A Biography of Jean-Baptiste Say

J.B. Say: The Forgotten Early Austrian

by Larry Sechrest

Beyond some rudimentary facts, very little is available in English about the life of J.B. Say.1 He was born in Lyons, France, to middle-class Huguenot parents, and spent most of his early years in Geneva and London. As a young man, he returned to France in the employ of a life insurance company, and soon became an influential member of a group of strongly pro-free- market intellectuals.2 Indeed, Say was the first editor of La Decade Philosophique, a journal published by the group. After the Napoleonic Wars, he held a Chair of Political Economy at the Conservatoire des Arts et Metiers, and again, later, at the College de France. In addition to his famous Treatise, his works included Cours Complet d Economie Politique Pratique and Letters to Mr. Malthus. By means of his writing, his influence spread to Italy, Spain, Germany, Russia, Latin America, Great Britain, and the United States, in which latter country his admirers included Thomas Jefferson and James Madison. His devotion to laissez-faire principles appears to have been maintained throughout his life. Say died in Paris.

J.B. Say deserves to be remembered, especially by Austrian economists, as a pivotal figure in the history of economic thought. Yet, one finds him discussed very briefly, if at all. In fact, even Austrians have devoted little attention to Say’s contributions.3

Mainstream history-of-thought texts usually mention Say only briefly, and then only in connection with his law of markets, thereby implicitly trivializing much of his work. One of the exceptions is A History of Economic Thought by Eric Roll.4 Roll treats Say with notable respect, but, unfortunately, partly because he misinterprets Say as an ancestor of modern general- equilibrium, positivistic, neoclassical economists.

In all fairness, one could argue that this lack of both attention and appreciation might be traced, at least in part, to Say himself. After all, Say did explicitly represent his work as being mainly an elaboration and popularization of Adam Smith‘s Wealth of Nations for the benefit of continental European readers. Taking Say at his word, many economists seem never to have bothered to investigate more closely. Upon close reading of Say’s principal work, A Treatise on Political Economy,5one will find that, although Say frequently praises Smith, he also departs from Smithian doctrine on a number of important points. In fact, Say even sharply criticizes Adam Smith on more than one occasion. Rather than thinking of Say as a slight variation on Smith, it is much more accurate to recognize that these two men represent two meandering, but generally divergent, paths embedded within classical economics.

Smith leads one to David Ricardo, John Stuart Mill, Alfred Marshall, Irving Fisher, John Maynard Keynes, and Milton Friedman. Say leads from A.R.J. Turgot and Richard Cantillon to Nassau Senior, Frank A. FetterCarl MengerLudwig von Mises, and Murray Rothbard. The reader should keep in mind, however, that these two paths, or progressions, have often been circuitous and nonlinear. That is to say, J.B. Say was in a number of ways truly a precursor of the Austrian School, but one must not leap to the conclusion that he was a full-fledged Austrian who was simply ahead of his time. One should not read Say and expect, at all points, to find Mises.



Say’s approach to economics is, in philosophical terms, that of a realist and an essentialist.6 He combines a healthy skepticism regarding the usefulness of statistical investigations with an emphasis on observing the facts of reality. A statistical description “does not indicate the origin and consequences of the facts it has collected.”7 For Say, only a causal analysis based on the essential natures of the entities involved can achieve that end, and such an analysis is the core task of political economy. He sees economics as a genuine science capable of establishing “absolute truths,”8 but insists that it “has only become a science since it has been confined to the results of inductive investigation.”9 In fact, Say declares that political economy “forms a part of experimental science” and is, thus, rather similar to chemistry and natural philosophy.10

Taxonomically, he divides all facts into (a) those that refer to objects and (b) those that refer to events or interactions. The former is the domain of descriptive science (e.g., botany); while the latter is the domain of experimental science (e.g., chemistry or physics).

