Thomas Robert Malthus. There were maybe 3 further economists/social thinkers whose theories have been similarly controversial since: Karl Marx, John Maynard Keynes and Milton Friedman. While Marx’s theories led, according to his critics, to the destructive “real” (Soviet, Chinese, Cuban, Cambodian or Korean) communism, Keynes’s to Big Government, restriction of (economic) freedom and soaring public debt, and Friedman was accused of having promoted unfettered, egoistic, socially destructive unregulated free markets – Malthus and his proponents (e.g., the ecologist Paul Ehrlich) have been the doomsayers. However, one can learn something from everyone of these thinkers. Especially from Malthus, as I would like to outline.
Let me first summarize the key features of Malthus’s theory of population and the economy. Living in the end of the 18th and the beginning of the 19th century, Thomas Malthus experienced deep poverty and exploitation – the same that led Marx to partly quite opposed conclusions. For Malthus, the sole source of widespread poverty was the reproductive drive of human beings coupled with the limitedness of natural resources.
In his model, Malthus assumed that the birth rate is constant and not dependent on real wage (i.e., the living standard), while the death rate decreases when wages go up. Furthermore, due to the law of diminishing returns (resulting from the absolute scarcity of land as the sole source of energy and food), he assumed that there is an inverse relationship between wages and population as well – the more people, the higher the pressures on natural resources and thus the lower the standard of living.
These assumption led Malthus to the formulation of his (in)famous iron law of wages: if an exogenous shock leads to a decrease of the death rate, the population increases, thus food becomes scarce and real wages fall, and as a consequence the death rate increases again – when the system reaches equilibrium, nothing changed. The same principle holds for an increase of the birth rate due to an external shock.
Furthermore, Malthus identified two classes of factors influencing the behaviour of the system: he called them positive and preventive checks. Positive checks influence the death rate (examples are “misery”, i.e., epidemics, famines etc., and “vice”, i.e., war, abortion and the like) and are assumed to have no positive impact in the long run (thus Malthus’s opposition towards charity). However, the so-called preventive checks that lower the birth rate have the potential to improve the society’s situation. Examples are “moral restraints” (such as marrying late or voluntary celibacy), but also (as mentioned in Malthus’s later writings) good education and “advancement prospects” in a civil society.
An important aspect of Malthus’s theory is his neglect of technological progress. He argued that since natural resources are limited, technological progress leads to an increase in the living standard only temporarily, but in the long term society goes back to the equilibrium (“subsistence”) real wage with a larger population. As a consequence of this, Malthus also neglected the possibility of permanent economic growth.
As can be seen, there are many features in Malthus’s theory that are (seemingly) not applicable to the modern world. First, we now know that there is a relationship between “real wage” and birth rates – although it seems to set in at a rather high level of affluence. Furthermore, due to continuous technological progress, not only have the world economy grown steadily for over 150 years now, but the world population soared – seemingly a contradiction to the theory outlined above.
On the other hand, there are still hundreds of millions of people living in poverty. Furthermore, it is ever more understood that the ongoing “economic” growth is increasingly damaging the natural environment. Climate change is only one example of the many human-made pressures on natural ecosystems that arise from our economic activity. We haven’t overcome the absolute scarcity of resources and are unlikely to achieve that in the future.
So, could it be that Malthus was right, after all? I would argue that yes, it could be – moreover, it appears to me quite realistic. We now are 7 billion and counting – according to some, more than can even potentially be fed on this planet. The destruction of Nature further endangers our livelihoods. So maybe Thomas Malthus have not been proved wrong by the ongoing technological progress – in the end, he admitted that technological change may alleviate poverty in the short run. It seems possible that human ingenuity merely postponed the “doom” again and again – that every new invention gave us some more time and some more room to grow in numbers and in affluence. However, this by itself does not mean that Malthus was wrong – the catastrophe correcting the numbers and the “real wage” may still come. Moreover, there are signs that it is approaching (e.g. in the form of a climate catastrophe). Maybe we will again be able to invent some backstop technology and avoid this particular catastrophe (but maybe we will not). However, always to count on human ingenuity and luck is a somewhat dangerous strategy. So, maybe it is time to change the way we are living – a good starting point would be to solve the population and environmental problems.