Classical Macroeconomics and Say’s Law (19th Century)

Classical macroeconomics, developed in the nineteenth century, argues that market economies are self-correcting and tend toward full employment in the long run if prices, wages and interest rates are flexible. A core idea is Say’s Law — commonly stated as ‘supply creates its own demand’ — which holds that production generates income that will be spent, so aggregate demand follows supply. This view emphasises supply-side constraints on growth (land, labour, capital, enterprise) and supports limited government intervention, while later critics (Keynesians) rejected its strong assumptions about flexible prices and quick adjustments.