Say's Law: No Over-Production

Say’s law says that the supply creates its own demand which means that when something is produced in market place it requires payments to factors of production and income earned by these factors is equal to the value of the object that is produced. This income is equivalent to demand of goods produced. Historical context of Say’s law is that when the over-production started happening then issue was faced that what is going to happen with all of surplus because nobody wants it. Say’s law answered this question as over-production is not an issue because in fact there cannot be such thing as over-production. If people are self-sufficient then Say’s law cannot hold.

One of the aspects of Great Transformation was the creation of needs as it made people feel that they want more and more. This was the only way to use and sale the surplus produced in Industrial Revolution. Today the advertisement plays the same role which creates the desire in our hearts for having luxurious life style. Islam teaches us to have simple life style and if we start doing it then market economy will automatically collapse. It is because the market economy is built around over production and people have to buy all of the things that they actually don’t need. An element that is important in context of Say’s law is that everyone is encouraged to be greedy so that everything can be sold. After Great Transformation money became more important than it used to be in contrast to market economy in self-sufficient economy people took care to each other and did not need money for trade. But in market economy one cannot live without money. Labor market is a market in which man sale him for money. So, in market economy everything is for sale including human beings and people have to be conditioned into it because it is not natural. In market economy either we have to sale our self or we cannot survive as there is no third option.