Above all, Say seeks to be practical; for “[n]othing can be more idle than the opposition of theory to practice!”11 To that end, he attempts always to employ language that is precise and yet as simple as possible, so that any literate, reasonably intelligent person can comprehend his meaning.12 For Say, as for most modern Austrians, economics is not a shadowy realm to be penetrated only by the expert, but a subject of enormous practical importance accessible to all. It is thus no surprise to find that Say, in keeping with such a goal of lucidity and intelligibility, criticizes Adam Smith’s Wealth of Nations for being “destitute of method,” obscure, vague, and disjointed as well as for containing too many long and distracting digressions on topics such as war, education, history, and politics.13



Say’s discussion of money opens with what is now a standard argument about the “double coincidence of wants” problem and how a medium of exchange solves it. His explanation of how one highly demanded commodity spontaneously evolves into an accepted exchange medium is reminiscent of Carl Menger’s more famous treatment of the same issue,14 although it predates Menger by almost seventy years. Historically, money appears due to self-interest, not government decree, and its form should be left to the interaction of consumers preferences. “[C]ustom, therefore, and not the mandate of authority, designates the specific product that shall pass exclusively as money.”15

He then reviews the list of properties a medium of exchange should (ideally) possess: durability, portability, divisibility, high purchasing power per unit, and uniformity. From this presentation, Say draws the familiar conclusion that the precious metals (gold and silver) are excellent choices as monetary substances. In other words, if individuals are left free to choose, it is highly likely that they will choose a commodity money (specie). While it is true that Say is a strong proponent of gold and silver as money, it is provocative to notice that he does allow for the possibility that they could be replaced by something else if “new and rich veins of ore should be discovered.”16 In short, Say is not unalterably wedded to the proposition that “money” means gold or silver. However, if money consists of precious metal coinage, then he does agree that monetary units, such as the dollar, should be renamed in terms of the mass of gold or silver contained in the coin. For example, if a coin denominated as one French franc is supposed to contain 5 grams of silver, then it should be named “5 grams of silver,” not “one franc.”17

According to Say, the only justifiable intervention by the State into monetary matters is the minting of coins. In fact, Say thought this should be monopolized by the State “because there would probably be more difficulty in detecting the frauds of private issuers.”18 In particular, in any system in which gold and silver coexisted as monetary metals, governments should studiously avoid setting an official exchange rate between the two, contrary to what was done in historical episodes of bimetallism.19 Say clearly understood why the practice under bimetallism always led to disaster. That is, the officially overpriced money drove the officially underpriced money out of circulation, a principle known as Gresham’s Law.20 Say emphatically states that money is ruled by supply and demand, just like all commodities. Money’s purchasing power “rises and falls in proportion to the relative demand and supply.”21 Therefore, exchange rates between gold coinage and silver coinage should be allowed to change with market conditions. Say seems to favor a “parallel” metallic system, much like that suggested by Murray Rothbard.22

With regard to banking, Say distinguishes between “banks of deposit” and “banks of circulation,” but treats them both as legitimate institutions.23 The former function as warehouses for money. They hold one-hundred-percent reserves at all times, and provide convenience as well as security in that they effect transactions on behalf of their depositors by transferring funds from one customer’s account to another’s, for which services they charge a fee.24 The latter function as true financial intermediaries. They hold fractional reserves, issue banknotes, and generate an interest income by discounting promissory notes and bills of exchange. The banknotes issued by such institutions must be backed by specie or short-term securities, but if so, then “[t]he holders of the notes of a bank issuing convertible money run little or no risk, so long as the bank is well administered, and independent of the government.”25 In fact, Say even argues that these fractional-reserve-holding banks of circulation bestow a benefit upon society because they provide “the advantage of economizing capital, by reducing the amount of the sum kept in reserve.”26 And if it happens that such fractional-reserve banknotes also supplant part of the specie that had been in circulation, then “the functions of the specie, that has been withdrawn, are just as well performed by the paper substituted in its stead.”27

There are two additional insights on monetary topics that one must not overlook. First, Say emphasizes that as the division of labor extends ever farther, horizontally and vertically, through the society, that is, as individuals specialize ever more, the number and the importance of exchanges will increase. And this requires an identifiable medium of exchange. Briefly put, money is an integral part of the rise of modern civilization.28 Second, Say agrees with Mises and Rothbard, who insist that any nominal supply of money is “optimal,” as long as prices are free to adjust, because any increase or decrease in nominal terms will simply change the purchasing power per unit in inverse proportion. Thus the real money supply will remain the same.29



