Academic journal article History of Economics Review

Malthus on Growth, Glut, and Redistribution

Academic journal article History of Economics Review

Malthus on Growth, Glut, and Redistribution

Article excerpt

1. Introduction

It is not uncommon to find histories of economic thought asserting that the attempt by Thomas Robert Malthus to formulate an acceptable theory of general glut or depression was not successful. A principal element of his theory was that general gluts (1) can occur because savings are not always invested, leading to a decline in general economic activity. Critics have maintained, on the contrary, that savings will always be able to find investment outlets, and that general gluts are impossible, because the production process generates enough purchasing power in the hands of consumers to enable them to purchase all that is produced, even though some temporary disruptions can occur because of unwise business judgements by producers.

This article defends Malthus' theory of gluts. It supports the view of those who say that Malthus successfully showed there is no necessary equality between savings and investments, and that he presented a logically coherent theory of how gluts can occur, and how they can be prevented or cured. It contends that an essential but too often overlooked element of his theory is its emphasis on the role played by maldistribution in causing gluts and in retarding growth.

The claim that Malthus identified or equated saving and investment is of considerable significance for any assessment of Malthus' macroeconomics. If the claim is correct, it would nullify his theory of gluts and weaken his case for the possibility of their existence; it would also undermine his arguments against Say's Law; it would establish a clear demarcation between the economics of Malthus and the economics of Keynes, and in so doing raise doubts about Keynes' estimates of the quality of Malthus' macroeconomics, and about Keynes' competence as a historian of economic thought. It would also weaken the case for economic policies directed towards consumer-led growth, rather than policies directed towards promoting savings and investment, and would weaken the economic arguments for an interventionist redistribution of income from the wealthy towards those with a higher propensity to consume. Because of the crucial importance of this issue, the first two sections of this paper are devoted to the arguments for and against Malthus' views on the question of the equality of saving and investment (hereafter, the S = I question). In order to defend his theory of glut, it must first be necessary to provide textual evidence showing that he did not hold the S = I position, and that he recognised the possibility that some savings might not succeed in finding profitable investment outlets, and remain idle.

Section 2 of this paper contains an outline and critique of the views of a selection of authors who have supported this saving-equals-investment (hereafter S = I) interpretation of Malthus. Section 3 offers alternatives to the S = I interpretation. Section 4 provides textual evidence of Malthus' insistence on the existence of redundant savings and redundant capital. Section 5 argues that Malthus' views on the maldistribution and redistribution of income and wealth provide the basis for a logically coherent theory of growth and depression, and stresses the role given by Malthus to the middle classes in the process of redistribution. Section 6 discusses the difficulties encountered by Malthus in recommending practical means for implementing a wider distribution. Section 7 summarises the main arguments of the paper.

2. Arguments for S = I

In this section we look at a selection of authors who appear to have given the S = I interpretation--namely, Lionel Robbins, Joseph Schumpeter, Mark Blaug, Bernard Corry, Samuel Hollander, Thomas Sowell and Murray Milgate--and who therefore conclude that Malthus did not have a satisfactory theory of gluts. (2)

2.1. Lionel Robbins

The claim that Malthus equated saving and investment was emphatically argued by Lionel Robbins: Oversaving for Malthus 'means over-investment, using over-investment in the Keynesian sense. …

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