J.B Say's Theory

French Economist Jean Baptise Say is one of the backbone of classical thoughts which formed as a base for many classical theories. Says's theory is based on the similar assumption that classicists used to assume. Simply stating, Say's main idea is that supply creates its own demand. In an economy, in order to make demand for goods and services, first the production and supply of those goods and services is necessary. According to him, market is self-adjusting in nature. So, whatever goods and services are produced, the demand makers ultimately emerges after production without any hindrances.
Say's law argues that demand cannot be created without supplying. For making consumption, at first supply of goods is necessary. After supplying only, a person gets to know about the product and gets information about the product and at last consumer demands it. For example, I am producer of a XYZ toffee. My motive is to gain profit from selling my product. But, for selling my product, demand from consumers is necessary. Hence, I advertise my product and then people get to know through primary and secondary advertisement and then gradually it's demand emerges. This is the simplistic theory of market according to J.B Say.
During the invention of his theory, barter system was still in existence and his theory was completely correct for barter system. During barter system, people at first produce their goods and services and after production, they get opportunity to demand those products. And the remaining surplus demand where Supply>Demand, the remaining are exchanged for other goods in the market. Similarly, store of value was not in practice and everyone were self-employed and saving was only for strengthening his/her production. For example, a farmer cultivates potato in his land. S/He consumes his production after some period. When producer has enough for himself, he gets to the market to exchange his products with other products like wheat, rice, other vegetables and his/her daily requirements for consumption.
Say's law was applicable in money economy as well but not as accurate as in the barter system. According to Say, money was only for transaction of goods and services. Generating income in monetary terms was only for expending it on his/her consumption expenses and satisfy wants and needs. Similarly, saving of money was only for investing it. Hoarding of money was not possible as Saving=Investment. Whatever amount of money was saved, through the help of financial institutions, those money were loaned to investors/producers at certain interest.
Total aggregate income would equal to aggregate expenditure according to Say. But, his law was very simplistic and destructive as of the other classical views which led to worldwide destruction during 1930's. I agree with Say's law in context to the barter system. But in our present society where money is given primary emphasis, it results to be misleading. His idea that demand emerges after supply does not holds to be true. Without any kind of demand in the market, a producer if according to Say's law, keeps on producing his goods then there arises problem of overproduction which will ultimately lead towards unemployment and destruction of the economy. His other idea like role of money and S=I and wage price flexibility in the market are heavily criticized by J.M Keynes. Concluding this topic, I want to say that Say along with other classical economists believed their economies will always remain in an ideal world far away from all kinds of obstacles which was short-sighted and resulted them as well as innocent people suffer.

How Classical Economists viewed about economy?

Classical economists are the economists from Adam Smith until 1930's where the Great Depression took place. They formed the base of economics and from which Keynesian and post Keynesian(modern) economics were developed. Classical economists in their approach of  theories, assumed certain economic units to be given. French economists J.B Say's theory is regarded as one of the foundation of classical economic though beside the thought of Adam Smith There were many assumptions in their theories in which all the classicists agreed. The assumptions are given below:

• Full Employment of resources: Classical economists assumed that all the available resources are fully utilized. Full employment here is only limited to the human resources not all the natural resources available for productive processes. It means people who are able and willing to work at the current wage rate can find job easily and are employed without any hindrance. Only involuntary unemployment is prevailed. Involuntary employment here means people who have ability to work but do not want work. Full employment for classicists implies for around 95%-96%. 
• Laissez faire policy: Classical economists believed that an economy is Laissez faire which means that there is no any government intervention in the market. Classical economists focused heavily on privatization and capitalization and created limited role of government in the markets. They argued that government should have limited role in the economy. Classicists advocated that resources are more rationally utilized by private sectors rather than the government.
• Self adjusting nature: Classical economists viewed economy as self adjusting in nature. There is no state of disequilibrium in the economy. There always remains equilibrium between two opposite ends according to classical economists. As there is full employment of resources, everyone will generate income through production of goods and services which results in no poverty and no overproduction or underproduction. Similarly wage rate, interest, and output also remains in equilibrium.
• Role of money: For classical economists, role of money was very limited. Money was only invented for the transaction of goods and services. People earned money either for spending or for the investment(which ultimately leads expenditure towards factors of production). Money do not play significant role in determining the output and employment. 
• Long-run: Long run period means the time period in which a producer/entrepreneur can expand its investment through increasing its labor as well as capital resources. Economy was always considered in long run time. Every theories of classical economists assumed the duration of long run time period. They ignored the fact that huge changes appear also in the short duration and perceived long run point of view. 
• Expandable market: Classical economists imagined that the market is expandable in nature. The market is very flexible and can be expanded according to the view of classical economists.

Classical economists idealized the markets beyond the limits and were like the teenagers enjoying the world of fantasy. They did not recognize that the markets face several problems and it has to be controlled through different measures as nothing in the world can be self adjusting. Too much simplicity of the economy ruined the whole world and their extreme simplicity towards the economy lead them towards huge destruction and the Great Depression of 1930's prevailed which created a significant impact in the world. John Maynard Keynes also known as the savior of the Great Depression, had heavily criticized the classical view of economy.