Without question, the one thing for which Say is best known is “Say’s Law,” also referred to as his theory of markets (la theorie des debouches) or law of markets (loi des debouches). This principle was, and still is, one of the key building blocks of the classical school of economics.30 It remains, in some guise or other, essential to any defense of free markets. Moreover, all collectivists attempt to refute it in the course of their assault on liberty and the free society. And yet, some writers have questioned the profundity of Say’s Law. Alexander Gray refers to “this theory, which perhaps does not come to much.”31 Even Murray Rothbard calls it a “relatively minor facet of his [Say’s] thought.”32

Most textbooks truncate Say’s Law into the transparently false proposition “supply creates its own demand.” At minimum, this should be given as “aggregate supply creates its own aggregate demand,” because the claim is not that the production of commodity X necessarily results in an equivalent demand for X, but that the production of X leads to demand for commodities A, B, C, and so forth. The production, or supply, of commodities (and complementary services) in general leads to the consumption of, or demand for, commodities (and complementary services) in general.33 It is certainly possible for there to exist either a shortage or a surplus of any particular commodity, but general overproduction or general underproduction can be no more than momentary phenomena. “It is because the production of some commodities has declined, that all other commodities are superabundant,” and such maladjusted production results from “some violent means . . . a political or natural convulsion.”34Left to its own devices, the market will correct such imbalances.

Say identifies two means by which the corrective process operates. Principally, he argues that, though individuals do save part of the income derived from production, as long as those savings are reinvested in “productive employment,” in the aggregate there need be no decreases in production, income, or consumption.35 This process of reinvestment is fueled by differences in the profits earned by entrepreneurs. Those goods that are relatively more scarce, and thus rising in price, attract additional investment, while those that are relatively less scarce, and thus falling in price, discourage investment. And even if one hoards money or buries it, “the ultimate object is always to employ it in a purchase of some kind,”36 so there still cannot be deficient demand as long as real economic values are being produced. In order for consumers to exist, there must first be producers.

Throughout his discussion of production and consumption, Say consistently maintains that money is merely a neutral conduit through which aggregate supply is translated into aggregate demand, or “money is but the agent of the transfer of values.”37 There seems to be no recognition of the transmission mechanism by which changes in the supply of money alter the relative prices of goods and, thereby, redirect the entire interrelated structure of production. From a modern Austrian perspective, Say’s failure to grasp the non-neutrality of money must be deemed a deficiency of some note.

On the other hand, Say eloquently expresses a clear understanding that it is wholly beneficial for a society to experience generally falling prices whenever such declining prices are the result of productivity gains. Not only does this circumstance indicate, contrary to popular belief, “that a country is rich and plentiful,”38 but also that “products formerly within reach of the rich alone have been made accessible to almost every class of society.”39 Moreover, Say correctly perceives that (a) the prices of goods reflect their utility to the buyer, (b) the prices of the factors of production are derived or “imputed” from the prices of the goods produced, and therefore (c) costs of production represent an interface between the utility of the good and the productivity of the factors of production.40



Rothbard has suggested that the world of economics should bestow blessings upon Say for reintroducing the entrepreneur into economic thought,41 and so it should. With pen and ink, Adam Smith made the entrepreneur invisible. J.B. Say brings him back to life and to the center of the stage.42 What do these entrepreneurs do? They use their “industry” (a term Say prefers to “labor”) to organize and direct the factors of production so as to achieve the “satisfaction of human wants.”43

But they are not merely managers. They are forecasters, project appraisers, and risk-takers as well.44Out of their own financial capital, or that borrowed from someone else, they advance funds to the owners of labor, natural resources (“land”), and machinery (“tools”). These payments, or “rents,” are recouped only if the entrepreneurs succeed in selling the product to consumers. Entrepreneurial success is not only sought after by the individual, but also essential to the society as a whole. “[A] country well stocked with intelligent merchants, manufacturers, and agriculturists has more powerful means of attaining prosperity, than one devoted chiefly to the pursuit of the arts and sciences.”45

Say’s use of the word “capital” can be confusing, because it is used to mean, as the context requires, either (a) capital goods that are integral to the production of further, final goods, or (b) the financial capital that constitutes the enterprise’s funding.46 The former are the result of some earlier production process and, when combined with the industry of the entrepreneur, generate profit (or loss). The latter is the result of saving some portion of the income from past productive activity and generates interest.

