Ricardo and Malthus were two economists in the early 19th Century, who participated in academic discussions...

Ricardo and Malthus were two economists in the early 19th Century, who participated in academic discussions on various subjects. One subject they disagreed on was, the most likely way, the profit rate may go down in a capitalist economy, which would potentially end the growth of the output level within the system. According to Ricardo, the profit squeeze is the most likely way. For Malthus, growth rates are likely to go down because of a demand shortage. How do Ricardo and Malthus describe their views? Compare Ricardian and Malthusian Models described above. Do you think one of these two potential problems, mentioned by Ricardo and Malthus is more critical than the other? Do you think both are critical, or none of them is critical? Explain your answer.

Expert Solution

The views of both Ricardo and Malthus are entirely different. Where Ricardo advocates capitalism and Malthus has a more socialistic view.

Ricardo emphasizes on profit maximization and Malthus on increasing the per capita income which will led to the well being of the working classes.

According to Ricardo if two strong nations help each other in exporting those goods which are produced in abundance in each country can help each other. Malthus debate was increase in output will help increase in the population.

Ricardo's theory has a major assumption that capital and labor cannot be moved internationally. Which kills the purpose of being a capitalist country. Capitalist economies are always ready to move capital outside the country to maximize profits;

Capitalist economies focus on profit maximization. These countries are in abundance of cash flow, due to which the interest rates are less compared to the developing countries. As such, these economies try to invest in other developing economies to increase the returns and maximize profits. It will not decrease the profit rates.

There are ideological differences between Ricardo and Malthus. Capitalist society does not provide opportunity for equal distribution of wealth among all the classes of the society. Socialist believe that distribution of wealth is necessary for an economy to grow.

Both the theories are critical one is based on increasing output and returns and the other is focused on how to prevent growth of population so that the output and demand are in place. Profit maximization is important so is population control.

Rahul Sunny answered 1 year ago

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