Say, A Treatise on Political Economy, book 1, chap. XV, para. 4.
On the first controversy, it is clear that Say did invent something like Say’s Law. But the first person actually to use the words “supply creates its own demand” appears to have been James Mill, the father of john stuart mill.
Say’s Law has various interpretations. The long-run version is that there cannot be overproduction of goods in general for a very long time because those who produce the goods, by their act of producing, produce the purchasing power to buy other goods. Say wrote: “How could it be possible that there should now be bought and sold in France five or six times as many commodities as in the miserable reign of Charles VI?”1 With this statement Say had the long run in mind. Certainly the long-run version is correct. Given enough time, supply does create its own demand. There can be no long-run glut of goods.
But Say also said that even in the short run there could be no overproduction of goods relative to demand. It was this short-run version that thomas robert malthus attacked in the nineteenth century and john maynard keynes attacked in the twentieth. They were right to attack it.
Say was the best-known expositor of Adam Smith’s views in Europe and America. His Traité d’économie politique was translated into English and used as a textbook in England and the United States. But Say did not agree with Adam Smith on everything. In particular, he took issue with Smith’s labor theory of value. Say was one of the first economists to have the insight that the value of a good derives from its utility to the user and not from the labor spent in producing it.
Say was born in Lyons. During his life he edited a journal, operated a cotton factory, and served as a member of the Tribunate under the Consulate of Napoleon. He was the first to teach a public course on political economy in France and continued his stay in academia first at the Conservatoire des Arts et Métiers, and then at the College de France in Paris. Say was a friend of Thomas Robert Malthus and david ricardo.
1803. Traité d’économie politique. Translated from the 4th edition of the French by C. R. Prinsep. A treatise on political economy; available online at: http://www.econlib.org/library/Say/sayT.html.
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