The analysis of interest rates is very perceptive and, in most respects, remarkably Austrian. First, Say realizes that the interest rate is not the price of money, but the price of credit, or “capital lent.”47Therefore, it is false that “the abundance or scarcity of money regulates the rate of interest.”48 Of course, Say is thinking of the real rate of interest, not the nominal, or market, rate. He also clearly sees that interest rates will include some risk premium as a sort of insurance to protect against loss due to default.49 Such a risk premium will become very large when, for example, laws are imposed so that creditors have no legal recourse against a debtor who defaults.50 Furthermore, Say identifies the fact that there are “political risk” differentials between nations that lead to an international array of nominal interest rates.51 Overall, in terms of public policy, Say adopts the same stance with regard to credit markets that he exhibits elsewhere: namely, the state should not meddle. The “rate of interest ought no more to be restricted, or determined by law, than . . . the price of wine, linen, or any other commodity.”52

It has been argued that the one glaring flaw in Say’s understanding of interest rates is his failure to anchor them on the bedrock of “time preferences,”53 that is, to explain interest rates as founded on the rate at which individuals prefer to trade present goods for future goods.54 While Say does indeed fail explicitly to connect interest rates with time preferences, he seems to possess at least an embryonic notion of time preference itself. He observes, for instance, that there often exists an “inducement to every one to consume the whole of his income . . . [during] times of political turbulence and confusion.”55 And when discussing the impact of increased frugality (a falling rate of time preference?) on the accumulation of capital, he even concludes that “the low rate of interest proves the existence of more abundant capital.”56



For Say, the foundation of value is utility or the capacity of a good or service to satisfy some human desire. Those desires and the preferences, expectations, and customs that lie behind them must be taken as givens, as data, by the analyst. The task is to reason from those data. Say is most emphatic in denying the claims of Adam Smith, David Ricardo, and others that the basis for value is labor, or “productive agency.”57 Economists who subscribe to a labor theory of value have the matter precisely backwards. “[I]t is the ability to create the utility . . . that gives value to productive agency.”58

The two categories of value are “exchange-value” and “use-value.”59 Exchange-value lies within the domain of economics, because it is a measure of what one must give up in order to acquire a good in the market. In economic terms, “[t]he only fair criterion of the value of an object is, the quantity of other commodities at large, that can be readily obtained for it in exchange.”60 Those things which possess exchange-value would today be called “economic goods,” but Say calls them “social wealth.” In contrast, some things, such as air, water, and sunlight, possess only use-value, because they are present in such abundance that they cannot command a price. These are now known as “free goods,” but Say labels them “natural wealth.”61

Unfortunately, by adhering to the above taxonomy of values, Say plunges into a most regrettable error. He concludes that since the measure of a good’s economic value is literally and precisely its market price,62 then all market transactions must involve the exchange of equal values. This, of course, must imply that neither buyer nor seller gains. Or, in other words, all market transactions are a “zero-sum game.” “When Spanish wine is bought at Paris, equal value is really given for equal value: the silver paid, and the wine received, are worth one the other.”63 Austrians are adamant in maintaining that exchanges, as long as they are voluntary, must be mutually beneficial in terms of the expected utilities of each the buyer and the seller. If that is not the case, then why would buyer and seller agree to trade?



Nowhere is Say’s radicalism more evident than in his critique of government intervention into the economy.64 Most succinctly stated, he declares that self-interest and the search for profits will push entrepreneurs toward satisfying consumer demand. “[T]he nature of the products is always regulated by the wants of society,” therefore “legislative interference is superfluous altogether.”65

Say’s comments on one particular series of legislative acts is very instructive. The first of the British Navigation Acts was passed in 1581; these Acts were strengthened in 1651 and 1660; and the last was not repealed until 1849. Their purpose was to reserve Britain’s international trade exclusively for the shipowners of the British merchant marine. Say argues that such monopolization of the “carrying trade” diminishes national wealth because it often reduces the profits of those merchants shipping their goods to market.

