Question

6. Explain Thomas Robert Malthus’s theory of population. Why did he think it was an appropriate rebuttal to the revolutionary and egalitarian proposals of William Godwin? How was this theory used by the Classical Political Economists to explain the wages of labor? Elaborate.

Answer 1

Malthus stated that population increases ‘geometrically’ or exponentially and that subsistence increases arithmetically. Thus, population increases along the order of 1, 2, 4, 8, 16, 32..., whereas subsistence limps along at the rate of 1, 2, 3, 4, …. .

Malthus developed model of growth that can best be understood by thinking of Great Britain as a huge farm, of fixed acreage, confronted with a potential for rapid population growth. Such growth leads to an increase in the output of products, as more labor is applied to a fixed amount of land. But, although output does indeed grow, the increments to output grow at a declining rate due to the law of diminishing returns. Eventually population growth will lead to a situation where diminishing returns drive up the incremental output of additional labor down to zero—that is, at some point the addition of yet another laborer to a farm of fixed size yields no increase whatever in the output of food. At such a point, even though the working population receives no more than a bare subsistence wage, wage payments eat up—literally—the entire output of the economy. Further growth is impossible because no nonwage income is available for capital formation. The economy has arrived at a so-called stationary state, where population has grown to its maximum size and the bulk of the population is living at a bare subsistence level.

As can be seen in the above illustration, there are several factors at work:

1) in a situation of fixed resources, population growth directly affects consumption;

2) with capital as a fixed variable, the production per worker falls with the addition of each new worker—this is the classical law of diminishing returns;

3) an increasing population implies a population with a large base of children who are both consumers and non-producers—thus, less production per capita; and

4) at a fixed income, population growth will shift investment from savings and human-capital development to subsistence.