On Malthusian Theory of Population

This post revisits ‘An Essay on the Principle of Population’ written by Thomas Malthus in 1798. In my last post I briefly touched upon his population theory. Unfortunately, mainstream economics textbooks mention Malthus only for his ‘bad’ population theory. His other significant contributions like Differential Theory of Rent, his theory of money, his questions about the validity of Say’s law, etc are conveniently suppressed.

First, I would like to discuss why his theory is ‘good’ and then I would like to show how Malthus is viewed, interpreted and treated by various economists and students of economics.

Economics as viewed earlier and as viewed now (by a few) was a discipline which tried to understand the society (now known an economy) and also to come up with solutions for the problems that persist. His Essay ‘was the first serious economic study of the welfare of the lower classes‘ during his times. He was also a clergyman who wanted to make the society perfect.

His two postulates were that ‘food is necessary to man’ and that ‘the passion between the sexes is necessary and will remain nearly in its present state’. [Malthus 1798] Now we know that the first is a true premise and the second one is believed to be a law of nature. So, there are no issues with both his postulates. He also refers to these postulates as ‘laws of nature’.

Ceteris paribus, population growth will outstrip food growth. He also gives additional insights as to how population growth will necessarily be checked. His thought experiment based on the ‘true’ premises is therefore valid. At this juncture, one needs to understand the underlying assumption of diminishing returns to agriculture. Once this is understood, there is no reason to call his theory ‘bad’.

How can such a theory be useful to the society’ It brings to the fore the need for improvements in agriculture through technological advances, so that food production can be increased. (Assuming increased food production implies lesser hunger, but Amartya Sen proved otherwise. But it is necessary to have sufficient ‘food’ to feed society) Family planning is undertaken so that no child goes hungry apart from other reasons. Such checks are welcomed by all. Also, they indirectly draw from Malthus- the need for all people to consume food. However, checks like the Chinese one child policy create social problems on a massive scale.

It is amazing that even when his theory is viewed in isolation (from his other works), it still holds good! With progress in education (school children get introduced to a lot of theories and facts at an early age) theories like Malthus’ seem obvious and hence pointless. This also reflects the way theories are taught in schools and colleges. Very often, the context of the theory is left out. Corn Laws, the then predominant Ricardian theories, etc are very often not mentioned or discussed.

Now, I shall put forth two different views on Malthus, the economist.

1)

In this famous work, Malthus posited his hypothesis that (unchecked) population growth always exceeds the growth of means of subsistence. Actual (checked) population growth is kept in line with food supply growth by “positive checks” (starvation, disease and the like, elevating the death rate) and “preventive checks” (i.e. postponement of marriage, etc. that keep down the birth rate), both of which are characterized by “misery and vice”. [Source] (Note the mention of (unchecked))

2)

Malthus believed that population would increase at a geometric rate and the food supply at an arithmetic rate.

Malthusian population theory was eventually dismissed for its pessimism and failure to take into account technological advances in agriculture and food production. [Source]

Conclusion

How should theories be taught’ By this post, I only intend to question the current teaching and understanding of Malthus’ theories. Also, I wish to stress the importance of understanding and studying the ‘context’ (historical, political, social, cultural,etc) of a theory.

Now, economists (positive economics) are busy using scientific methods so as to universalise theories rather than provide solutions to hunger, poverty, unemployment and other socio-economic problems.

To sum up, Malthus stressed on the need to keep population and food production in such a way that everyone would be fed. I believe that this still holds true across the globe as one of the main concerns of economics.

Further Reading

1) 1) 1) Darwin and Malthus

2) 2) 2) Is India falling into the Malthusian trap’, C. J. Punnathara, The Hindu Business Line, April 9, 2008.

3) 3) 3) Malthus, the false prophet, May 15th 2008, The Economist.

4) 4) 4) The International Society of Malthus (further links from the society)

5) On GM Food and GM Mosquitoes

Economics Education: The Indian Context

Economics is viewed in most schools, colleges (Management institutes as well) and universities as a monolithic enterprise. It comprises mainly Microeconomics and Macroeconomics and uses Econometrics and Mathematical Economics as tools to understand the economy. Interestingly, tools like philosophy, history, sociology, anthropology lie forgotten. Or probably they are not viewed as tools anymore. Or they are not scientific enough!

This post deals with the dominant perception of Economics within India and how these perceptions adversely affect the spirit of economics in particular and of scientific inquiry in general.

Courses like History of Economic Thought are extended to include Classical Political Economy, Marxian Economics, etc. They are taught as outdated ideas and not as relevant approaches in understanding the economy. This is visible from the responses of students when works of Adam Smith, David Ricardo, Karl Marx etc are mentioned. I shall discuss Malthus in this post and in the next post, I shall discuss some of the theories of Marx.

