Communicating economics to a general audience isn’t just about accuracy. It’s also about keeping people interested. In Useful Economics, AIER Founder Colonel EC Harwood aimed to engage “both student beginners and general readers” by grounding economics in “an area of the field where they at least have some familiarity with the principal matters discussed.”
Making economics accessible often means finding relatable situations. Colonel Harwood used the example of making decisions in a supermarket. One such moment caught me by surprise while reading to my children. In the pages of Richard Scarry’s What Do People Do All Day? I found an illustration of Say’s Law of Markets.
Scarry’s story offers a case that can help general readers — especially children — grasp the basic intuitions of economics.
The Busy World of Markets
What Do People Do All Day? Is a collection of illustrated short stories set in fictional Busytown, a community populated by animal characters who go about their daily jobs, aiming to teach children about different occupations and how they contribute to the wider community.
The story “Everyone is a worker” follows Farmer Alfalfa and his interactions with five other workers in Busytown. He grows food, keeps some for his family, and then sells the rest to Grocer Cat in exchange for money. With the money, Farmer Alfalfa buys a new suit from Stitches the tailor, a new tractor to boost his productivity, and presents for his wife and son from Blacksmith Fox. He then puts the remainder of his earnings into the bank.
The story doesn’t end there. Grocer Cat sells the food to other people in Busytown, using the proceeds to buy a dress for his wife and a present for his son. Stitches and Blacksmith Fox first use the money to buy food, then new clothes, and then other goods. Stitches buys an eggbeater to make fudge while Blacksmith Fox buys more iron for his shop, reinvesting in his business. Any money left over, Scarry notes, is saved in the bank.
Those familiar with Say’s Law may already see the connection. While Scarry does not include equations or a specific discussion of economic terms, he includes the core aspects of Say’s Law: exchange, money, and a division of labor.
What Is Say’s Law?
Say’s Law (named after nineteenth-century French political economist Jean-Baptiste Say) is often reduced to the phrase “supply creates its own demand.” Taken literally, that would mean any good or service automatically generates buyers. If that were true, I could get rich selling surfboards at the Continental Point of Inaccessibility in South Dakota (the farthest spot from any ocean in the continental US).
Say himself wrote in A Treatise on Political Economy: “[I]t is production which opens a demand for products…Thus the mere circumstance of the creation of one product immediately opens a vent for other products.” Essentially, one’s ability to produce is the source of demand.
Say’s Law means that one’s ability to do his or her job enables that person to demand all the goods and services he or she cannot personally produce (also known as “noncompeting” goods and services). Recall Farmer Alfalfa. Because he can grow his own food, he does not demand additional food. Instead, he trades his output for money and then uses the money to purchase goods that do not compete with his own labor.
A more influential criticism comes from John Maynard Keynes. He argued that Say’s Law implies market economies cannot experience economy-wide gluts or shortages, because income from production should always be sufficient to purchase what is produced — in other words, that aggregate supply must equal aggregate demand. Critics then point to recessions and depressions as evidence that Say’s Law fails.
Economist Steven Horwitz explained why this critique misses the point. Say’s Law, he noted, “has nothing to do with an equilibrium between aggregate supply and aggregate demand.” Instead, it describes how production generates income, which then becomes demand. As each worker becomes employed, Horwitz explained, he or she can purchase goods and services from other noncompeting producers, creating opportunities for their employment as well.
Farmer Alfalfa’s ability to grow and sell food allows him to demand the goods produced by others. Those workers, in turn, can demand food and other noncompeting goods and services. Production, not consumption, drives the process.
Horwitz also noted that larger, wealthier communities support greater product variety, specialization, and competition, while smaller, poorer areas face fewer choices because they produce less. As Busytown becomes more productive — shown by workers reinvesting in their businesses — residents can offer one another a wider range of goods and services.
Money also plays a crucial role in connecting production and demand. The Busytown workers receive money in exchange for their productive actions, and the money serves as an intermediary good facilitating exchange. In a barter economy, if Stitches does not want Farmer Alfalfa’s vegetables, no trade can be made. Money makes exchange possible even when preferences do not align.
Savings matter too. When Busytown’s workers deposit money in the bank, those funds become available for loans. When people delay consumption, spending power shifts to borrowers, whose purchases replace what savers set aside. So long as savings flow through the banking system, overall spending need not fall.
Economics in Ordinary Life
From the little I was able to read about Richard Scarry, he did not appear to have any economic training or particular interest in economics. Yet, intentional or not, Say’s Law shines through the ordinary interactions of Busytown residents.
That’s the beauty of economics. Its core principles reveal themselves in everyday life. While young children may not grasp the great debates in economics, they can still see through a simple picture book that honest work, currency, and exchange help make communities prosper.