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Say's Law of Markets: What Did It Mean and Why Should We Care?


  • Mark Blaug

    (University of Exeter)


When the Classical economists asserted the "impossibility of general overproduction," or what we now call Say's Law of Markets, they had in mind not periodic crises or business cycles but secular stagnation. Could the capitalist system absorb the constant increases in output without breakdown from limits inherent in the system? Say's Law supplied an affirmative answer to the question: with flexible prices, the system is forever tending to full employment, full-capacity equilibrium. The issue of what was meant by Say's Law has been hopelessly misunderstood in modern times, first by a Keynesian reading but more by a Walrasian reading of the doctrine.

Suggested Citation

  • Mark Blaug, 1997. "Say's Law of Markets: What Did It Mean and Why Should We Care?," Eastern Economic Journal, Eastern Economic Association, vol. 23(2), pages 231-235, Spring.
  • Handle: RePEc:eej:eeconj:v:23:y:1997:i:2:p:231-235

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    References listed on IDEAS

    1. Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
    2. Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc.
    3. Levy, Philip I, 1997. "A Political-Economic Analysis of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 87(4), pages 506-519, September.
    4. Panagariya, Arvind & Findlay, Ronald & DEC, 1994. "A political - economy analysis of free trade areas and customs unions," Policy Research Working Paper Series 1261, The World Bank.
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    Cited by:

    1. Vahabi, Mehrdad, 2003. "La contrainte budgétaire lâche et la théorie économique
      [Soft Budget Constraint and Economic Theory]
      ," MPRA Paper 17651, University Library of Munich, Germany.
    2. Kakarot-Handtke, Egmont, 2015. "Essentials of Constructive Heterodoxy: Say’s Law," MPRA Paper 61670, University Library of Munich, Germany.
    3. William J. Baumol, 1999. "Retrospectives: Say's Law," Journal of Economic Perspectives, American Economic Association, vol. 13(1), pages 195-204, Winter.
    4. Kakarot-Handtke, Egmont, 2013. "Say’s Law: A Rigorous Restatement," MPRA Paper 52550, University Library of Munich, Germany.

    More about this item


    Business Cycles; Cycle; Employment; Full Employment; Prices; Stagnation;

    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity


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