law of markets
E654011
The law of markets is an economic principle, commonly associated with classical economist Jean-Baptiste Say, which posits that aggregate supply inherently creates an equivalent level of aggregate demand.
Statements (45)
| Predicate | Object |
|---|---|
| instanceOf |
economic principle
ⓘ
macroeconomic theory concept ⓘ |
| alsoKnownAs |
Say's law
NERFINISHED
ⓘ
Say’s Law of Markets NERFINISHED ⓘ |
| appliesTo | aggregate level of the economy ⓘ |
| associatedSchool | classical economics ⓘ |
| associatedWith | Jean-Baptiste Say NERFINISHED ⓘ |
| assumes |
competitive markets
ⓘ
flexible prices and wages ⓘ money is neutral in the long run ⓘ savings are automatically translated into investment via interest rate adjustments ⓘ |
| contrastedWith | Keynesian economics NERFINISHED ⓘ |
| coreClaim |
aggregate supply creates its own aggregate demand
ⓘ
general overproduction in the whole economy is impossible in the long run ⓘ production is the source of demand ⓘ |
| criticizedBy | John Maynard Keynes NERFINISHED ⓘ |
| criticizedIn | The General Theory of Employment, Interest and Money NERFINISHED ⓘ |
| debatedBy |
David Ricardo
NERFINISHED
ⓘ
Thomas Robert Malthus NERFINISHED ⓘ |
| doesNotDeny |
possibility of sectoral overproduction
ⓘ
possibility of temporary gluts in specific markets ⓘ |
| domain |
economic theory
ⓘ
macroeconomics ⓘ |
| focusesOn | relationship between aggregate supply and aggregate demand ⓘ |
| formulatedBy | Jean-Baptiste Say NERFINISHED ⓘ |
| historicalContext | developed in the early 19th century ⓘ |
| implies |
markets tend toward full employment if prices and wages are flexible
ⓘ
unsold goods result from misallocation of production, not from a deficiency of aggregate demand ⓘ |
| influenced |
19th-century debates on crises and gluts
ⓘ
classical macroeconomic thought ⓘ laissez-faire policy arguments ⓘ views minimizing the role of government in stabilizing demand ⓘ |
| KeynesianCritique |
aggregate demand can be insufficient to purchase full-employment output
ⓘ
economies can experience prolonged underemployment equilibria ⓘ |
| languageOfOrigin | French ⓘ |
| modernInterpretation | often reformulated in terms of long-run supply-side orientation of growth models ⓘ |
| modernView | considered an oversimplification of aggregate demand dynamics by most economists ⓘ |
| originalFormulationContext | analysis of industrial and commercial markets in early 19th-century France ⓘ |
| policyImplication |
emphasis on encouraging production and supply
ⓘ
limited need for government demand management ⓘ |
| relatedConcept |
Say’s equality
NERFINISHED
ⓘ
Say’s identity NERFINISHED ⓘ classical dichotomy ⓘ |
| usedToSupport |
arguments against the possibility of chronic general gluts
ⓘ
arguments for self-correcting markets ⓘ |
Referenced by (1)
Full triples — surface form annotated when it differs from this entity's canonical label.