Question

Discuss Say's law of markets. How far is it relevant to a modern society?

Answer 1

Say's Markets Law, after J.B., is an important element of classical economics. Say, a French economist who first systematically declared the law. The law means, in short, that' supply always generates its own market.' In other words, J.B. says. Indeed, because of the excess supply over demand, there can be no over-production or general unemployment because whatever is supplied and generated is exchanged for money immediately. Whenever additional production occurs in the economy, the requisite purchasing power is also produced simultaneously to absorb additional supply; thus, there is no range of supply that exceeds demand and contributes to unemployment. This policy was the foundation for their presumption of full employment in the economy, which was founded on the argument that money is immediately invested at a rate that will always keep the assets fully employed.

According to classics, savings are just another form of expenditure; they believed that all income was spent partly on consumption and partly on investment. There is no reason to fear a break in the economy's revenue stream flow. Therefore there can be no over-production or unemployment in general. J.B. in his study of the structure of the market. Say noted down: a product is produced no longer than it gives the full extent of its quality to a demand for other goods from that moment on. When the manufacturer put the finishing hand on his product, he is most anxious to sell it immediately, as long as the value in his hands should disappear. Nor is he less anxious to dispose of the money that he might get for it; for the money's value is also perishable. But buying some product or other is the only way to get rid of cash. Thus, the mere fact that one product was created immediately opens the door to other products

"Say's law is a definition of a free exchange economy in a very broad way. Thus conceived, it illuminates the reality that the main source of demand is how the income from the production process itself is produced by variable. A new efficient system, by paying out income to its employed factors, generates demand at the same time that it adds to supply. "Say, no doubt, acknowledged that the supply of a particular commodity may temporarily surpass its demand because of the businessmen's miscalculations, but it is impossible to generate over-production and thus general unemployment.

It is evident from the points listed above that whatever power Say's Law had during the barter economy, it certainly holds true to modern conditions. In their theoretical and practical research on money and business cycles, modern economists have completely abandoned it. Under the barter economy, where production was primarily for consumption, that is, whatever was produced was exchanged for goods and services. There was some sense in the rule of Say. Yet today, if production is based on future projections and demand forecasts, it has little value, as over-production is bound to happen, resulting in some kind of surplus on the market.

Say's Law is a good argument against the pessimism of those who see a general production increase leading to a slump. For example, in the underdeveloped countries, many fear the expansion of production. We know that the world will be filled with commodities, but we ignore and overlook the fact that this increased production inevitably contributes to higher money income, which, if it is invested in the right way, generates the demand for greater flow of goods, which does not mean that disruptions can not occur, but they are nothing but a necessary consequence of the expansion of productivity. In fact, supply tends to create its own demand.