The General Glut Controversy and Say's Law

Schools of Economic Thought
General Equilibrium

Article

In a simple shoe-hat world, at any one time, three possible situations may arise: (1) there may be a sufficient amount of shoes and hats to satisfy all demand; (2) there may be too many shoes offered on the market - implying too great a demand for hats; and (3) there may be too many hats and not enough shoes. Situations (2) and (3) are situations when markets have not made precise the allocations. However, the essence of Say's Law is that there can never be too much of both shoes and hats. A shoemaker would not make more shoes if he did not desire more hats. Therefore, Say's Law concludes, general gluts cannot exist.