We will honor tradition and begin with a discussion of Say’s law — an old and simple idea that still stirs strong passions.   Conservatives often claim Say as one of their own and defend him mightily.   See

It is worth while to remark, that a product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value. When the producer has put the finishing hand to his product, he is most anxious to sell it immediately, lest its value should diminish in his hands. Nor is he less anxious to dispose of the money he may get for it; for the value of money is also perishable. But the only way of getting rid of money is in the purchase of some product or other. Thus the mere circumstance of creation of one product immediately opens a vent for other products. (J.B. Say, 1803: p.138-9)

Lets consider the statement a bit. Production is said to create demand equal in value.   The $20,000 you pay for a car is divided up in payments to autoworkers, steelworkers, rent on land, machinery and profits.   All funds go to a person who then decides to go to the movies, buy books, travel, buy stocks, bonds, deposit the funds in a bank or start their own company. While if all these possibilities are considered demand, it is clear supply and demand must be the same but the supply and demand for autos certainly need not be the same. Even the supply and demand for goods need not be the same once goods are separated out from financial instruments.   All recognize this distinction between the identity of aggregate demand and supply and the components of supply and demand.

However conservatives question whether there can be a general lack of demand.   This is puzzling given that Say was quite clear on the point.

“In a community city province or nation, that produces abundantly…almost all the branches of commerce… yield handsome profits, because the demand is great… And vice versa, wherever, by reasons of the blunders of the nation or its government, production is stationary, or does not keep pace with consumption, the demand gradually declines, the value of the product is less than the charges of its production; no productive exertion is properly rewarded; profits and wages decrease;… Depopulation misery and returning barbarism, occupy the place of abundance and happiness” (p. 21-22 of the 1832 English translation)

However, the brief quote evokes several other controversies as well. Say claims the producer is anxious to sell immediately.   Unless production is intended for inventory, this is of course true.   However, the producer’s anxiety may well stem from his recognition that there is no guarantee the product will ever sell.   It is quite possible products intended to be sold get held by the producer in a warehouse as unintended inventory investment.

The next line “Nor is he less anxious to dispose of the money” is a reference to the oldest theory of depressions.   Fear was said to cause people to hoard money and thereby depress demand. Say’s theory connects money with production.   Any disruption of the money flow affects production and any disruption of production affects the flow of money.   Whether we choose to focus on money or production is in some ways arbitrary but historically quite important.