Thomas Malthus: a clergyman who had strong beliefs in political economy and philosophy. He wrote an essay on the Principle of Population.

Transcription

1 Malthus and Population/Essay Thomas Malthus: a clergyman who had strong beliefs in political economy and philosophy. He wrote an essay on the Principle of Population. The Perfectibilists believed that huge technoligical advances would rid society of poverty, disease, war, and social conflict. Malthus used his essay to critique their beliefs, stating that those ideas were too far fetched and idealistic. His theory was that production of food and the poverty level would always reach equilibrium, and that there would always be some level of poverty. Malthus's Postulates and Their Implications 1. First Postulate: Population Tends to Grow Geometrically It follows the mathematical/exponential pattern: 1, 2, 4, 8...Every population follows this pattern however depending on how the society is run the population may either increase or decrease. 2. Second Postulate: Agricultural Output Tends to Grow Arithmetically Arthmetic Pattern: 1, 2, 3, 4...Because of the massive population, food becomes scarce. Malthus believes that because of this more poverty is created. He believes that as a result the population will naturally decrease (fewer children being born, elderly dying earlier, etc.) creating an equalibrium between population and food production. 3. Third Postulate: Checks to Population Preventive checks or Positive Checks: Either choose to not have children, or wait till marriage to have children making there a limit of time to have children. Or you can continue to increase the population and therefore more people will starve because of the lack of food supply. 4. Forth Postulate: The Majority of Humanity Must Always Live in Misery Doesn't have hope that the population will decrease enough to eliminate poverty all together. 5. Fifth Postulate: Demographic Equilibrium

2 Once the population decreases = more food more jobs etc. the population will rise again until it reaches equalibrium. 6. Sixth Postulate: Malthus's Critique of the Poor Laws With Poor Laws everything is provided therefore the poor have more children but don't have work. Malthusian Logic Marx criticizes Malthus saying that we should amend his postulate to say that every society has its own law of population growth, which must correspond to its own productive powers and system of social distribution This then poses the question: "What happens to Malthus's critique of the Perfectibilists?" He says that maybe they will solve the population problem by solving the production problem, creating a stable population with low fertility and mortality rates. This would prove to make what Malthus claimed to be an "unrealistic utopia" to be successful. Population Growth, Economic Growth, and the Demographic Transition Malthus' predicted patterns of how population would result from changes in standard of living, food supply, etc. have not proven to be true in the real world: -When society shifts from low-tech and low-productivity to high-tech and highproductivity the standards of living rise, causing mortality rate to drop and birth rate to rise, resulting in an increase in population. (Population does not grow geometrically) -The world in fact does not suffer food shortages, but rather does not effectively distribute food. Technological advancements have allowed us to increase food production. (Population will not surpass food supply) Populations always reach demographic equilibrium at high standards of living. This balanced population is capable of producing more than enough food to sustain itself through new technology. Ricardo's Labor Theory of Value David Ricardo: began as a stockbroker who later took up economics -his Labor Theory of Value highly influenced Marx

3 Unlike Smith who thought value should be determined by a product's exchange on the market, Ricardo believed the value of reproducible goods is determined by the amount of labor needed to make them -complex forms of labor can be broken down into standard units -value should be independent of variations in wages Labor Theory of Value was used to compare trade between nations -value holds within countries but not between countries The Quantity-of-Money Theory of Prices Prices are dependent on the quantity of gold in a country -Ex) If quantity of gold increases but the quanitiy of goods remains constant, prices increase -prices can be compared relative to the wealth of the nation -gold prices of goods + volume of goods = total value Contradicts Labor Theory of Value -according to Labor Theory of Value, workers produce the same amount of relative profit -Yet this is not the case. Profit rates vary depending on the industry. "Invariable Standard of Value" -- a product that is always produced with the average amount of capital per worker and has a value determined by the production labor -Ricardo never found a product that fit these criteria Accumulation and the Stationary State Ricardo builds on the labor theory of value and states that it determines the whole value of the commodity (on average over the whole society) and divided between wages, profits, and rent depending on the theory of distribution. As long as the profit rate is positive, the capital accumulation will increase the stock of capital, demand for labor, and the population. This growth will only stop when the population on land causes the rate of food prices to get so expensive that there is no profit made. This is called the stationary state.

