Sunday November 15 will mark the 188th anniversary of the death of Jean-Baptiste Say (1767-1832), author of the Traité d’économie politique, whose first edition appeared in 1803. The 4th edition (1819) was translated in English and published as A Treatise on Political Economy (1821). I recently directed a Liberty Fund conference of this great economist, mainly known as the discoverer of Say’s Law (supply creates its own demand), against which John Maynard Keynes more or less conceived his 1936 General Theory of Employment, Interest and Money.

Among his many ideas that preceded today’s economics by one or two centuries, Say explained that the middlemen between the producer and the final consumer play an efficient role by moving goods to where the consumer can purchase them. The middlemen create value too. Say also developed an idea that many of our contemporaries—think of the defenders of “price-gouging” laws—still do not grasp. He explained how the speculators and hoarders benefit the consumer:

There is a further branch of commerce, called the trade of speculation, which consists in the purchase of goods at one time, to be re-sold in the same place and condition at another time, when they are expected to be dearer. Even this trade is productive; its utility consists in the employment of capital, warehouses, care in the preservation, in short, human industry in the withdrawing from circulation a commodity depressed in value by temporary superabundance, and thereby reduced in price below the charges of production, so as to discourage its production, with the design and purpose of restoring it to circulation when it shall become more scarce, and when its price shall be raised above the natural price, the charges of production, so as to throw a loss upon the consumers. The evident operation of this kind of trade is to transport commodities in respect of time, instead of locality.

The last sentence is the crux of the matter. Let me also quote these lines in their original French, as they appeared in the 6th edition of the Treatise, the last one in Say’s lifetime. The text is much clearer than the previous translation:

Il y a un commerce qu’on appelle de spéculation, et qui consiste à acheter des marchandises dans un temps pour les revendre au même lieu et intactes, à une époque où l’on suppose qu’elles se vendront plus cher. Ce commerce lui-même est productif ; son utilité consiste à employer des capitaux, des magasins, des soins de conservation, une industrie enfin, pour retirer de la circulation une marchandise lorsque sa surabondance l’avilirait, en ferait tomber le prix au-dessous de ses frais de production, et découragerait par conséquent sa production, pour la revendre lorsqu’elle deviendra trop rare, et que, son prix étant porté au-dessus de son taux naturel des frais de production, elle causerait de la perte à ses consommateurs. Ce commerce tend, comme on voit à transporter, pour ainsi dire, la marchandise d’un temps à un autre, au lieu de la transporter, d’un endroit dans un autre.

The formulation could perhaps have been more general—for the same speculation happens when, say, facemasks are not produced under their cost of production but the speculator foresees that their demand will jump over the current quantity supplied. But remember that Say wrote in the early 19th century, just a quarter of a century after Adam Smith’s The Wealth of Nations, at a time when the first conceptualization of this sort of economic problems was attempted. In fact, such issues are so difficult to understand that many among our intelligent contemporaries still don’t.

On Sunday, raise your glass to Say.

Yet, a historical mystery remains. Why was classical liberalism, which was then on its rise, so rapidly restrained by reactionary opinions? Is the classical-liberal or libertarian ideal a mirage? Jean-Baptiste Say foresaw an explanation:

To speak the truth, it is because the first principles of political economy are as yet but little known; because ingenious systems and reasonings have been built upon hollow foundations, and taken advantage of, on the one hand, by interested rulers, who employ prohibition as a weapon of offence or as an instrument of revenue; and, on the other, by the personal avarice of merchants and manufacturers, who have a private interest in exclusive measures, and take but little pains to inquire, whether their profits arise from actual production, or from a simultaneous loss thrown upon other classes of the community.

A good explanation, no doubt, and which was much improved by the public-choice school of economics that developed a century or more after the Treatise. But is it sufficient?