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Malthus, An Essay on the Principle of Population, as it Affects the Future Improvement of Society with Remarks on the Speculations of Mr. Godwin, M. Condorcet, and Other Writers, 1st ed., 1798 . First principlesFood is necessaryPassionPopulation, when unchecked, increases in a geometric ratio1, 2, 4, 8,
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1. Ricardo & Malthus: Welcome to the Dismal Science
David Ricardo, 1772 1823
Stockbroker/Dealer
Abstraction ? Economic Science
Championed capitalists
Opposed Corn Law
Advanced Says Law
Major contributions
Differential rent
Labor theory of value
Theory of distribution
Comparative advantage
Thomas Malthus,1766 1834
Parson
Intuitive approach/preacher
Championed landlords
Favored Corn Law
Advanced Theory of Gluts
Major contribution
Law of population
2. Malthus, An Essay on the Principle of Population, as it Affects the Future Improvement of Society with Remarks on the Speculations of Mr. Godwin, M. Condorcet, and Other Writers, 1st ed., 1798 First principles
Food is necessary
Passion
Population, when unchecked, increases in a geometric ratio
1, 2, 4, 8,
[25 year doubling time]
Subsistence increases in an arithmetic ratio
1, 2, 3, 4,
Subsistence checks population
Positive checks: Vice, Misery War, pestilence, famine
Preventive check: Moral restraint
Law of Diminishing Returns
in proportion as cultivation is extended
additions to average produce must be gradually and regularly diminishing
3. From An Essay in Population
Famine seems to be the last, the most dreadful resource of nature. The power of population is so superior to the power in the earth to produce subsistence for man, that premature death must in some shape or other visit the human race. The vices of mankind are active and able ministers of depopulation. They are the precursors in the great army of destruction. But should they fail in this war of extermination, sickly seasons, epidemics, pestilence, and plague, advance in terrific array, and sweep off their thousands and ten thousands. Should success be still incomplete, gigantic inevitable famine stalks in the rear, and with one mighty blow levels the population with the food of the world.
to better the condition of the laboring classes [we should cultivate] a spirit of independence, a decent pride, and a taste for cleanliness and comfort. The effect of a good government in increasing the prudential habits and personal respectability of the lower classes
will always be incomplete without a good system of education
The benefits derived from education are among those, which may be enjoyed without restriction of numbers; and, as it is in the power of governments to confer these benefits, it is
their duty to do it.
Why no apocalypse? What did Malthus miss?
4. The Dismal Science of David Ricardo
Ricardo offers us the supreme intellectual achievement, unattainable by weaker spirits, of adopting a hypothetical world remote from experience as though it were the world of experience and then living in it consistently. With most of his successors, common sense cannot help breaking in with injury to their logical consistency.
John Maynard Keynes, The General Theory of Employment, Interest, and Money
Ricardo, The High Price of Bullion, 1810
Traced wartime inflation to emissions of paper money.
Regulate paper currency (so its value corresponds to its gold content
Stick to metallic money
Ricardo ? Currency School ? Monetarism
Ricardo, Principles of Political Economy and Taxation, 1817
5. Ricardos Theory of Distribution Differential rent: rent built up from zero-rent margin
As push out to worse and worse land, owner of better land command bigger and bigger premiums (rents)
Extensive margin / Intensive margin
Wages ~ (socially determined) subsistence
Malthusian Law of Population ? Iron Law of Wages
Poor Law (Speenhamland System) only increases number of poor but does not improve their well-being
Dole (wage subsidy) ? Population growth ? Lower wage ? Dole
Profits ~ equalized and eliminated by competition
Diminishing returns ? Profit squeezed as economy grows
Ricardos Labor Theory of Value: Production of commodities by means of commodities (Pierro Sraffa)
In market economy, labor is a commodity
6. Ricardo: Value, Distribution, and Growth
7. Ricardo: Value, Distribution, and Growth
8. Ricardo: Value, Distribution, and Growth