Is General Glut Possible

1.0 Introduction

1.1 What is general glut?

The general glut controversy has been ongoing for almost 207 years now. It simply revolves around the question of “Is it possible for supply excess demand”. “Economists of the early 19th century used the term ‘general glut’ to refer to economic stagnation, accompanied by high employment, idle farms and factories and a ‘glut’ of unsold commodities of all types”(Steven Kates, 2003). Dr Joseph Clark (2010) addresses general glut as “Can there be too much of everything?”

1.2 What did Jean Baptiste Say said and believed?

This issue was first discussed by Jean-Baptiste Say in his work, ‘A Treatise on Political Economy or The Production, Distribution and Consumption of Wealth’ in 1803. Jean-Baptiste Say examined in his book the development of trade between Brazil and Great Britain. In his book, he realize the only way for Brazil to purchase British goods is by supplying Brazilian goods to British for sterling pound, which in turn is used to purchase British goods. If the veil of money is removed, it simply involves an exchange of goods. However, it is important to note that this exchange of goods should not be mistaken as barter trade. In Jean-Baptiste Say’s perspective, he believed that the supply for a good will be met by the demand for another good, as Say simplifies it as “supply creates its own demand”.

I intend to provide an example to illustrate on glut:

Suppose that there are two parties, or exchange economies, Elves and Orcs. Elves produces butter while Orcs produces bread. So how do the Elves obtain bread? They can either produce the bread themselves (in which they lack the technology or skill to do so) or they can simply product more butter and exchange their butter for bread. Say simplifies the situation as ‘supply creates its own demand’.

Jean-Baptiste Say believed that wealth can be created by stimulating production, and not consumption. He believed that the excess supply of one good can always...