Say’s law: supply creates its own demand

The third in a series on "Six big ideas" in economics at The Economist.

"His [Jean-Baptiste Say's] greatest work was A Treatise on Political Economy [1803], a graceful exposition (and extension) of [Adam] Smith’s economic ideas. In Say’s time, as nowadays, the world economy combined strong technological progress with fitful demand, spurts of innovation with bouts of austerity.
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"How then did Say explain the woes of his age, the stuffed warehouses, clogged ports and choked markets? He understood that an economy might oversupply some commodities, if not all. That could cause severe, if temporary, distress to anyone involved in the hypertrophied industries. But he argued that for every good that is too abundant, there must be another that is too scarce. The labour, capital and other resources devoted to oversupplying one market must have been denied to another more valuable channel of industry, leaving it under-resourced."

The books is available in several formats at the Online Library of Liberty.