what is say s law of markets 
say s law of markets is a classical economic theory that says that the income generated by past production and sale of goods is the source of spending that creates demand to purchase current production the law comes from an 1803 book titled treatise on political economy or the production distribution and consumption of wealth by french economist jean baptiste say 1modern economists have developed varying views and alternative versions of say s law understanding say s lawsay s law of markets was developed by the french classical economist and journalist jean baptiste say say was influential because his theories addressed how a society creates wealth and the nature of economic activity to have the means to buy a buyer must first have sold something say reasoned so the source of demand is prior to the production and sale of goods for money not money itself in other words a person s ability to demand goods or services from others is predicated on the income produced by that person s own past acts of production say s law says that a buyer s ability to buy is based on the buyer s successful past production for the marketplace say s law ran counter to the mercantilist view that money is the source of wealth under say s law money functions solely as a medium to exchange the value of previously produced goods for new goods as they are produced and brought to market in turn by their sale they produce money income that fuels demand to subsequently purchase other goods in an ongoing process of production and indirect exchange to say money was simply a means to transfer real economic goods not an end in itself according to say s law a deficiency of demand for a good in the present can occur from a failure to produce other goods in the past which would otherwise have sold for sufficient income to purchase the new good say went on to state that such deficiencies of production of some goods would under normal circumstances be relieved before long by the inducement of profits to be made in producing the goods that are in short supply however he pointed out that the scarcity of some goods and glut of others can persist when the breakdown in production is perpetuated by ongoing natural disaster or government interference say s law therefore supports the view that governments should not interfere with the free market and should adopt laissez faire economics investopedia alison czinkotaimplications of say s lawsay drew four conclusions from his law say s law thus contradicted the popular mercantilist view that money is the source of wealth that the economic interests of industries and countries are in conflict with one another and that imports are harmful to an economy later economists and say s lawsay s law still lives on in modern neoclassical economic models and it has also influenced supply side economists supply side economists especially believe that tax breaks for businesses and other policies intended to spur production without distorting economic processes are the best prescription for economic policy in agreement with the implications of say s law austrian economists also hold to say s law say s recognition of production and exchange as processes occurring over time focus on different types of goods as opposed to aggregates emphasis on the role of the entrepreneur to coordinate markets and conclusion that persistent downturns in economic activity are usually the result of government intervention are all particularly consistent with austrian theory say s law was later simply and misleadingly summarized by economist john maynard keynes in his 1936 book general theory of employment interest and money in the famous phrase supply creates its own demand though say himself never used that phrase 2 keynes rewrote say s law then argued against his own new version to develop his macroeconomic theories keynes reinterpreted say s law as a statement about macroeconomic aggregate production and spending in disregard of say s clear and consistent emphasis on the production and exchange of various particular goods against one another keynes then concluded that the great depression appeared to overturn say s law keynes revision of say s law led him to argue that an overall glut of production and deficiency of demand had occurred and that economies could experience crises that market forces could not correct keynesian economics argues for economic policy prescriptions that are directly contrary to the implications of say s law keynesians recommend that governments should intervene to stimulate demand through expansionary fiscal policy and money printing because people hoard cash in hard times and during liquidity traps 