’” (Blaug 1958, 188); it was the life of his work and the work of his life. This opinion was shared by Charles Comte, Say’s son-in-law, in his brief biography of Say (in Say 1833, page xxiv). Say arrived at his principles through induction; induction gave Say's principles empirical content. Utility was the primal economic induction that Say conducted. The fact that man has wants, and that there are things which satisfy these wants, is constantly and consistently observed operating among others and within the observer himself. That utility is subjective, Say took as an inductively established economic truth. Utility is objectified only through observable exchange; this is value. To Say, value is another truth. With the truth of value, Say made other observations, discovering the nature of wealth. From this truth or general principle, and coincident with observations, other truths could be discerned such as the production, distribution, and consumption of social wealth.
Lawrence Klein stated, “to the extent of our powers of observation, we cannot cite empirical support that is widely accepted as validating Say's Law” (1983, 118). This conclusion is not surprising since no empirical evidence exists nor even possibly could exist—by the measures of modern economic method. Jean-Baptiste Say was an inductivist; his Law of Markets is an inductive truth. This being the case, Say's own Law of Markets is based on nothing except empirical evidence and other inductive truths, which are in turn based on nothing except empirical evidence. A major source of nonacceptance of Say's own Law of Markets (in particular, his definition of a product) has been the rejection of direct induction by modern economists. This rejection of direct induction also helps in explaining how moderns got from Say's own Law of Markets to the abstract Laws that they deal with.
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_____ 1829. Cours complet d'économie politique pratique. Volume VI. Paris.
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_____ 1833. Cours complet d' Économie politique pratique. Volume complementaire. Paris.
_____ 1966. Oeuvres diverses de J.-B. Say. Osnabruck.
_____ 1967. Letters to Mr. Malthus. Translated by John Richter. New York.
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 This explains the title of Say's longest work, Cours Complet D'économie Politique Pratique.
 “Ricardo in England and Sismondi in France concur with Smith in his mistake” (Say 1828, 189).
 See Say 1971, 137-140.
 Say judged immaterial value as a reality, an objective reality. This judgment means Say's economics had a wider scope than that of most other classical economists, including, of course, Adam Smith. Accordingly, Say's economics encompassed more forms of wealth, more of that which makes up human welfare and action. For example, a day of work is a thing that has a value. Likewise, the council of a doctor, a play, etc. “A proof that they have value, is that a price is placed on them and to have them one gives in exchange money or other values” (Say 1828, 161).
 Hoppe's words are a description of Ludwig von Mises' achievement concerning the concept of human action; his words are also appropriate to Say and induction.
 In the exchange that is production there is, seemingly, a complication for direct induction; the exchange is one of immaterial things (i.e., productive services) against what might be immaterial things or material things (i.e., products). “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 1967, 15). But there is no complication here, this exchange (production) is no different from any other exchange; exchange is observable and objectifies the immaterial.