History of Economic Thought
Monday 28/03/2022
Newsletter
“Thomas Robert Malthus”
Edition: 001
Table of Contents
Monday 01/02/2020
01
Introduction
02
Poor Laws
03
Population Theory
Hard hearted?
Issue of the Day
Newsletter
Edition: 001
04
Theory of Gluts
05
Events
Describe the section here
History of Economic Thought
Monday 28/03/2022
Newsletter
01
Introduction
Edition: 001
Malthus
Monday 28/03/2022
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Newsletter
Son of an eccentric member of the English
upper middle class.
Tenderly tutored for a university under
the guidance of his father.
Spent his life in academic research
First professional economist, teaching at
a college training young administrators.
Keynes called him “the first of the
Cambridge economists.”
Edition: 001
History of Economic Thought
Monday 28/03/2022
02
Poor Law
Newsletter
Edition: 001
Problems of the Day
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Omnipresent problem of poverty
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Poverty on the rise, particularly because of large tariffs on corn imports under the Corn
Laws.
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Unemployment high in early phase of the industrial revolution with the introduction of
mechanization.
Population concern: How many Englishmen were there?
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Convinced that England’s population was dwindling
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Depended on statistics by Dr Price, Houghton and Gregory King
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Records of taxes and baptismal registrations: 5.5 million (extraordinarily accurate
estimate!!!)
Problems of the Day
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The concern: future population growth
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next doubling of the people of England
would be in six hundred years to come, or
by the year of our Lord 2300
By the time of Adam Smith, another view:
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From taxes record, Dr Price proved that
population of England had declined by
30%.
Validity of his findings was hotly disputed, yet
taken as fact.
“The decay of population is the greatest evil
the state can suffer……..”
Introduced a new poor relief bill for the specific
purpose of boosting the population.
By having children a man enriched his country,
even if his offspring should turn out to be
paupers.
Poor Laws: Collective set of redistributive
measures to help the poor.
Main elements of the Poor Laws:
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Income guarantee program: family
income was linked to cost of living
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The poor should have a minimum
income irrespective of their
earnings.
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Income below the threshold
triggers transfers, mainly from
landlords, but also merchants.
Transfers tied to number of children to
boost the population.
Problems of the Day
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Population problem from the perspectives of a vision that puts its faith
in natural law, reason and progress
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Was it declining? Should be encouraged to grow
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Was it growing? All to the good, the belief was population was a source
of national wealth.
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There was nothing in the population question that could shake men’s
faith in their future.
Problems of the Day
Godwin’s Optimism
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Political Justice (1793),
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excoriated the present but gave promise of a
distant future in which,
“there would no longer be a handful of rich and a
multitude of poor…There will be no war, no crime,
no administration of justice, as it is called, and no
government. Besides this there will be no disease,
anguish, melancholy, or resentment”…in short,
utopia.
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Godwin argued that there would be no
population crisis, because reason will compel
people to cease propagation.
Malthus’s Response
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An Essay on the Principle of Population as it
Affects the Future Improvement of Society
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There was a tendency in nature for
population to outstrip all possible means
of subsistence.
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Far from ascending to an even higher
level, society was caught in a hopeless
trap – human reproductive urge would
shove humanity to the precipice of
existence.
History of Economic Thought
Monday 28/03/2022
Newsletter
03
Malthusian Population Theory
Edition: 001
Population Theory
Malthus’s assumption:
● Human animal would tend to double its number in 25 years.
● Where life is freer and healthier, population doubles every 15 years.
● In contrast, land could not be multiplied. It could be added to laboriously but the rate of progress is
very slow and hesitant.
● Hence, while the number of mouths grows geometrically, amount of cultivable land only grows
arithmetically. The population will increase at a rate of 1,2,4,8,16,32 and so on, while the rate of
subsistence increases at best only 1,2,3,4,5,6.
● As a result, the number of people will outstrip the number of food.
● The larger number of mankind would forever be subjected to some kind of misery.
● Population cannot exist without food, the gap must be sealed…population check.
