This is the 200th anniversary of the publication of the first edition of Thomas Robert Malthus’s Principles of Political Economy in 1820.
The funny thing is that I was thinking about the publication of Malthus’s first edition of his Principles only because I was thinking about how hard it is to maintain friendships with other economists who differ with our own views, which from that led me onto thinking about the greatest friendship in the history of economics, the friendship between David Ricardo and Robert Malthus, and how Ricardo had written to Malthus, just before he died, that even had they agreed on everything instead of disagreeing on everything – which was more or less the truth of it – he could not have liked Malthus any more than he did. It really is how economic discourse should be undertaken. And from that it occurred to me that the publication of Malthus’s text led onto the General Glut debate, the formulation of what we now call Say’s Law, which then instigated the Keynesian Revolution and thereon to modern macroeconomic theory. There can hardly be an anniversary in the entire history of economics more significant than that.
The second edition from The Liberty Press can be found online here.
Malthus may have been the single most influential economist who has ever lived – Karl Marx included. In his own time there was his Essay on Population which was a crucial element in the structure of economic theory as well as a good deal of social policy in his own time and for long after. Far more important, however, was his Principles of Political Economy, published exactly two hundred years ago this year in 1820, which touched off a debate over the possibility of a “general glut” – demand deficiency – that has had two sets of consequences. In his own time and until 1936, the mainstream of the economics community were united in denying the possibility of a general glut, that is in denying the possibility of over-production as a cause of recession and high unemployment. But then, of even more significance, John Maynard Keynes, following his coming across the general glut debate in his reading of Malthus’s correspondence with Ricardo at the trough of the Great Depression in 1932, was set on the road to write The General Theory in which the possibility of a general glut – a deficiency in the level of aggregate demand – was developed so that an under-employment equilibrium was seen as not only possible but common. Virtually the whole of mainstream economic theory has as a result accepted Malthus’s conclusion down through to the present day.
Malthus published his economics text Principles of Political Economy exactly two hundred years ago in 1820, but what made its publication so notable was that Malthus was already world-famous because he had previously published his Essay on Population in 1798 (a book which has never since then been out of print). Malthus’s Principles was not therefore just another text on economic theory but was authored by the most famous “public intellectual” of his time.
In so far as economic theory was concerned, it was a generally standard account for its time, except that he argued that the recessions that had followed the Napoleonic Wars which had ended in 1815 were due to a general glut, or in modern terms, to a deficiency of demand. The notion of a general glut needed to be distinguished from a particular glut. That an individual product could be produced in quantities so large that not all production could be sold was recognised as obviously true. A general glut, however, suggested that not just individual products, but an excess of output in general of everything could be produced.
The reason that a general glut might occur was due to over-saving. Production was being channelled into proportionately too large a flow of capital goods rather than into consumer demand. The additional capital was creating a flow of output beyond the willingness of the population to consume everything that had been produced, leading to a general glut and a high level of unemployment.
His solution was that the landed aristocracy be encouraged to spend more and invest less.
This proposition led to what has since been called “the general glut debate” which, according to Thomas Sowell, continued through until 1848, only finally coming to an end with the publication in that year of John Stuart Mill’s own Principles of Political Economy.
The core question of the general glut debate was whether it was even conceivable in a world of scarcity that the productive powers of an economy could overwhelm the willingness of a community to buy everything that had been produced. It was conceded by all that too much of any individual product might be produced, and that if there was a large disorganisation in the specific goods and serviced being produced an economy might end up in a downturn where many might lose their jobs.
Virtually every economist at the time entered into this debate.
But the economic consensus was that an economy could not produce more than an economy.