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Barber, W.J. (2009), A history of economic thought

Elaborations and Cleavages within the Classical System:
Thomas Robert Malthus

 He played an important role in the classical debate

 He wanted to implement standardized definitions regarding
economics (more on the subject in his book: Definitions in
Political Economy) since the public was confused with the
research papers (not his main interest)
 He wanted to place the economics on empirical foundation
along with its deficiencies in statistical data and theories
 After 1815: a big boom in reanalysing economic theories since
world-wide events affected the world market

Thomas Malthus
 “The best-abused man of his age”- his biographer
 Distinguished academic record in College, studied mathematics
 Interested in the practicality of the current theories, not
 Academic career: Cambridge – Professor of Modern History and
Political Economy; no precedent => world’s first professional
 Fame: Essay on the Principle of Population (1798), appeared
anonymously due to possible controversies (he was a
clergyman at the time); he conversed with William Godwin
(whose theories he criticised in the essay)
 Good reception => 6 more editions, ending in 1826
 Census in 1801 => the population grew substantially
 Gregory King, the pioneer national income statistician:
predicted in 1696 that the population in England would be
unlikely to double in the next 600 years => slow population
 Malthus: good friend with Ricardo

The Law of Population

 The idea started from an argument between Malthus and his

father regarding the ideology of Godwin, which stated that
more people equals more happiness and that the common
food resources were enough to feed the whole population. As
such, Malthus wrote the document The Law of Population to
refute Godwin’s utopian thinking.
 Two fundamental principles:
1. That food is necessary to the existence of man
2. That the passion between sexes is necessary, and will
remain nearly in its present state
 The population is growing much faster than the food
production (geometrical ratio compared to arithmetical ratio),
hence a clash between them since the population couldn’t
grow without the necessary output of food
 How to slow the reproduction:
1. more workers => cheap labour + rise in food prices =>
more necessary work for the same amount pf food =>
discouragement for having a family => slow population
2. cheap labour => more cultivated land + usage of
fertilizers => the same ratio of resources required for
the population to live without overpopulating, like in
the past
 More reproduction checks (positive and preventive)
1. Positive: population reduced by war, famine,
pestilence, plague or disease
2. Preventive: prudence, foresight
 Meanwhile, mankind was suffering: large labour force => any
improvement in the level of income would go back to the
subsistence level (considering that even kids worked, not just
adults) + just in the 1st edition
 As such, Malthus has been interpreted as converting Smith’s
analysis in the “Wealth of Nations” into an analysis about “the
poverty of nations”
 But, from the 2nd edition => 2 interpretations of subsistence:
1. Physiological requirements for survival
2. Psychological version: the minimal acceptable level of
income that a potential parent would want before raising
a family
 Malthus believed that the changes affecting the population
would develop over time, hence 2 long-term alternatives:
1. Rapid increase in population => high wages used for
large families
2. Less increase in population => more conveniences
and comfort
 But, because of this mild approach (compared to the 1st
edition’s harshness), his recognition started to fall + lack of
empirical evidence
 Still, the critical economists recognised the idea that real wages
would be stable at a fixed subsistence
 Malthus: real income increased => more early marriages and
births increased; the booming of the population due to the
reductions in death rates due to the improvements in public
health and sanitation.
 Malthus underestimated the technological progress, fertility
limitation, agricultural changes which could bring more food
output + not appreciating international trades (even though
this saved Britain from the Malthusian danger in the 19th
 Even so, it was hard for Malthus to predict these changes in his
of time (for ex: the potato famine in Ireland in 1840 resulted in
2.5 million deaths)
 In the Western countries, Malthus’ theory doesn’t hold too
much meaning since their findings show many variables
regarding the relationship between the human reproduction
and food production; but, they agree that they can be applied
to poorer countries due to the backward agriculture, lack of
contraceptive techniques and reduced mortality rate (thanks to
public health) which are related to Malthus’ warnings

