Question about Say's Law that perplexes me?

Economics Economics Questions
1

After reading an exilerating exchange between some Neo Classical Marxist (actually I have no idea what he’d refer to himself as) and some Austrians about Say’s Law, one of the quotes from Say baffled me a bit. Here’s the quote:

“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 the creation of one product immediately opens a vent for other products.”

Why would Say state that the producer is most anxious to sell his good immediately, lest its value diminish in his hands? I get the idea that it may be perishable or that it could break or be damaged and therefore lose value, but isn’t its value really an exchange ratio with the goods the producer wants to purchase? Why would he presume his goods will diminish in value relative to what he demands? I get it if his goods are perishable or he has market information that suggests he needs to sell early before other competitors of like goods to capture higher profits, but for non-perishable goods?

More importantly, Say goes on to say that the producer is just as anxious to dispose of the money he receives from the sale of his goods because the value of money is also perishable. Why would Say state this? Is Say assuming a fiat currency where inflation is the norm in this system? What about under a sound money system like gold that’s free of monetary inflation? Without inflation, wouldn’t a producer’s choice to hold money instead of immediately purchasing goods be rational choice based on the producer’s liquity preference (or whatever it’s called) since the value of his money could appreciate as easily as it could depreciate?

2

“Why would Say state that the producer is most anxious to sell his good immediately, lest its value diminish in his hands?”

That’s the way a business is run. You don’t make money when it sits on the shelf. And indeed, all kinds of things could go wrong. The ones you mentioned, plus fire, theft, water damage, obsolecense, and anything else one can possibly worry about. The producer has all to lose and nothing to gain by just hanging around with the stuff.

“More importantly, Say goes on to say that the producer is just as anxious to dispose of the money he receives from the sale of his goods because the value of money is also perishable. Why would Say state this?”

I saw an article that said, “Finally in regards to money, Say has been accused of missing the point that money is dynamic.[17] However, this is not the case. Say is a strong advocate of a hard currency and decries the state’s manipulation – usually through debasement – of the value of the currency. Quite astutely Say writes that the manipulation of the monetary value confuses the pricing system thus making the adventurer/entrepreneur hesitant to further invest in capital and production. In addition, grievous price controls and taxation usually follow such debasement, which together all greatly limit production and exchange.[18]”

Which makes me think that’s what he was talking about, the state debasing the currency. Maybe it was a problem in his day, and it’s what he’s referring to.

“Without inflation, wouldn’t a producer’s choice to hold money instead of immediately purchasing goods be rational choice based on the producer’s liquity preference (or whatever it’s called) since the value of his money could appreciate as easily as it could depreciate?”

Say had a footnote to the paragraph you quoted. He wrote: “Even when money is obtained with a view to hoard or bury it, the ultimate object is always to employ it in a purchase of some kind. The heir of the lucky finder uses it in that way, if the miser do not; for money, as money, has no other use than to buy with.”

BTW reading the him from the link above, it becomes very obvious why Keynes did all he could to attack him. He draws a very logical conclusion from his law, the ultimate in anti Keynesianism. “The same principle leads to the conclusion, that the encouragement of mere consumption is no benefit to commerce; for the difficulty lies in supplying the means, not in stimulating the desire of consumption; and we have seen that production alone, furnishes those means. Thus, it is the aim of good government to stimulate production, of bad government to encourage consumption”

3

Why aren’t my posts going through? I’ve typed an answer twice and it’s not going through.

4

I’ll try to post an answer one more time.

I think the idea is that a producer hopes that demand will exist for the good that he is producing at the moment it is ready for sale. Otherwise, he may have to lower his price for the good in the future in order to stimulate demand.

As for money, the producer is hoping that demand for money remains constant relative to the goods that he desires. Any number of events, such as a decrease in the supply of the good he desires, an increase in the number of buyers for that good, or a change in the supply/velocity of money could lead to an increase in the units of money required to purchase the good he desires.

In a nutshell, a producer sells good A for $X in order to afford good B for $X. If demand is low for good A, or if any of the abovementioned factors lead to an increase in the price of good B, then selling good A will not be sufficient to purchase good B. This is what the producer is anxious about.