Say's Law

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What is Say's Law? Meaning.

Say's Law is the theory by French economist, Jean-Baptiste Say (17671832) that supply creates its own demand. He believed that increasing supply would yield full employment and that economies are supply-driven.

The more goods (for which there is demand) that are produced, the more those goods (supply) can constitute a demand for other goods. Therefore prosperity should be increased by stimulating production, not consumption. In Say's view, creation of more money simply results in inflation; more money demanding the same quantity of goods does not represent an increase in real demand.

Keynesian economics places central importance on demand, believing that on the macroeconomic level, the amount supplied is primarily determined by effective demand or aggregate demand. Because some producer income is eroded by savings and taxes, Keynes argued that they are demand-driven.

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