4 The Corn Model Since capital and labor can move freely (found anywhere) in any country, Ricardo stated that land was not as important. If there are higher wages in a certain place, more people will move there to work because they are being paid more and can make a living. But then, as the population in that area increases, wages will go down because there is too much labor. Therefore, in the end it balances out because the people will no longer be able to afford to live there and will eventually move to another region. He uses the equilibrium corn wage and it becomes his natural wage. Both Malthus and Ricardo assume that most of the population in the country are agricultural workers. The amount of capital going into the wages ("wage fund") determines the number of workers, and this in turn determines the population of the country and the demand for food. Rent-Explained In Terms of Corn Fertile land will be of greater value than non-fertile land. The number of plots of land cultivated determines the number of workers employed in agriculture. "Marginal product of labor"-for every next one that you make, the profit will decrease. The less fertile land that a worker has to work on means that the output per worker decreases. It costs more to make the product on infertile land but it yields less product and costs less to buy it. As the less fertile plots of land are cultivated, the total agricultural output of the country increases, Therefore, when new workers come in, all that is left is the infertile land. This is contradictory to Adam Smith's theory of the division of labor, which implies that output per worker will increase with a larger population--increasing returns to population. Rent cont. The amount you make and the rent must be equal to the wages that the worker gets for cultivating it. surplus product- what is left over after the full costs of production, including the reproduction of labor force, are deducted. Rent must be set just high enough to make the profit rate on the plot of land equal to the profit rate on all the other cultivated plots on industrial capitalist production. Rent is "differential" because it depends on the relative fertility of the landowner's plot to the marginal plot of land. The marginal, or the lowest fertility land, gets no rent. This land could be used to grow corn but its product would be too little to provide a capitalist with a profit rate

5 after she has paid workers at natural wage, therefore it would be pointless to cultivate marginal land. However, if the profit rate decreased then the land would become profitable. Ricardo's theory of rent implies that as population expands, bringing less fertile land into cultivation, the rent of the already-cultivated land will rise. The owner of the marginal land that previously had zero profit can now make a profit. Marginal Land and the Profit Rate Because the marginal land yields no rent, the surplus product on the marginal land determines the profit rate in the whole economy. Ricardo, like Smith, believe that competition will eventually equalize profit rates in different parts of the economy. Therefore, the profit rate of capital invested on infertile land will equal the profit rates on other lands and equal profit rates in other industrial production. Since population determines the marginal land in cultivation, the profit rate in the economy as a whole has to change. Accumulation Smith, Malthus, Marx, and Ricardo all believed that the working class consumed their wages in the process of reproducing themselves. Ricardo believed that all the saving and capital accumulation in the society was attributable to capitalists because they saved all their income If profits are saved, there will be more demand for labor the next year and population and labor force will increase. Therefore, there will be more less fertile land. Effect of capital accumulation is to increase population, food output, and agricultural labor force-->increase total rent but lower rate of profit on marginal land. Over time, profit rate and amount of profit will reach zero. The Stationary State Stationary state- Ricardo believed that capital accumulation will eventually bring about its own demise and eventually the rate of profit will fall to zero and accumulation will cease. In order for socialism to arise capitalism must arrive and then fall for it to work. Foreign trade and technological progress will keep foreign trade alive. -Foreign Trade-What one country lacks can be gained from another Technological progress- less laborers and therefore more bang for your buck.

6 Ricardo's views on Machinery Immediate effect would increase productivity of labor, which makes commodities cheaper benefits capitalists depending on mechanized expensives the more pricey the less chance of success If capitalists benefit too much it could offset the need for workers