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J.B Say; Ideology and Contributions in Economics
J.B Say is regarded as one of the greatest economist belonged to classical economics family. He is a Frenchman. He profoundly analysed contributions of Adam Smith and popularised them. He worked as businessman and later worked as a professor in political economy in France. His ideas were in universal applicable in nature. His interested areas in economics includes production, distribution and consumption of wealth. Since he believed in laissez-faire, he says that the role of an economist is to find causes of various economic problems and not to advice with solutions. Here this hub is aimed to explain main contributions of J.B Say to economic thought. His main work is ‘Traite de Economic politique’ in 1803.
J.B Say’s ideas are some what differ from the original ideas of Adam Smith. J.B Say considered both material and immaterial actions in economic terms while Adam Smith focuses only to the material human activities. So, J.B Say listed out series of human economic activities such as consultation of a doctor.he argues that a doctor’s advices is like commodities and hearing by patients is like consumption. Further J.B Say focuses on manufacturing sector while Adam Smith focuses on agriculture. According to him utility is the main factor which determines the value of commodities.
Say’s law of Market
Say’s law of market is one of the core economic idea of classical economists. It was the contribution of J.B Say. And he remember in economic thought particularly by the Say’s law of market. Actually now the theory lost its significance especially after the great depression of 1030s. during his period, the society believed that both unemployment and over production are common phenomenon. Or occurrences. Based on this believe Say developed the renowned economic idea called Say’s law of markets.
According to J.B Say, Say’s law of market refers that supply of commodities will always creates its own demand. Further is there any increment in supply, it will automatically creates additional demand.the theory is based on barter system. So the assumption is that there is no money in the economy. Then all the good s and services are exchanged for goods and services itself. It means that production of a particular commodity will increase its supply. Along with that it automatically creates demand for another commodity. J.B Say concludes that the market will always clear. Both demand and supply will adjust to equilibrium automatically.
Since market will automatically reach in equilibrium, there will never occur over production and unemployment. The economy will enjoy the benefits of full-employment. At the same time, J.B Say mentioned about partial over production. But it never effect on the economy as a whole and may affect a particular industry. For instance, take a footwear industry. They produce more and more. But other people did not come to demand it since they already using. Here the footwear industry’s supply increased over demand. In such a short term cases it is better to halt the production of footwear industry for a short period. There after the market will automatically reach in to equilibrium. Another solution for the same issue is that, the producers can shift their production to another industry.
Say’s Law of Markets and its Implications
The core idea of Say’s law of market is the equilibrium condition of an economy where supply will be always equals with demand. So that the economy never wear any burden of unemployment and over production. The economy always attain full-employment condition based on this idea. Since demand and supply are equal, every sectors of the economy will be active. Any products from agricultural sector may demand by service or manufacturing sectors and vice versa. In short, the economy enjoys full-employment condition by inspiring the working of all sectors of the economy. Here it is noted that, J.B Say supported industry or manufacturing sector. While physiography and Adam Smith highly focuses on primary or agricultural sector.
Similarly the theory supports international trade. If any country bought any thing from one country it will automatically supports both import and exports. Whatever a country demanded from another country will be substituted with supplying of another commodity. So, it proved that v supported free trade and laissez-faire.
Say’s law of market lost its purity in modern times. Later J.B Say criticised by many economists like Malthus, Keynes etc. His assumption of full-employment economy criticised largely. Later it found that there will be unemployment in any economy. So, the aggregate demand will decline. The great depression of 1930s proved the lacking of effective demand in the economy. It was explained by J.M Keynes through his great masterpiece “The General Theory of Employment interest and Money” published in 1936. similarly classical economists believed that all savings will convert automatically in to investment. They also thought that interest is the main factor which determines the rate of investment in the economy. Here too, the classical notion removed by the modern view that, it is the Marginal Efficiency of Capital (MEC) [expected rate of return on investment] ate of investment.