Simple Say's Law
May 18, 2015

To prove the sophistry of capitalism, we must trace the roots of its core ideas.

Among its core ideas is the production motive , or the sophistical belief that what is good for the producers or sellers, or those who live by profits, is good for the nation. This is in contrast to Smith's proper belief that what is good for the people or all three classes (wage, profit, rent, earners) is good for the nation. This production motive is best seen in Say's Law which says that production is the cause of demand. On the surface, Say's logic seems correct, until you realize that he is actually talking about producer's demand and not consumer demand. He is talking about wholesale trade or the trade between dealers and dealers, and not retail trade or the trade between dealers and consumers. In The Wealth of Nations, Smith already implied that retail trade is more significant than wholesale trade:

The value of the goods circulated between.. dealers, never can exceed the value of those circulated between the dealers and the consumers; whatever is bought by the dealers, being ultimately destined to be sold to the consumers.

Say's derision of consumers is easily defeated when one thinks that society can exist without businesses (as in a native tribe), but businesses cannot exist without society. In this chapter, Say sounds like a lobbyist for manufacturers. While mercantilism is economics for merchants, Say's proto-capitalism and proto-neoliberalism here can be viewed as economics for producers, prioritizing business interests over societal interests. The lines in red below indicate his sophistry.


Book 1, Chapter 15: The Demand or Market for Products

1 Businessmen frequently assert that:

Their great desire is a consumption brisk enough to quicken sales and keep up prices.

2 To know this demand, we must carefully analyse the best facts.  3 A man who produces anything can only expect it to be of value if others can buy it.

4If a businessman says "I want money for my woollens, not other products," it would be easy to convince him that his customers must first sell their own products for money, to buy his woollens.

5To say that sales are dull because of the scarcity of money, is to mistake the means for the cause.

6When a superabundant product cannot be sold, the scarcity of money has so little to do with the obstruction of its sale, that the sellers would gladly receive its value in kind.

7 This is applicable to all cases.

It is worth while to remark, that a product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value.

9 For this reason, a good harvest is favourable to all businessmen generally.

10 Why is there so great a glut of commodities in the market sometimes, and so much difficulty in selling them?

11Some commodities are superabundant because the production of some commodities has declined.

12At the same time one commodity makes a loss, another commodity is making excessive profit.

13A producer is shallow if he imagines that the demand of non-productive consumers such as public functionaries, physicians, lawyers, churchmen, etc, is different from the demand of the actual producers.

14We make the following conclusions from this important truth:

  1. 15 The more the producers and the more various their productions:
    • the more prompt, numerous, and extensive are the demand for those productions
    • the more profitable are they to the producers for price rises with the demand
  2. But this advantage is from real production alone and not from a forced circulation of products like when governments tax goods to provide for non-producers.
    • This is a great injury to production.
    16Each individual is interested in the general prosperity of all.17High production is the true source of the gains made by townseople over the country people.18 The position of a nation with its neighbours, is analogous to the relation of one of its provinces to the others.
  3. 19It does not hurt the national industry to import commodities from abroad.  
  4. 20 The encouragement of mere consumption is no benefit to commerce because the difficulty is in supplying the means, not in stimulating the desire of consumption.
    • Production alone furnishes those means.
    • Thus, good governments stimulate production, bad governments encourage consumption.

21Since the creation of a new product is the opening of a new market for other products, to consume or destroy a product is to stop selling those other products.

22The general demand for products is brisk proportionally to production.

23A nation that produces abundantly yields handsome profits because:

Wherever production is stationary or lags behind consumption the demand gradually declines.

24 Such are the concomitants of declining production, which are only to be remedied by frugality, intelligence, activity, and freedom.