Unfortunately, Malthus is known only for his ‘bad’ population theory. Interestingly enough, all that Malthus [1798] said was ‘that population, when unchecked, increased in a geometrical ratio, and subsistence for man in an arithmetical ratio.

Let us examine whether this position be just. I think it will be allowed, that no state has hitherto existed (at least that we have any account of) where the manners were so pure and simple, and the means of subsistence so abundant, that no check whatever has existed to early marriages, among the lower classes, from a fear of not providing well for their families, or among the higher classes, from a fear of lowering their condition in life. Consequently in no state that we have yet known has the power of population been left to exert itself with perfect freedom.‘ (Italics added)

Such an argument is what philosophers of science classify as a ‘thought experiment’. But mainstream economists classify this as a theory which has provided wrong predictions.

Thought experiments are devices of the imagination used to investigate the nature of things. And in our own time, the creation of quantum mechanics and relativity are almost unthinkable without the crucial role played by thought experiments. [Brown 2007] If one were to discredit and disregard Malthus’ theory, then there is no reason why the theory of perfect competition should be considered in Economics at all. The issue is that, there is hardly any work being done in methodological issues pertaining to economics and on the structure of a good economic theory, therefore one definitely needs to consider each and every theory in its own context. By context I refer to the historical background and the general argument that is being put forth.

Philosophical debates within Economics are very essential for the growth of both the disciplines, but more significant for economics. Methodological and epistemological issues are not commonly discussed in economics. This is very necessary because economics, economists and economies are ever growing in importance. Their policies have far reaching effects. And if they are not constructed in the right spirit, the objectives of the policy might not be fulfilled at all. The Indian budget 2008-09 is one such example. None of the Indian universities have a course pertaining to the Philosophy of Economics in its Masters’ courses. This shows the importance it has received vis-a-vis econometrics and game theory.

Also, economics claims to be a science and Professor Peter Englund, Secretary of the Economics (Nobel) Prize Committee thinks so as well when he says ‘In all relevant respects the committee understands and treats economics as a field of science.’ I see it as a shirking away of economics from questioning itself- its methodology and its knowledge.

It is primarily this attainment of a scientific nature by mainstream neoclassical economics that is bringing doom to the people constituting the economy. The present analysis in mainstream economics is not only ahistorical but also asocial. Economics needs to understand its origins and its epistemology. It ought to be a pluralistic enterprise. And let theoretical anarchism prevail because ‘it is more humanitarian and more likely to encourage progress.’ [Feyerabend 1975]

Budget 2008-09: Whither Indian Economists’

Almost a month has passed since the Budget was announced. The media has stopped discussing loan waivers. Economists are done with their write ups on the same as well. I guess it is no more glamorous or more pressing matters might have cropped up. This post discusses some of the concerns relating to the loan waiver which had been voiced by the media and my concern for economics in general and economists (associated with policy making) in particular.

P. Sainath says that ‘The UPA government’s waiver is no solution to even the immediate crisis let alone long-term agrarian problems. Nothing in this budget will raise farm incomes.‘

Satish Nandgaonkar writes in The Telegraph that the loan waiver was unjust because ‘the waiver helps only if the loan has been taken from a government-backed institution, but most farmers in Vidarbha borrow from moneylenders at the start of the sowing season to buy seeds.‘ Didn’t the economists behind the budget know this’

The economist from Harvard, P. Chidambaram said that ‘loan waiver will strengthen banking.’ I had thought that the loan waiver was targeted at the farmers in India! But then, the FM talks about growth quite a lot and how it is the only fast remedy to poverty. I wonder what growth he refers to!

Gurcharan Das thinks that the loan waiver is immoral as it ‘wounds that moral universe. It tells the farmer not to bother to repay his next loan, because, who knows, another party will be in power and it too will cancel his debts. What message does this send to the honest village woman who struggles every week to repay her micro-loan’‘ He has brought in the ‘moral’ angle to the loan waiver. It is interesting because, the government frames laws and establishes morality which is then modified by the civil society. The concern should be whether the loan waiver achieves its objectives or not.

Mutiny.in does not question the FM’s ‘economic sense’ and goes on to say that ‘but, burdened no doubt by political considerations, the Finance Minister has made this unabashedly populist announcement.‘ Populist-in what sense’

‘India cancels small farmers’ debt’ says the BBC. It also has a picture of a representative small farmer. I wonder whether the objective of the waiver was to help the small farmers at all. The rationale behind the waiver is debatable. It has not fooled the public therefore it won’t help in the elections. It has done nothing to resurrect the farmers in distress.

According to Business Standard, the present budget is evidence for politics winning over economics. The author(s) have not studied anything but neo classical economics. Their notion of politics and economics as distinct disciplines is quite scary. This is where Classical Political Economy aids. They do not view economics as an independent arena. For them, it is very much a part of politics, society, etc.

India Today describes the budget as ‘Bad politics bad economics‘. According to me, this is the best description of the budget.

