Move over Adam Smith, according to Professor Richard Salsman, Jean-Baptiste Say is capitalism’s greatest economist:
Having studied quite a lot of political economy over the past four decades, and critically, I must say that I consider A Treatise on Political Economy (1803)1 by Jean-Baptiste Say (1767-1832)2 to be best work ever published in the field. It easily surpasses anything contemporary but also Adam Smith’s Wealth of Nations (1776) and Ludwig von Mises’s Human Action: A Treatise on Economics (1949). Nothing beats it. Not coincidently, I also judge Say to be history’s greatest political economist, indeed, “capitalism’s economist” (though the term “capitalism” wasn’t coined until 1850).
According to Salsman:
For Say, Smith wasn’t sufficiently pro-capitalist. …. [Say’s]Treatise rejects roughly a half-dozen of Smith’s erroneous ideas, including his belief in the labor theory of value, his denial of the productivity of services, and his defense of usury laws. Say’s objectivity and independence made him reject the labor theory of value even as predecessors and successors—Smith (1776), Ricardo (1817), Malthus (1821), Mill (1848), and Marx (1869)—accepted it in their own texts, helping promote (by intent or not) anti-capitalism.
Salsman also summarizes Say’s key doctrines. He states that Say:
- contends that strict preservation and protection of private property advances both justice and prosperity;
- explains how intelligence is the main source of wealth and profit is the net production of wealth, not a “theft” from laborers nor an unearned monopolist “rent”;
- explains why a harmony of interests exists among seemingly disparate classes and all the factors of production, and why machinery is good and not, as Smith, Ricardo, and Marx believed, a source of alienation or mass joblessness;
- recognizes entrepreneurs as the premier producers, because skilled solicitors, organizers, motivators, and payers of the various factors of productions
- defends as productive what later became known as the “service sector” (including finance);
- promulgates the “law of markets” (later, “Say’s Law”), the principle that supply constitutes demand, that production has primacy (we must produce before we can demand), that aggregate supply and aggregate demand are inseparable (like two sides of a coin), so no aggregate “over-production” (or “general glut”) can possibly arise;8
- explains how recessions are caused not by prior episodes of “over-production” (or “deficient demand”) but by government impediments to producing and profiting (such as punitive or arbitrary taxation and regulation);
- rejects the labor theory of value (that economic value reflects some embodied time spent in manual labor) and in its stead explicates and advances the idea that utility is the sole basis of value and price, as embodied in prices;
- shows that the value of finished goods determines production costs (not the reverse);
- distinguishes demand and consumption, the first being a desire to purchase coupled with purchasing power (prior production), the latter a destruction (using up) of wealth; real demand is synonymous with supply; consumption per se (unless part of a net-value creation in a production process) is no boon to wealth-creation.
Related Articles on Say:
- Jean-Baptiste Say: An Economist in Troubled Times
- Jean-Baptiste Say, Capitalism and Say’s “Law of Markets”
- Jean-Baptiste Say, Ayn Rand, and Objective Economics, Part 2 of 2
- Jean-Baptiste Say, Ayn Rand, and Objective Economics, Part 1 of 2
- Say’s Law versus Keynesian Economics
- Say’s Law and the Keynesian Revolution: How Macroeconomic Theory Lost Its Way by Steven Kates