He recognizes that defenders of such statutes may grant this, but still insist that the restrictions are justified on the grounds of national security. Say retorts that this is so only if “it is an advantage to one nation to domineer over others. . . . The love of domination never attains more than a factitious elevation, that is sure to make enemies of all its neighbors. It is this that engenders national debt, internal abuse, tyranny and revolution; while the sense of mutual interest begets international kindness, extends the sphere of useful intercourse, and leads to a prosperity, permanent, because it is natural.”66

The foregoing reveals how well Say comprehends the proposition that free trade and peace go hand in hand.

As for taxation, Say divides it into two types. Direct taxes are those levied on income or wealth. Indirect taxes are those such as sales taxes, excise taxes, and tariffs. Regardless of its specific form or method of collection, “all taxation may be said to injure reproduction, inasmuch as it prevents the accumulation of productive capital.”67 Therefore, contrary to what some economists have claimed, “[i]t is a glaring absurdity to pretend, that taxation . . . enriches the nation by consuming part of its wealth.”68

Today, one will find many writers who insist that high rates of taxation, and the concomitant high levels of government spending, somehow cause a society to be more prosperous. Naturally, Say knows this to be false, despite the fact that, from a statistical standpoint, prosperity and taxation may be positively correlated. He explains that such assertions commit the error of reversing cause and effect. That is, “[a] man is not rich, because he pays largely; but he is able to pay largely, because he is rich.”69Prosperous nations, if they remain prosperous, do so despite heavy tax burdens, not because of them. Anyone who reads Say’s Treatise should not overlook the fact that the discussion of taxes and government appears in the section headed “consumption.” That is no accident, for Say does not hesitate to identify government spending as “unproductive consumption.” And “[e]xcessive taxation is a kind of suicide.”70

It is true that Say either overlooked or misunderstood certain points of theory dear to the hearts of Austrian economists. He does not believe that market exchanges represent utility gains for both buyer and seller; he does not see the relationship between interest rates and time preference; he offers no theory of business cycles. On the other hand, he is cognizant of the limitations of statistical investigations; he is very much in favor of commodity money and free banking; he knows that entrepreneurs and the accumulation of capital are essential to economic advancement; he correctly identifies both government regulation and taxation as threats to prosperity, indeed, even as threats to civil society itself.

Jean-Baptiste Say has much to offer any reader, whether Austrian or not, whether an economist or not. He saw many important truths with clarity, and wrote of them with passion and lucidity. Say once called economics “this beautiful, and above all, useful science.”71 He left economics both more beautiful and more useful than he had found it.



1. One recent book may rectify that deficiency. See R.R. Palmer, J.B. Say: An Economist in Troubled Times (Princeton, N.J.: Princeton University Press, 1997).

2. This group was inspired by the work of Abb, Etienne Bonnot de Condillac, and it included such men as Destutt de Tracy and Pierre Jean Georges Cabanis as well as Say.

3. Of course, Murray N. Rothbard does discuss Say in detail and with great respect in Classical Economics, vol. 2, An Austrian Perspective on the History of Economic Thought (Cheltenham, U.K.: Edward Elgar, 1995), pp. 3 45.

4. Eric Roll, A History of Economic Thought (Englewood Cliffs, N.J.: Prentice-Hall, [1956] 1961).

5. This was first published in French in 1803 as Traite d Economie Politique. There were five editions of this enormously popular book published during Say s life, the last being in 1826. See Jean-Baptiste Say, A Treatise on Political Economy: or the Production, Distribution, and Consumption of Wealth, C.R. Prinsep and Clement C. Biddle, trans. (New York: Augustus M. Kelley, [1880] 1971), p. 111. It has been translated into a number of other languages.

6. It is not clear, however, whether Say adopts the Aristotelian position that “essences” are metaphysically real, that is, that particular objects “partake of” the essence of the class of objects, or the position of contextual realism that “essence” is a necessary epistemological device, but possesses no metaphysical reality. See David Kelley, The Evidence of the Senses: A Realist Theory of Perception (Baton Rouge: Louisiana State University Press, 1986).