The Malthusian Analysis of the laws of production in agriculture

 Malthus’ theories required further analytical inspection,

especially his agricultural ideas, hence the need to demonstrate
why food supplied could not be expected to expand more than
the people
 From this he developed the “law of diminishing return”, a
concept which was discovered by 3 other economic theorists at
the same time: Ricardo, West and Torrens
 In the present, the concept means: if all the production factors
save one are held constant, then the successive addition of
more factors would lead to a diminishing value
 As for Malthus, he proposed a three-fold representation of the
origins of the rent: that the fertile grounds could yield more
food than the employed people’s needs, that the supply for the
yield would meet the necessary demand and that the fertile
grounds were scarce, either natural or artificial ones
 The third idea offers the more insight since it entails a whole
process: bigger population => bigger demand for food =>
agriculture extended to the less fertile ground to meet the
demand => more production costs on the non-fertile land =>
benefits for the owners of the fertile grounds since they can
raise their rents
 Thus, Malthus was in favour of more technological progress in
the agriculture sector, even though there were still diminished
returns => he thought that the landlord was important, unlike
 Like the other classical economists, Malthus thought that the
“diminishing returns” could be applied only for agriculture
production, not for something like manufacturing where the
factors of production could be multiplied indefinitely, unlike
agriculture + the returns (profits) of the capitalists were
diminishing => a raise in food prices and rent
 As such, Malthus challenged the Wealth of Nations in this
matter since he discovered this contrast: while Smith had
viewed the rent as an unearned income from the bounty of
nature, Malthus emphasised that, due to the limited fertile
lands, the agricultural output growth had to be regulated in
order to maintain the fertility

Malthus and the Law of Markets

 Malthus wasn’t interested only on the relationship between

the population and the agricultural productivity, he also
researched the ‘self-adjusting’ properties of the markets, but in
a different manner compared to other classical economists
 Concept started from Say
 Say’s Law: (1) Products are given in exchange for other
products; (2) Goods constitute the demand for other goods
 (1) Money = medium of exchange for goods, as a catalyst for
commerce; worth acquiring as an asset
 (2) = Supply creates its own demand; from the whole
economy’s perspective, not just individual firms
 Say’s Law ruled out the ‘general over-production’ situation
 Resulted conclusion: all income was spent and none being kept
or hoarded (the normal logic at that time, except for the
mercantilists who thought it was socially beneficial)
 Other situation : ‘partial over-production’ = not all the output is
sold => other merchants win more => all income was spent on
either consumption goods or investment goods
 As such, the possibility of transferring the labour to the bigger
sellers => self-adjusting mechanism
 Malthus disagreed since he knew the aftermath of the
Napoleonic Wars: difficulty of disposing products,
unemployment => 1.5 million registrants for parish relief
 A strange counter-argument: Malthus attempted to use his
ideology regarding the relationship between the population
growth and the food growth in the contrast between non-
essentials and capitalists (the first one created its own demand
while the second one depended on the tastes of the capitalists)
 Hence he believed that it was to society’s advantage for the
rich to employ jobless people and for the state to hire the poor
for public services and productive work since, after the war, a
lot of sailors, soldiers etc were left out.

Malthus and Economic Policy

 Malthus was separated from the classical economists on
different matters. For example, he defended the Corn Laws
while his colleagues preferred free trade (particularly in
agricultural environments); He was positive about the
government spending while the other thought of this as
unproductive expenditure
 He was supporting the incentive of expansionary food
production => high prices => high investment => less reliant on
imports => less vulnerable during war time
 Opposed to birth control => more responsible men and less
lazier => incentive for hiring idle labour => more land

 Even with all his abstract theories, he still adopted orthodox

 He attacked the Poor Laws since they put more pressure on the
food supply with helping in expanding it ( a lot of parish relief
=> less incentive to work + higher reproduction rate => more
competition for food)
 Harsh policies made from genuine concerns for the humanity
 Everything stemmed from the conviction that constraints on
the food production imposed limits that the people could
ignore at their own risk in exchange for material circumstances
Karl Mark