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week 1: 2. classical school (1776-1871): Thomas Malthus (Discussion Thomas…
week 1: 2. classical school (1776-1871):
Thomas Malthus
Thomas Malthus (1766-1834)
Professor East India College (1805)
Works:
Principles of Political Economy (1820)
An Essay on the Principle of Population (1798)
Attended Cambridge
Population growth 1.
Historic setting:
•Unemployment and poverty
•Corn Laws
Tension between growth of population vs food
•Population growth follows geometric series:
1, 2, 4, 8, 16, 32
•Food growth follows arithmetic series:
1, 2, 3, 4, 5, 6
→first mentioning of diminishing returns
Natural growth rate of population must be kept down to rate of food growth
Population growth 2.
Mechanism: economic growth --> population growth food shortage-->more people living in poverty starvation and fewer births-->balance population and food supply
-->very pessimistic view!
Mechanisms to keep population growth down:
Preventive checks --> reduce birth rate ‘Moral restraint’, not ‘vice’
Positive checks-->increase death rate Famine, disease, war
Theory of market gluts 1.
Potential insufficiency of effective demand:
Capitalists remain profit = productivity – wage
Workers receive subsistence wage
Workers cannot buy back total output
Capitalists only concerned with creating fortune
→Landlords should consume to avoid glut of good on market and hence prevent market stagnation and unemployment (spending creates effective demand without adding to production costs!)
Discussion Thomas Malthus today:
+ Theory of gluts showed awareness of problem that lack of demand could lead to unemployment
→Keynes later built on that in 1930s
+ Population theory
→Many people worldwide live in poverty
- Population to subsistence growth rate overrated
→Population growth below prediction, and food production increased faster
- Diminishing returns to food production
→Technological innovation and capital accumulation led to more food production with fewer workers
Economic policy
Population theory
:
•No government relief to the poor (Poor laws, 1834) →make people have fewer children
Theory of market gluts
:
•Prevent abolishment of Corn Laws (no free trade) →enrich land owners, avoid stagnation