MALTHUS'S THEORY OF DEMAND AND ITS INFLUENCE ON VALUE THEORY1
| Date | 01 October 1956 |
| DOI | http://doi.org/10.1111/j.1467-9485.1956.tb01175.x |
| Published date | 01 October 1956 |
| Author | V. E. Smith |
MALTHUS’S THEORY
OF
DEMAND AND
ITS
INFLUENCE
ON
VALUE THEORY’
THE
major events
in
the development of Malthus’s theory of demand
were by-products of his controversies with Ricardo concerning other
matters. In the bullion and corn-law controversies Malthus’s efforts
to convince Ricardo that demand could affect the rate of profits
were unsuccessful. When Malthus’s
Principles
appeared it contained
a
new concept
of
demand which measured the varying wants and
tastes of the people. These. which he had been stressing all along,
now assumed new importance because of their r81e in the theory of
gluts which the
Principles
presented. Continued efforts to support
his position concerning gluts led to the measure-of-value controversy
and thence to changes in Malthus’s value theory which weakened his
emphasis on demand.
THE
FIRST
Two
DECADES
Malthus’s theory of value had its textual roots primarily in Smith
and Lauderdale. and its immediate historical roots in England’s
troubled times during the first three decades of the nineteenth century
:
war-time inflation, agitation for corn-law reforms, and post-war
depression.
Malthus considered himself the spiritual descendant
of
Adam
Smith, presenting the true doctrine in opposition to the distortions
imposed by Ricardo. However, the features of his thought that most
distinguish him from the Ricardians are those that remind us of
Lauderdale 2-his emphasis
on
demand, and his insistence that the
aggregate demand for consumers’ goods may be diminished by exces-
sive accumulation. Emphasis on demand characterised Malthus’s
thought from the beginning, but, though references to the
‘
caprice of
fashion’ and miserliness as causes of unemployment can be found
prior to the appearance of Lauderdale’s volume,
in
that early period
Malthus could also write that
‘.
.
.
Smith has very justly observed,
that
.
. .
every frugal man was a friend, and every spendthrift an
enemy to his country
. .
.
.’
Though Malthus charged Smith with
error
in
representing every increase of the revenue
of
the country as
an increase
in
the demand for labour, instead of raising the objection
1
should
like
to
express
my
appreciation
to
Professor
F.
S.
Deibler, who
first called
my
attention
to
the change of emphasis that occurred in
Malthus’s
value
theory.
,
James Maitland, Eightb Earl
of
Lauderdale.
An
Inquiry
into
rhe
Nature
und
Origin
of
Public
Wealth
(Edinburgh, Constable and
Co.,
1804).
205
206
V.
E.
SMITH
that surplus revenues would not be applied to the demand for labour,
his argument at this time was that the real demand for labour was
limited by the produce
of
the land.s
The population problem called forth Malthus's first statement on
demand. In the
Essay
he had remarked that the poor law accom-
plished little by increasing money grants to the
poor
when grain prices
rose, without increasing the quantity of food.' In
An Znvestigation of
the Cause
of
the Present High Price
of
Provisions,
discussing the
inflationary results of increasing parish allowances when corn prices
rose. he demonstrated the point vividly. The argument ran as follows
:
when a commodity is scarce, the natural price is forgotten, and the
actual price is regulated by the excess
of
demand over supply. Sup-
pose there are fifty demanders, and only enough of a good for forty
people. Considering the demanders as arrayed in increasing order
according to their maximum offers, the price would have to be high
enough to exclude the ten whose offers were least.
If
the fortieth
from the top could just pay two shillings. two shillings would be the
price. But let each of the ten poorest be given a shilling, and all now
be able to offer two shillings
or
more. and the price would have to
rise. Now, however, some of the poorest of the unsubsidised forty
would be excluded in favour of some of the subsidised ten.6
To
make
his point Malthus had developed a market demand schedule-a
schedule of demand prices like that in Bohm-Bawerk's horse market
example, each buyer taking but one unit of the good.
His
purpose did not require him to consider an individual's adjust-
ment
of
the quantity purchased in accordance with the price, though
Malthus was aware of a relationship between price and
Here the limitation of incomes sufficed as an explanation.
The demand schedule never reappeared. but Malthus continued
to insist on the importance
of
demand. When the bullion question
arose. his review of Ricardo's pamphlet,
The High Price
of
Biillion
u
Proof
of
the Depreciation
of
Bunk Notes,
complained that Ricardo
An
Essay
on the Principle
of
Population.
reprint of 1798 edition. edited
by James Bonar (London, Macmillan and
Co..
1926). pp. 320, 295-8, 282,
304-10.
'
Op.
cit..
pp. 74-83.
(London,
J.
Johnson, 1800). pp. 5-7. (Reprinted in Harry
G.
Johnson.
'
Malthus on the High Price
of
Provisions
'.
Canadia,r
Journal
of
Econornir.c
and
Political Science.
Vol.
15.
1949. pp. 190-202.
In the
Provisions
he remarked that the
wor
laws.
become
thev led
to
high prices of necessaries. forced 'strict economy in all ranks
of
lcfe
'
(pp.
19-20). and in the
Essay
on
. . .
Population
(London.
J.
Johnson, 1803) he
wrote:
'.
. .
the price of corn in
a
scarcity, will depend much more upon the
obstinacy with which the same degree
o!
consumption is persevered in. than
on the degree
of
the actual deficitncy (p. 399) and
'.
. .
high prices do
ultimately diminish consumption
. .
.
(p.
400).
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