Causes, Effects and Control of Inflation

Discussed in the post about meaning of inflation, we are now able to know what inflation means. In this post, I will focus on its causes and effects. There are many views regarding the causes of inflation as classical economists have a different perspective (money supply) and Keynesian economists blame different factor (when demand exceeds supply) for its occurring. Irving Fisher in this propounded theory often regarded as 'Quantity theory of Money' opines that inflation occurs when money supply increases. Fisher argued that value of money decreases after increase in money supply. When people receive more cash in their hands, they try to purchase limited goods and resources at high price due to the shortage or excess demand over the supply.
On contrary, Keynes believed that inflation occurs when total expenditure is greater than the total output of an economy. Keynes argued that real inflation occurs only after full employment of all resources available. Inflation before full employment is considered as semi-inflation. He categorized his causes into demand pull and cost push inflation. Demand pull inflation means when aggregate/total demand exceeds aggregate supply. It is the state where too many money chases few amount of goods. Similarly, when cost of factor of inputs(production) increases, the price of goods and services increases resulting in inflation and this type of inflation is supply shock inflation.
Discussing about the general causes, very minute factor which are gone unnoticed also plays important role in effect in inflation. Factors like increase in supply of money, increase in public and private expenditure, reducing taxation, increasing net exports, paying public debts, increase in black money, shortage of factor inputs, increase in factors of inputs, increasing interests, hoarding of businessmen, and global effect on factors of production also cause inflation in a state.
If inflation is under control then its progressive. But huge rate of inflation and hyper inflation are very hazardous for an economy. It has huge impact on production as productivity decreases (decrease in saving leads to decrease in investment and it leads towards low income and ultimately decrease in saving), effects distribution in an economy, effects the employment level, decreases government revenue, and increases immoral activities in the society and the important one is that it creates inequality due to its discriminating nature in which some category of people gain more and some heavily lose during inflation.
Controlling inflation is impossible for every nation and it is necessary as well because it is necessary. The main thing is that stable inflation rate should be maintained which is difficult. It can be controlled by various monetary measures (increasing bank rate and cash deposit rate), fiscal policy measures (increasing tax, deficit financing) and other similar methods like proper wage policy, population control, indexation(compensation paid for change in price level) . In my view, inflation is stubborn problem and however if the inflation rate is null, then there an economy will face widespread unemployment and the problem of Deflation(decrease in general price level along with the decrease in national output and national employment). My suggestion to all the readers as being the responsible economic unit, is that we should reduce our unproductive expenses and have significant role in the productive sectors so that an economy can remain in progress.

Inflation for me; and inflation desirable or unwanted?

In an economy, inflation is the most common phenomena and is an important part of study in economics. We should know the term inflation if we want to have a standard analysis of current economy. The main objective of discussing the meaning of inflation is only to make everyone clear about it so that there may not be any confusions and tensions for those readers who are not familiar with the precise terms used in economics.
Many people have conventional belief that inflation means just the increase in price of goods and services but it is more broader term than we used to think about it. There are many conditions in order to happen an inflation. Increase in price of goods and services is not inflation but it is price hike.
Inflation in my words is the state in which there is increase in general price level which results in decrease in the value of money and economic units i.e. the consumers/peoples are compelled to buy goods and services in relatively high price compared to the past. It means each unit of money can purchase few amount of goods and services and purchasing capacity or power of money decreases. I want to make it clear through real life example of my own experience. When I went to the market before a year for buying a jacket, its price tag was 30$ and I bought it. But now after a year, I went to market with my friends and saw that the same jacket costs 32$ which is the effect of inflation as the central bank had increased its money supply to the public which resulted in the same jacket to cost 2$ more than before. There are so many cases like this which we can refer through our experiences.
Inflation is continuous rise in the general price level not the individual price and the supply of goods and services is low with respect to its demand and its purely monetary phenomenon as it is dependent upon the supply of money.
Different economists had given their different view towards inflation. Classical economists, neo-classical and Modern also known as Keynesian supporters defined inflation differently but shared same idea that it results in high amount of money chases few amounts of goods.
Inflation has many pros and cons. Everything has to be done in certain limit and same case applies to inflation in an economy. Inflation of 2% for developed countries and 5% for developing countries is regarded as appreciable as it promotes business activities and the private sectors remains in profit which results in further economic growth. When private sectors who are guided by profit motive; and expects profits and positive return in any kind of investment, it will invest more resulting in more amount of income to the economic units and more amount of consumption which creates a cycle and this process leads towards economic growth of a state and an economy becomes progressive.
On the other hand, if the rate of inflation is very high than desired than it creates economic depression which have been experienced by the whole world during the great depressions after the world war i.e. during 1930's which resulted in global poverty, unemployment, destruction conflicts which is discussed in brief as its causes, effects and controlling measures.         
Inflation should not be taken as an economic evil because Moderate rate of Inflation leads towards progressive economy. Therefore Inflation with moderate rate is desirable but inflation which a state cannot absorb or in other words a state cannot absorb is unwanted. I also used to think inflation as economic evil but after many studies and knowledge about it, I concluded that inflation is also necessary for an economy.