Thomas Malthus 1766-1834

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Thomas Malthus 1766-1834
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Historical Setting 1

• Corn Law Large tariffs on corn imports imposed
  after the French Revolution.
• Imports of French corn diminished to a trickle.
• Protection of domestic landowners.
• After Waterloo, expectation that corn imports
  would increase and Corn prices decrease.
• But the landlords succeeded in amending the Corn
  Laws to actually increase the tariffs.
• They argued that higher corn prices would
  encourage increased domestic production of corn.
  
• This was a very Mercantilist view and high
  domestic price of corn did result.

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Historical Setting 2

• Fears of declining population
• First official estimate of English population
  made by Gregory King, a cartographer,, in 1696.
• Estimated it at 5.5 million (slightly less than
  that of NC today).
• Used existing tax data to project that the
  population would grow very slowly over time.
• How slowly double in 600 years (2300 AD), and
  double again in 1200-1300 years (3500 AD).

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Historical Setting 3

• Poor Laws Collective set of set of
  redistributive measures to help the poor.
• Poverty on the rise, particularly because of
  large tariffs on corn imports under the Corn
  Laws.
• Unemployment high in early phase of the
  industrial revolution with the introduction of
  mechanization.

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Historical Setting 4

• Main elements of the Poor Laws
• Income guarantee program family income was
  linked to cost of living
• Income below the threshold triggers transfers,
  mainly from landlords, but also merchants.
• Transfers tied to number of children to boost the
  population.
• because there was concern that the population of
  England was on the decline.

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Historical Setting 4

• Debate on Technology (see handout) on
• Leeds Woollen Workers Petition, 1786
• Letter from the Leeds Cloth Merchants, 1791

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Intellectual Influence and Background 1

• Thomas, son of Daniel Malthus.
• Rich landowner.
• Friend of David Hume and Jean-Jacques Rosseau.
• Subscribed to the extreme views of William Godwin
  (1756-1836).
• Godwin believer in Anarchy.
• Father-in-law of the poet Shelley.

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Intellectual Influence and Background 2

• Anarchy extreme form of the doctrine of natural
  law, rejects authority of state and collectives.
• Godwin argued that the human race could achieve
  perfection based solely on reason.
• A perfect society would produce perfect people,
  and imperfections of society were due to private
  property, inequality of power and wealth, and the
  state.

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Intellectual Influence and Background 3

• In Political Justice (1793), he notes that in a
  perfect society there would no longer be a
  handful of rich and a multitude of poorThere
  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 resentmentin short, utopia.
• Godwin argued that there would be no population
  crisis, because reason will compel people to
  cease propagation.

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Intellectual Influence and Background 4

• The Marquis de Condorcet was another intellectual
  influence on Daniel Malthus.
• Arguing in favor of the perfectibility of
  humanity, he writes in the Sketch of Intellectual
  Progress of Mankind (1793) Equality among
  nations will abolish wars between nations.
• League of nations would maintain peace.
• Equality of individuals in wealth and education
  would eradicate crime.
• Championed the redistribution of wealth, and free
  education.
• Population would increase but food supply would
  increase even more.
• Else, use of artificial birth control would
  ensure the balance of food and population.

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Malthus Contributions

• Thomas Malthus rejected the inevitability, even
  the possibility of attaining such a perfect
  society.
• Heilbroner aptly describes his views as gloomy
  presentiments, in contrast to the utopian world
  of the Anarchists and natural law proponents.
• Two main areas of contribution
• Theory of Population
• Deficiency of Demand

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Theory of Population

• An Essay on the Principle of Population (1798)
  refutes the rosy view of Anarchists.
• Argues population increases in geometric
  progression
• Food supply grows in arithmetic progression.
• Binding food constraint will check population
  growth

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Theory of Population Preventive Checks to
Population Growth 1

• Preventive Checks curtail the birth rate.
  Advocated poor people should not marry, marry
  late, not have children.
• He disapproved of vice, e.g., prostitution and
  use of birth control, as a preventive checks.

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Theory of Population Preventive Checks to
Population Growth 2
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Theory of Population Positive Checks to
Population Growth 1

• Positive Checks famine, disease and wars would
  increase the death rate.
• Positive checks cast in a moralistic context as
  punishment for lack of moral restraint.

