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What is Say’s Law of Markets?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 30 August 2014
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Say’s Law of Markets is a set of economic principles that are commonly associated with the concepts developed by Jean-Baptiste Say during the latter 18th and early 19th centuries. Say’s ideas focus on the underlying reasons for economic recessions and the roles that supply and demand play in the creation and perpetuation of a recession.

Essentially, Say’s Law of Markets holds to the idea that demand does not exist unless there is supply. This would mean that a recession could not take place due to a failure in demand. As long as there are goods available, there will be a demand for goods. Thus, a failure to create and offer an ample amount of desirable goods would be the factor that would trigger a recession. If there are not desirable goods to purchase, there will be no active commerce, even though consumers are willing to make purchases.

A lack of money in the hands of consumers is also not considered to be a trigger for a recession. According to Say’s Law, consumers always find a way to purchase when there are ample goods to choose from. The demand will be there, and will exist without the need to issue more currency. In fact, Say tended to lean away from issuing more currency in order to balance economic conditions, as the action could quickly swing the economy away from a recession and into a high rate of inflation.

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It is important to note that Say did not actually develop a short set of laws. In reality, what is known as the Laws today came about due to the later work of such economists as John Stuart Mill, David Ricardo, and James Mill. The shorter definitions were the result of research using the writings of Say and employing the principles in various economic models.

Say’s Law of Markets spoke directly to economic conditions in the early years of the 19th century and continued to be relevant to market performance well into the 20th century. Even today, some of the principles are considered to be of value. However, the work of Jean-Baptiste Say continues to be re-evaluated in light of shifts in the way markets function. This means the perception and application of Say’s Law of Markets to economic conditions has changed over time.

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