Question

David Hume articulated an “Iron Law of Wages” whereby if the market wage rises above the subsistence wage, the population increases and wages fall back to their subsistence level. Was David Hume’s Theory of wages consistent with Thomas Malthus’ theory of wages? Why or why not? (typed, 3 paragraphs)

Answer 1

the iron law of wages articulated by david ricardo is consistent with the theory of wage given by thomas malthus. malthusian theory of wage is from the population point of view and ricardos wage rate that is the subsistence wage theory is also based on population, labour supply and labour demand so both the theories in general talk about the same thing.

malthus in his theory stated that when wage rate is high people tend to enjoy a luxurious life and they start to have more children. this practice will make the popyuation in the country to rise and then the competitiveness among people for job will rise. as the labour supply increase the wage rate will decline and will come back to the subsistence level. on the other hand when the wage rate is below the subsistence level, people starve for food and they will not indulge in producing more children. this will make the population rate to go down and this will in turn decrease the supply of labour in the economy. the wage rate will rise to the subsistence level again. as described by ricardo the wage rate will always follow the subsistence level in the long run no matter wahat so that is why its called the iron law of wages.

as both the theories are talking about the wage rate from the population point of view and that the demand and supply of labour plays a great part deciding the wage rate, both the theories are consistent with each other explaining why the wage rate will always be at the subsistence levle in the long run.