What is overproduction?

Overproduction, also called overproduction and underconsumption, is defined as the excessive production of a product compared to what is necessary. It can be divided into two types, the quantitative and the anticipated. The first occurs when there is a greater production than what is requested by the client. For example, if 130 shoes are required to be manufactured, but 155 shoes are produced, then the leftover products are the result of overproduction. The second type refers to situations where the company decides to manufacture the product before its application.

In the economy

Overproduction occurs within the economy when supply exceeds demand in the market. This causes the price of the excess manufactured product to be pushed down, according to the economic law of supply and demand. At the same time, overproduction causes a market imbalance called a 'demand crisis', as producers are unable to recover production costs, and waste of both financial resources and time is generated.

Various economic thinkers have raised the issue of overproduction. Jean-Baptiste Say, for example, with 'Say's law', where he ensures that in a free market a general crisis of overproduction is impossible, since supply creates its own demand. However, in reality, the offer is strongly conditioned by the purchasing power and circumstances of the people.

An example of this was the Great Depression of 1929, an event that began in the United States and spanned the world system. Companies produced more goods than people could buy, so prices fell, factories closed, and unemployment rose, leading to an endless cycle of poverty and want. Then, monetarist and Keynesian economists, as well as Marxist sociologists, approached theories with the objective of explaining the crisis based on overproduction.