Malthus and Ricardo
Chapter 5
Thomas Malthus
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His father was a personal friend of
David Hume and Jean Jacque Rousseau
Malthus’ ideas were reactions against
the optimistic views of his father and
others, like Rousseau
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optimism and faith in the nature of man
man might perfect himself through the
application of reason and will power
Framework of Analysis
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What are the questions that
Thomas Malthus is asking?
What is the nature and cause of
poverty?
Can humans solve the problems of
poverty, inequality, and oppression?
What policies, if any, might help to
solve these problems?
Essence of Malthus’ Population
Theory
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Population growth always exceeds the growth of means of
subsistence (food supply)
Actual (checked) population growth is kept in line with food
supply growth by "positive checks" (starvation, disease and the
like, elevating the death rate) and "preventive checks" (i.e.
postponement of marriage, etc. that keep down the birthrate),
Malthus's hypothesis implied that actual population always has a
tendency to push above the food supply. Because of this
tendency, any attempt to ameliorate the condition of the lower
classes by increasing their incomes or improving agricultural
productivity would be fruitless, as the extra means of
subsistence would be completely absorbed by an induced boost
in population. As long as this tendency remains, Malthus
argued, the "perfectibility" of society will always be out of
reach
Essence of Malthus’ Population
Theory
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“(There is a) constant effort towards an increase in population
[which tends to] subject the lower classes of society to distress
and to prevent any great permanent amelioration of their
condition…The way in which these effects are produced seems
to be this. We will suppose the means of subsistence in any
country just equal to the easy support of its inhabitants. The
constant effort towards population …increases the number of
people before the means of subsistence are increased. The
food, therefore which before supplied seven millions must now
be divided among seven millions and half or eight millions. The
poor consequently must live much worse, and many of them be
reduced to severe distress.” (Chapter II, An Essay on the
Principle of Population)
The burden, of course, falls upon the poor
Framework of Analysis
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What are Malthus’
assumptions?
Food is necessary for human existence
Passion between the sexes is necessary
and will remain unchanged
Population grows exponentially, food
supply grows arithmetically
Framework of Analysis
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What is the economic/political /
cultural/social environment of
Malthus?
Rise of classical economics (e.g. Smith)
Food imports into Britain with rising prices
Miserable working/living conditions for the
poor, especially in rural areas
It was generally thought that the plight of the
poor was due to the landed aristocracy
Framework of Analysis
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What is the role of the market?
Didn’t really address this issue directly but the process was marketlike
The misery of the poor was inevitable, not due to capitalism and
markets, but due to the imbalance between population growth and
growth in the food supply
During good times human numbers increase to the point where
available resources are overwhelmed, at which point misery acts to
reduce the numbers. Malthus understood that “this necessary
oscillation, this constantly subsisting cause of periodical misery, has
existed ever since we have had any histories of mankind, does exist
at present and will for ever continue to exist . . “
In other words, there is a tendency toward a “subsistence
equilibrium”
Framework of Analysis
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What is the role of government?
Get rid of the poor laws, a decentralized
system of poor relief in England, in
practice for two hundred years
These laws might alleviate short term
suffering, in the end, they cause greater
suffering.
Framework of Analysis
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What is the role of government? (cont’d)
“Moral restraint" (voluntary abstinence which leads to neither
misery nor vice) can bring the unchecked population growth
rate down. Government can inculcate the lower classes with
middle-class virtues.
HOW? Universal suffrage, state-run education for the poor and,
elimination of the Poor Laws and the establishment of an
unfettered nation-wide labor market.
Once the poor had a taste for luxury, then they would demand a
higher standard of living for themselves before starting a
family. Thus, although seemingly contradictory, Malthus is
suggesting the possibility of "demographic transition", i.e. that
sufficiently high incomes may be enough by themselves to
reduce fertility.
These ideas came out in a revised (1803) issue of Essay
Shortcomings of Malthus’
population theory
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Did not account for improvements in
agricultural technology
Did not account for contraception
Confused the desire to engage in sexual
activities from the desire to have
children
Other economic contributions
of Malthus
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Endogenous theory of money
Opposite of Quantity Theory of Money
Rising prices are followed by increases
in the quantity supplied of money, not
caused by increases in the quantity of
money
Other economic contributions
of Malthus (continued)
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Ideas on international trade
At first, was against the Corn Laws
(1814)
Then, favored them (1815) – they could
keep Britain self sufficient in food
production and not dependent on other
countries and international politics
Other economic contributions
of Malthus (continued)
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Opposition to Say’s Law
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Supply Creates It’s Own Demand
Malthus believed that economic crises were
characterized by a general excess supply
caused by insufficient consumption – like
Keynes’ notion of business cycles
His defense of the Corn Laws rested partly on
the need for landlord consumption to "make
up" for shortfalls in demand and thus avert
crisis
Other economic contributions
of Malthus (continued)
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Malthus’ theory of rent
Rent is not a cost of production, it is merely a
deduction from the surplus
Rent is due to three facts:
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agricultural production yields a surplus
the wage-fertility dynamics guarantee that the
price of corn would remain above its cost of
production
that fertile land is scarce.
Rent is price determined, not price
determining