Question

1. What is Thomas Malthus’s theory of glut? Why did Malthus support the “corn law” while Ricardo opposed it?

Answer 1

The Malthus theory of glut also known as the theory of deficient demand, meaning their by that there could be possible for the demand of goods and services to be less than the supply, In results the goods piled up in the market and a general glut will ensue,which leads to the problem of unemployment ultimately. To this situation, Malthus said that the cost of production should be equal to the income of various classes in the society. He ignored the rent and examined the value of production as wages plus interest plus profit.

The Corn Laws were trade laws designed to protect cereal producers in the United Kingdom of Great Britain and Ireland against competition from less expensive foreign imports between 1815 and 1846. Malthus supported them because By raising the price of corn, rents would increase and this would shift income to landlords. They would then buy up all the extra goods the capitalists had left idle by saving too much and the problem would be solved.

However, the views of Ricardo were contrary to the Malthus, he said that with the increase of population and capital accumulation, the prices of agriculture will fall and subsequently the farmer will shift to the less productive land which in results lead to decline in the rates of profit for agriculture in the economy.