Say's Law Of Markets

Economics is a social since...not like physics. Gravity is predictable with math. People? Not so much. But we try.

One of the many theories in econ is classical economic theory. Say’s law of markets falls under classical econ. Old school. Say’s says that demand is derived from production. It says "well, people can’t buy anything if there is nothing to buy!"

Some economists say "yes, of course" to Say’s law of markets. Other economists say, "Um...what? Demand is what creates supply; firms wouldn’t make stuff if there were no consumers around to buy the stuff...that would be silly. It’s the other way around."

It’s kind a chicken-or-the egg issue in economics: is production derived from demand, or is demand derived from production? Say’s law of markets says the latter. Why? Because you can’t demand any goods if you don’t have income. And to get income, you have to have sold something. To be a consumer, Say said, you must first be a seller. Therefore, demand is derived from production.

People who like Say’s law of markets argue for free markets—let them do their thang. Yet classical economics was phased out—and Keynesian phased in—when the markets couldn’t fix themselves during the Great Depression. Keynesian economics was all about governments intervening to stimulate the economy when it was down in the dumps. Further, Reaganomics is the brainchild of supply-side economics, a.k.a. trickle-down economics, which definitely didn’t trickle money down, but the economy kept going like it ain’t no thang.