Jean-Baptiste Say - Theories

Say can take credit for (or take the blame for - depending on your view of economics!) the way in which we tend to divide the factors of production into three different types:

1. Land - all natural resources
2. Labour - all human resources
3. Capital - man-made resources to aid production e.g. machinery and equipment

He can also take some credit for introducing the concept of an entrepreneur into economics - an obvious connection, given his background as an industrialist. However, he is best known for his 'law of markets' or Say's Law.

Say's Law

His law says (excuse the pun!) that:

"Supply creates its own demand."

This once again provides a justification for the Classical view that the economy will tend to full employment. This is because, according to this law, any increase in output of goods and services (supply) will lead to an increase in expenditure to buy those goods and services (demand). There will not be any shortage of demand and there will always be jobs for all workers - full employment. If there was any unemployment it would simply be temporary as the pattern of demand shifted. However, equilibrium would soon be restored by the same process.

There is some speculation as to exactly what he meant (it doesn't help the original being in French!), but Keynes interpreted in the way explained above, and it was this basic tenet of Classical economics of which he was particularly critical.

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