Today's issue of The Wall Street Journal also included an interesting piece on the fiscal stimulus package proposed by New York Senator and Presidential candidate Hillary Clinton. The piece was interesting to me not because it was about one of the campaigners, but because it referenced 18th-century French economist Jean-Baptiste Say.
The author of the editorial, George Melloan, quotes Say as saying "products are paid for with products." There may be a few would see this as a confirmation that a manufacturing economy is the only real source of wealth. I suspect that Jean-Baptiste could not begin to imagine, much less fathom the modern service sector and all it brings to improve our standard of living. However, the idea is essentially correct. And that is, we can't consume what is not produced. Or to reverse it, we must produce before we consume. Say's Law is also frequently stated as "supply creates its own demand." I feel that version is perhaps a bit suspect. Despite what some popular culture would like to portray, it is not necessarily true that "if you build it, they will come". Ask the owner of any poorly located restaurant, boutique or small business. But the idea of linking production and consumption is a vital part of economic and financial literacy. Too often, people presume that a job is something you get, and a raise is something you deserve, just because you exist. That's not the case. With a job, you are expected to produce. And it is that production that enables you to consume. You may not consume what you produce, but you are enabled nonetheless. Production and consumption are connected, at the personal and the national level.
What are your thoughts?