7. Say, Treatise, p. xix.

8. Ibid., p. xlix.

9. Ibid., p. xxxvi, emphasis added.

10. Ibid., p. xviii.

11. Ibid., p. xxi.

12. Ibid., p. xlvi.

13. Ibid., p. xliv.

14. Carl Menger, Principles of Economics, James Dingwall and Bert F. Hoselitz, trans. (New York: New York University Press, [1871] 1976), pp. 257 62.

15. Say, Treatise, p. 220.

16. Ibid., p. 222.

17. Ibid., p. 256.

18. Ibid., p. 229.

19. Ibid., p. 254.

20.This is an application of the textbook treatment of price controls, but to money. Simultaneously, a price ceiling is imposed on one form of money and a price floor on the other. This, of course, creates a shortage of the former (that is, it disappears into savings) and a surplus of the latter (it is used for daily transactions).

21. Say, Treatise, p. 226.

22. Murray N. Rothbard, The Case for a 100 Percent Gold Dollar (Auburn, Ala.: Ludwig von Mises Institute, [1962] 1991), p. 28.

23. This is certainly not the case with all Austrians. Murray Rothbard was especially hostile to fractional-reserve banking, and frequently condemned it as “inherently fraudulent.” See ibid., pp. 42 51; also Murray N. Rothbard, The Mystery of Banking (New York: Richardson and Snyder, 1983), pp. 97 98; and idem, Man, Economy, and State (Los Angeles: Nash Publishing, [1962] 1970), p. 700.

24. Say, Treatise, pp. 268 69.

25. Ibid., p. 278.

26. P255J0>Ibid., p. 272.

27. Ibid., p. 274.

28. This poses a problem for Karl Marx and those other socialists who have wished to abolish money but somehow retain the productive benefits of a division of labor.

29. Say, Treatise, p. 151.

30. See Thomas Sowell, Say’s Law: An Historical Analysis (Princeton, N.J.: Princeton University Press, 1972); idem, Classical Economics Reconsidered (Princeton, N.J.: Princeton University Press, 1974); also, George Reisman, Capitalism: A Treatise on Economics (Ottawa, Ill.: Jameson Books, 1996).

31. Alexander Gray, The Development of Economic Doctrine: An Introductory Survey (London: Longmans, Green, [1931] 1961), p. 268.

32. Rothbard, Classical Economics, p. 27.

33. Say, Treatise, pp. 132 40.

34. Ibid., p. 135.

35. Ibid., p. 110.

36. Ibid., p. 133.


38. Ibid., p. 303.

39. Ibid., p. 288.

40. Ibid., p. 287 88.

41. Rothbard, Classical Economics, p. 25.

42. For the benefit of those who might be reading Say’s Treatise for the first time, it should be pointed out that the commonly found text is a reprint of the American edition of 1880, and in that edition the French word “entrepreneur” is translated as “adventurer.” See Say, Treatise, p. 78n.

43. Ibid., p. 83.

44. Ibid., p. 82 85.

45. Ibid., p. 82.

46. Ibid., p. 343.

47. Ibid.

48. Ibid., p. 353.

49. Ibid., p. 344.

50. Ibid., p. 345 46.

51. Ibid., p. 347.

52. Ibid., p. 352.


One might also think of this as the rate at which an individual prefers to consume now as opposed to saving for the future.

55. Say, Treatise, p. 348.

56. Ibid., p. 116.

57. Ibid., pp. xxxi, xl, 287.

58. Ibid., p. 287.

59. For a discussion of value that bears some strong similarities to Say’s, see Menger, Principles, pp. 114 21, 295 302.

60. Say, Treatise, p. 285.

61. Ibid., p. 286.

62. Ibid., p. 285.

63. Ibid., p. 67.

64. Murray N. Rothbard, in his Power and Market: Government and the Economy (Kansas City: Sheed Andrews and McMeel, [1970] 1977), provides a superb analysis of this issue from a modern Austrian perspective. One cannot but believe that Say would have applauded this work quite heartily.

65. Say, Treatise, p. 144.

66. Ibid., p. 104.

67. Ibid., p. 455.

68. Ibid., p. 447.

69. Ibid., p. 448.

70. Ibid., p. 450.

71. Ibid., p. lii.