Population Theory
Population dilemma posed:
Theoretical question (identification of the actual checks on
population)
Practical question ( solutions to the problem –which checks should be
encouraged)
Population Theory
Monday 01/02/2020
Newsletter
Preventive Checks
• Moral restraint
• Vices: Prostitution and Birth
Positive Checks
• Famine, Misery, Plague, War
• a form of punishment for those that did
Control
not lead a moral life. If these checks
were ever defeated, people would starve
because population would grow too fast
for the food supply.
Edition: 001
Population Theory
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The conclusion drawn from Malthus’ essays was that the reproduction of the lower
classes needed to be restrained.
“The poor breed like rats and the population problem goes on..”
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Poverty and misery are the natural punishment for the failure of the “lower classes”
to exercise moral restraint.
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The poor must receive no governmental aid.
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To provide aid would be to allow children to survive and only worsen the population
concern.
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Poor Law should be abolished so that positive checks to population could take affect.
Population Theory
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Several ideas of Malthus were included
in the Poor Law Amendment in 1834.
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The amendment added several concepts:
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To apply for relief a man must
pawn all possessions and enter a
workhouse as well as his family.
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The workhouse imposed high
psychological costs. Most people
would rather starve than to face
the indignities of entering the poor
house.
Thomas Carlyle, after reading Malthus’
book, called political economy “the
dismal science”.
Population Theory
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Urged the abolition of Poor Laws;
opposed housing project for the working
poor…
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Is he an ogre?
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Done with the sincere interest of the
poorest at heart.
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Not so much a hard hearted as a
supremely logical one.
History of Economic Thought
Monday 28/03/2022
Newsletter
04
Theory of Gluts
Edition: 001
Theory of Gluts
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Possibilities of Gluts?
Flood of commodities without buyers.
Say’s Law
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2 simple propositions:
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The desire for commodities was infinite.
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Ability to purchase was guaranteed.
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Producing goods cost something and every cost was some man’s income.
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The demand existed, the incomes to buy existed as well.
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Was it not possible, for the act of saving to make the demand for goods too small for the supply?
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In Malthus’ Principles of Political Economy, he developed a theory of potential insufficiency of
effective demand.
Theory of Gluts
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Workers receive a subsistence wage.
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So, who will buy the products?
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The workers are hired because wages
< than value of their output.
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The workers cannot buy back the total
amount of output so others must.
Unproductive Consumption: the
answer lies in the consumption by
landlords.
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Rent, is a surplus between price of
agricultural produce and the cost of
production. Thus, when this amount
is spent, it adds only to effective
demand and not to the cost of
production.
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The output is purchase in part by
capitalists in the form of capital
goods.
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However, the investment will only
occur to provide further consumption.
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There is a possibility of
underconsumption in the economy.
Theory of Gluts
Monday 28/03/2022
Newsletter
Edition: 001
Workers
Capitalists
Landlords
Workers receive a subsistence
wage. The workers are hired
because wages < than value of
their output. The workers cannot
buy back the total amount of
output so others must.
The output is purchase in part by
capitalists in the form of
capital goods. However, the
investment will only occur to
provide further consumption.
Have the purchasing power, pursue
unproductive consumption. Rent, is a
surplus between price of agricultural
produce and the cost of production. Thus,
when this amount is spent, it adds only to
effective demand and not to the cost of
production.
Theory of Gluts
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Corn Laws must be retained.
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These tariffs enriched the landlords
and promoted unproductive
consumption.
There should be no unproductive
consumption by government or buying off
the market to feed the poor.
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To Malthus, this type of expenditure
was critical to the success of the
market system since it could avoid
the stagnation that could take place.
Despite favoring unproductive consumption
in the private market, Malthus opposed
unproductive consumption by the
government.
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Soldiers, sailors, and government officials
lived off of taxes collected. These taxes
would impede the collection of wealth by the
landowners.
Summary
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Initially, economists claim that Malthus overrated the growth in
population.
Also, the world’s output has continued to grow at a faster rate
than population.
Malthus’ view on agriculture was also incorrect. Modern
technology has allowed fewer workers to achieve greater yield
from the land.
Also, trends show that increases in the national output may
actually result in a lower birth rate as the opportunity cost of
having children increases with the wages.
However, the Global Food Crisis 2008 has changed this view, to a
certain extent. The debate now is Could Malthus be Right?