This so-called profit motive, the core of the capitalist economy, creates a dynamic whereby an abundance of commodities has negative consequences.
The overproduction of commodities forces businesses to reduce production in order to clear inventories.
The general reduction in the level of prices (deflation) caused by the law of supply and demand also forces businesses to reduce production as profits decline.
In any unqualified sense, over- production is preposterous, when everywhere the struggle to get wealth is so intense; when so many must worry and strain to get a living, and there is actual want among large classes.
[3]Karl Marx outlined the inherent tendency of capitalism towards overproduction in his seminal work Das Kapital.
According to Marx, in capitalism, improvements in technology and rising levels of productivity increase the amount of material wealth (or use values) in society while simultaneously diminishing the economic value of this wealth, thereby lowering the rate of profit—a tendency that leads to the paradox, characteristic of crises in capitalism, of "reserve army of labour" and of “poverty in the midst of plenty”, or more precisely, crises of overproduction in the midst of underconsumption.
John Maynard Keynes formulated a theory of overproduction, which led him to propose government intervention to ensure effective demand.
Following Say's law, overproduction (in the economy as a whole, specific goods can still be overproduced) is only possible in a limited sense.