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Theory of Population Positive Checks to
Population Growth 2
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Policy Implications for the Poor Laws 1

• Malthus concluded that terrible events would
  follow if population increased, so policies
  should be followed to reduce the birth rate. See
  previous slide.
• He maintained that individuals did not have a
  right to subsistence, they would need to depend
  upon the beneficence of others. But this
  beneficence would exacerbate the population
  overload.

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Policy Implications for the Poor Laws 2

• At natures mighty feast there is no.

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Policy Implications for the Poor Laws 3

• He argued for the gradual removal of the Poor
  Laws.
• He maintained that they would only postpone the
  inevitable.
• Some examples of his proposed policies follow.

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Policy Implications for the Poor Laws 4
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Poor Laws Epilogue

• Months after his death, the Poor Laws were
  amended to make public assistance unbearably
  onerous, and were strongly stigmatized.
• Any analogy to the debate surrounding welfare
  programs in the US today?

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Deficiency of Demand 1

• Malthus feared that the capitalist system
  described by Adam Smith had a fundamental
  problem.
• It had a tendency to get into a recession, or, as
  he put it, a market glut.
• He noted that the glut would result as a
  consequence of insufficient effective demand.

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Deficiency of Demand 2

• Quesnays deep suspicion that saving would spell
  trouble for the economy shared by Malthus. Why?
• Total Spending C I
• National Production Total Income C S
• If the desire to invest is too low S gt I.
• Then Production gt Spending.
• Hence a general glut, or recession, ensues.
• Malthus argued that there was no mechanism
  available which would always ensure that Saving
  and Investment would automatically match.

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Deficiency of Demand 3 On savings and tendency
towards general glut

• The whole problem of the balance between Saving
  and Investment had been posed in the Preface to
  the book, as follows
• Adam Smith has stated, that capitals are
  increased by parsimony, that every frugal man is
  a public benefactor, and that the increase of
  wealth depends upon the balance of produce above
  consumption. That these propositions are true to
  a great extent is perfectly unquestionable.

Excerpted from J.M. Keynes, Robert Malthus,
Essays in Biography, Mercury Books, London1961.
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Deficiency of Demand 4 On savings and tendency
towards general glut

• But it is quite obvious that they are not true
  to an indefinite extent, and that the principles
  of saving, pushed to excess, would destroy the
  motive to production.
• If every person were satisfied with the simplest
  food, the poorest clothing, and the meanest
  houses, it is certain that no other sort of food,
  clothing, and lodging would be in existence....

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Deficiency of Demand 5

• The two extremes are obvious and it follows that
  there must be some intermediate point, though the
  resources of political economy may not be able to
  ascertain it, where, taking into consideration
  both the power to produce and the will to
  consume, the encouragement to the increase of
  wealth is the greatest.

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Deficiency of Demand 6 Policy Implications

• Encourage Unproductive Consumption He provided
  his argument by looking at the division of
  income, and argued that
• Workers earned and spent at subsistence. They did
  not save or dissave.
• Profit earners would consume little they were a
  thrifty lot. Yes, they would spend their saving
  on investment, but investment would be profitable
  if ultimately there was demand for consumption
  goods.
• Since workers did not consume much, who was to
  provide the stimulus to consumption? The
  landowners. They had little incentive to save,
  and the more they spent, the more they made up
  for the lack of spending by profit-earners. In
  fact, he called upon them to consume more than
  they produced, i.e. to dis-save.

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Deficiency of Demand 7 Policy Implications

• He called spending by Landowners unproductive
  consumption.
• He thought of landowners as residual claimants
  who were not themselves a productive class.
• To Malthus, this type of expenditure was critical
  to the success of the market system and many of
  his policy positions reflected this sentiment.
• Thus, he favored the Corn Laws which would
  increase Landowners incomes and, therefore,
  spending.
• He favored the lavish lifestyle led by the
  landlords, favored public works projects like
  building of bridges and roads.

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Deficiency of Demand 8 Policy Implications

• Fiscal Policy
• John MaynardMalthus!

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Relationship with David Ricardo

• His long and affectionate relationship with David
  Ricardo is well known. In every important aspect
  of personal life, they were opposites. On each
  important question, they were on the opposite
  sides of the issue.
• This is how Keynes sums up his views on their
  rivalry
• One cannot rise from a perusal of this
  correspondence without a feeling that the almost
  total obliteration of Malthuss line of approach
  and the complete domination of Ricardos for a
  period of a hundred years has been a disaster to
  the progress of economics.
• See handout for the correspondence between them.