The Indian Government consults famous economists who have been trained abroad and in India and also has talks with various eminent economists. Have they suggested ‘wrong’ policies’ Or is that the Government decided not to accept their policies’ To make such ‘loan waivers’, one does not need an academician.

Economists like Keynes, Smith, Ricardo, etc wrote ‘economics’ books not for fame or money but to help their respective economies. They studied economics to rectify the problems that existed then. Though a lot of research papers and articles are being published by Indian Economists, none of them seem to help the people of India. What are economists doing these days’

Is any 'economics' being taught’

Prices- how are they formed’ Economics fundamentally is concerned with the theory of value; wherein prices play a crucial role. Does the mainstream or marginalist (neoclassical theory) explain the formation of prices’ In equilibrium, the forces of demand and supply interact to give the equilibrium prices and quantity purchased and sold. But, in reality, is it so’ Does this theory explain the actual working of any economy’

In school textbooks, I remember being taught the law of demand, factors affecting demand and the exceptions to demand. The law of demand conveniently takes into account only one factor, which is its own price. And economists like Veblen and Giffen who tried to discuss demand were sidelined as exceptions.

Thorstein Veblen talked of ‘social factors’ like status symbol, conspicuous consumption etc which affected demand. His book The Theory of the Leisure Class explains how interdependent individuals in an economy are, and how the individual is very much a part of the society unlike the ‘rationalist atomistic individual’ as assumed by the mainstream theory.

In Marshall’s Principles of Economics, he mentions Giffen effect- a rise in the price of bread results in a large drain of resources which force them to curtail the consumption of relatively expensive items like meat; and they consume more of bread as it is still the cheapest food they can get. In India, with more than 60% percent of the populace being poor [Guruswamy and Abraham], Giffen effect is the norm rather than the exception!

This post discusses some of the microeconomic concepts taught across schools and colleges.

Scarcity

I was taught that the central problems in economics were that of scarcity, of unlimited wants and how one chooses the best option. And here optimization (a mathematical apparatus) comes to the aid of economics- in finding the optimum. But are resources really scarce’ If resources were really scarce, how could an economy grow’ Land, of course is scarce; but the availability of land can be increased through reclamation, deforestation etc. Economics ought to be concerned about wants that are backed by purchasing power; otherwise the theory will be trying to reconcile dreams and scarce resources.

Equilibrium

Equilibrium is reached when the demand and supply curves intersect in the graph having quantity demanded and supplied on the x axis and price on the y axis. Joan Robinson (1973) wonders why one uses a metaphor based on space to explain a process which takes place in time.

This approach has for quite some time disturbed me. Why is it that we take ‘equilibrium’ to be favorable’ Equilibrium is a thing very commonly found in Physics. One of the meanings is that ‘it is a state of rest’ and this is precisely the meaning economists provide. For, in equilibrium, the quantity demanded will be equal to quantity supplied and all is well. Coming to think of it more, why would a stagnant economy be favorable’ What is more frightening is that, we are taught that it is what economic policies should aim at!

Prices

Prices, according to the mainstream neoclassical theory are determined based on the intersection of demand and supply; that too in a static set up. Prices, in today’s world is certainly not fixed in the before said manner. The producers decide the price based on the cost of raw materials and other items needed for production, wages and salaries of employees, advertising costs, existing taxes, etc. So this means, prices in an economy has more correspondence to the supply side than the demand side.

What is the significance of the demand side’ One of the reasons could be to point out the importance consumers have in deciding the prices in a ‘perfectly competitive’ economy. It would signify consumer sovereignty in such an economy. Again, this belief of ‘consumer sovereignty’ is something one would like to have, but is absent totally.

Perfect Competition

No student of economics graduates without studying ‘perfect competition’. It is very much entrenched in economic theory as taught today. Why’ The answer given is that it is the ideal state for an economy. Or rather, as the name suggests, it is ‘perfect’. Then we are taught about imperfect competitions keeping in mind what is good or ideal-perfect competition.

One of thoughts one could have is ‘why is it considered perfect’. The price is assumed to be given or it is said that the firm is the price taker. Another query would be- is perfect competition possible’ The main driving force behind corporations and businesses is money or precisely speaking, profits. Would firms like an atmosphere where they are unable to fix prices and hence unable to earn more profits’ It reeks of Orwell’s Animal Farm. Why would there be any competition at all’ Aren’t differences that lead to competition’ Would there be any incentive to produce or to diversify’

Conclusion

This post ends on a skeptical note. Is the current mainstream economics helping the economy by tailoring productive and progressive economic policies’ Is they are not, why are they still being taught as compulsory topics’ Is there an alternative approach’

I would like to put forth a question regarding the notion of prices.

50 years ago, one could buy a book for a rupee; but now, a book’s average cost would be about 100. This follows for all other goods and services too. What is that which accounts for this sustained rise in prices’ Is it inflation alone’