The Road to Heterodoxy: F.S. Constancio and the Critical Acceptance of Classical Political Economy

The subject of this article is deeply related to the theoretical meaning and historical significance of one of the most relevant and controversial themes in the history of economic thought: Say’s law of markets. Over the first two decades of the nineteenth century, it was the subject of intense debates, which greatly contributed to the reinforcement of the fundamental structure of classical political economy; namely, the notion of, and belief in, the spontaneous, self-regulating market mechanism tending toward equilibrium. More than a century later, John Maynard Keynes (1936, 18–19) used Say’s law as a kind of symbolic element and illustrative feature of classical and neoclassical economics, ascribing to it the virtue of representing the dogmatic assertion of full employment equilibrium. Since then, there have been several interpretations and reconstructions not only of its origin and significance, but also of its theoretical and political implications, all of which have provided additional arguments for the historical understanding of the conceptual elements of a science that is continually searching for its own renewal and improvement.

This article deals with the debates about Say’s law that took place in the early 1820s, a period particularly rich for understanding the original dissemination, acceptance, and refutation of the law. It will also try to shed some light on the spread and impact of Say’s law outside the usual circles. It will focus on the work of the Portuguese author Francisco Solano Constâncio, to whom the established, authorized historiography of economic thought seems to pay almost no attention, no doubt due to the difficult nature of the language of his most noteworthy texts. ¹

It is not my intention to present any critical survey or revision of the literature available on the law of markets, which mostly emphasizes its analytical and theoretical meaning, largely focusing on the study of equilibrium conditions in the commodity and money markets, highlighting the analysis of the favorable or adverse conditions to long-term economic growth, or even further stressing the study of the short-term problems of overproduction and unemployment. Nor shall I discuss its analytical development as expressed through the distinct propositions of Say’s equality and Say’s identity. ² However, the restricted and modest scope of this article should not prevent me from indicating the innovative element it contains: the presentation of a forgotten participant in a debate whose main players included Jean-Baptiste Say, James Mill, David Ricardo, Thomas R. Malthus, James H. Lauderdale, and Simonde de Sismondi. I shall try to show that the study of Constâncio’s contribution brings a new critical dimension to the analysis of the law of markets, bearing in mind both the national context and the social environment, which should be seen as indispensable complements for its historical assessment. In so doing, Constâncio provides further evidence for the importance of the external elements fostering a better understanding of the theoretical relevance of economic laws, as well as a rigorous assessment of their adherence to the very economic problems of the time. His participation in the debate is therefore a useful pretext for stressing the social and political implications of Say’s law of markets.

1. An Overview of Say’s Law and of the General-Glut Controversy

So far I have been referring to a so-called Say’s law of markets, taking for granted that the formalization of this famous economic law is due to the French economist Jean-Baptiste Say. Its first sketch was presented in the first edition of the Traité d’économie politique (1803) and further elaborated in subsequent editions. It is a basic structural element in the edifice of classical economics, for it illustrates in a very simple but also extremely accurate way the idea that there is a spontaneous, self-regulating mechanism that brings the market for commodities to a permanent equilibrium. According to Say ([1826] 1972, 137–47), “products are exchanged for products,” or “it is production that opens up outlets [débouchés] to the products.” These expressions...