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Two issues have been raised on Say's Law, the first on the origins  
of this form of words in place of the more traditional "law of  
markets" and the second on Keynes's use of the phrase "supply  
creates its own demand" as a short form paraphrase of Say's Law's  
essential meaning.   
 
In regard to the origin of the term Say's Law, its first recorded use  
is found in the works of Fred Taylor, with the most important  
reference found in his introductory text, Principles of Economics  
(1921). He did, however, first use this form of words in print in a  
1909 Journal of Political Economy article dealing with the "teaching  
of elementary economics". That Taylor recognised he was coining  
an original phrase may be seen where he wrote in introducing this  
term:   
 
"I shall therefore put the proposition we have discussed in the form  
of a principle. This principle, I have taken the liberty to designate  
Say's Law; because, though recognized by many earlier writers, it  
was particularly brought out in the presentation of Say (1803)."   
(Taylor 1921, p 201 - italics in the original.)    
 
>From the 1920s onwards, and in following Taylor, Say's Law had  
become a frequently used term, usually found in American  
histories of the business cycle. There is, however, no doubt that it  
was the use of the phrase Say's Law in the General Theory which  
made it the common term it has become amongst economists. A  
more complete discussion of Taylor as the originator of the term  
Say's Law may be found in my article, "Critical Influences on  
Keynes's Understanding of Say's Law" found in the Winter 1995  
issue of the History of Economics Review (Number 23 - pp 74-82).    
 
On the second matter raised, the form of words used by Keynes,  
"supply creates its own demand", is entirely his own and was first  
stated in published form in the General Theory (page 18). There are  
a number of places where similar words are found amongst  
classical writers, but the closest parallel is at the end of John  
Stuart Mill's essay, "Of the Influence of Consumption on  
Production", his second essay in his Some Unsettled Questions of  
Political Economy (1844). There he wrote:   
 
"every increase of production, if distributed without miscalculation  
among all kinds of produce in the proportion which private interest  
would dictate, creates, or rather constitutes, its own demand."   
(italics added.)   
 
That is, "every increase of production . . . creates . . . its own  
demand." I might just add that it is the words that Keynes omitted  
from this quote which make his "supply creates its own demand" a  
comprehensively incorrect abbreviation of the underlying issues.  
There was no doubting amongst classical economists that  
miscalculations by producers could and did lead to recessions.   
 
For those interested in the history of Say's Law, which includes  
detailed discussion of both of these questions, and who are  
interested in the of relevance Say's Law to economic theory even to  
this day, might I recommend my own _Say's Law and the  
Keynesian Revolution_ published by Edward Elgar in 1998. The  
ebbs and flows surrounding Say's Law presents, in my view, the  
strangest story in the history of economics and it is one upon  
which the last word has not yet by any means been written.   
 
Dr Steven Kates 
Australian Chamber of Commerce & Industry 
 
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