Ignoring The Wisdom of J.B. Say Will Ruin the World

If you want to consume, you must first produce

It just occurred to me – rather belatedly, but still usefully – that perhaps every economic problem haunting the world today exists because people have chosen to ignore the stubborn, timeless wisdom of Jean Baptiste Say.

Say, for those unfamiliar, argued something so simple it should be tattooed on every economist’s forehead: if you want to consume, you must first produce. In practice, this means: to buy anything, you must make something of value. Whether that’s a good, a service, your labour, or something else others desire. You then exchange what you’ve produced for what you want, with money acting merely as a convenient intermediary.

This clear, elegant idea was later twisted and straw-manned by Keynes and his disciples into the cartoonish slogan: “supply creates its own demand.” The caricature suggests Say thought everything produced automatically finds a buyer, which he never said. What he meant was simply this: production is the root source of demand. Only by producing do people generate the income and purchasing power to buy the output of others. Remove production, and the chain of demand collapses.

Economic problems arise because so many men would rather consume without ever producing. They want to eat without planting, spend without earning, and live richly without ever offering anything of value to anyone else. Some simply steal, but oddly enough, that isn’t the real problem.

When men steal in the old-fashioned, direct way, by breaking into your house or holding you at gunpoint, they are at least honest about their dishonesty, and this – although bad – still has a silver lining. There are mechanisms that keep thieves on a short leash and by this, I mean that they declare open season on themselves, and humanity has invented magnificent ways to deal with them – knives, dogs, high walls, and my personal favourite – ventilating them generously by putting holes in them. Nothing quite beats the polite finality of hot lead moving at great speed to inform a thief his services aren’t required.

Conventional thieves – bad as they are – aren’t an insoluble problem. Here’s where it the real problem lies. Some men discover that if they gather enough numbers, they can legalize their theft; they can take what they want without fear of holes, dogs, or high walls. Enter taxation. They no longer sneak into your home at night, dressed in hooded clothes and a mask; they come dressed in suits, in daylight with the full majesty of the law, announce what percentage of your life’s sweat they’re seizing. Object too strenuously, and they’ll throw you in a cage, or worse.

Yet even taxation isn’t the most sinister method used by men to consume without producing. Far worse is when they master the dark art of monetary inflation. They conjure money from thin air – digitally or on paper – and spend it first, taking from us without creating a thing. If I did this, I would be called a counterfeiter and imprisoned, but when they do it, they call it “Monetary Policy”. They print money, enjoying its full value before it seeps into the broader economy. By the time the rest of us get our hands on this new money, it has lost part of its worth, silently eroding our savings and our purchasing power. You feel poorer, but can’t quite point to who robbed you, so you blame “rising costs”, “greedy capitalists”, or anyone and anything other than which is actually responsible.

All of this would be less tragic if it were not so predictable. Say’s Law tells us production must precede consumption, but modern policymakers, drunk on debt and fiat money, think consumption itself is the engine. “If we just spend enough, we’ll get rich,” they insist. They reverse the order, imagining that demand creates supply. It never does, not sustainably.

The refusal to accept Say’s simple wisdom is what leads to deficit spending or trading speculative assets forever. When people forget that to buy something you must first produce something, entire nations slide from self-reliance into parasitism, from thrift into debt, and from honest exchange into legalised plunder, and so, step by step, we drift from a society of producers into a society of looters and seriously doubt that a society of looters lasts very long. Eventually, there’s nothing left to loot.

Perhaps, then, it is time to rediscover the hard, simple, inconvenient truth from J.B. Say: before you can consume, you must produce. Before you can demand, you must supply. Before you can live off the wealth of others, you must first ask whether there will be any wealth left once everyone else tries to do the same.

If we continue to ignore the timeless wisdom of Jean Baptiste Say, no amount of printing, borrowing, or taxing will save us from ruin; remember it, and we might yet salvage this horrid situation in which we find ourselves and perhaps build a world of prosperity beyond our imagination.

Econ Bro (@EconBreau and @EconBreau2 on Twitter/X) is a Nigerian Austrolibertarian economist and an apprentice at the Mises Institute. Under the organisation name “The Freedom Institute” he teaches individual liberty, personal responsibility, private property rights, free markets, and sound money to mostly young people across Nigeria. Econ Bro is an Associate of the Free Market Foundation.