Adam Smith and T. Robert Malthus
Ross Emmett for AdamSmithWorks
January 8, 2020
January 8, 2020
Both Adam Smith and Thomas Robert Malthus are often associated with ideas they did not espouse. Smith is accused of advocating that Gordon Gekko line “greed is good” and the corollary that capitalism’s success is built on its reliance on human selfishness. He is thus known as an advocate of unfettered markets, exploiting labor, and marrying Wall Street and Main Street. Malthus, for his part, is associated primarily with the notion that human population growth inevitably pushes at the limits of our food and natural resources, leading to overpopulation and the Malthusian Catastrophe. Malthus’s “gloomy presentiments” (Heilbroner 1999) are immortally captured in the line that Dickens gave to Scrooge — “If they would rather die, they had better do it, and decrease the surplus population!”
While many liberty-loving economists are happy to correct the criticisms of Smith, many are equally happy to criticize Malthus for the Malthusian trap, not realizing that the usual portrayal of Malthus is equally false. Malthus shares far more with Smith than most expect. He is, in many ways, as much the inheritor of Smith’s mantle as David Ricardo, if not more so. Ricardo is known as a stalwart supporter of free trade, and the creator (with Malthus, mind you) of the basic classical economic model. His theory of comparative advantage is generally considered the backbone of the case for free trade; and Ricardian equivalence is recognized as a telling argument against debt-financed government spending. So why make a case for Malthus when you have Ricardo to turn to?
In order to make my job even harder, let me add another version of the Smith – Malthus divide that we hear more often today than in earlier times. One of Alex Tabarrock’s favorite sayings is that there are two kinds of people: people who believe people are stomachs (obviously a reference to Malthus), and people who believe people are brains (probably a reference to Julian Simon, but easily extendable to include Smith). Smith’s focus on specialization, interdependence, and increasing returns provides us with an economic outlook that implies people are capable of innovation that increases our capacity to expand population while also increasing real incomes. On the other hand, Malthus’s introduction of scarcity into economics is usually associated with the increased pressure that population growth puts on our use of natural resources and food supplies, and hence, the inevitability that some will remain in extreme poverty.
But I want to suggest that Tabarrock’s stomach versus brain distinction may be misguided. Obviously, human beings have both brains and stomachs. A civilization that connects the two by providing institutions, social mores, and customs which promote innovation and maintain a population through well-functioning markets and liberty-enhancing civic institutions can enjoy rising population and rising real incomes, simultaneously. It’s not a choice between brains and stomachs if a coherent vision of how stomachs and brains are mediated by markets and civilizations is available. The last two hundred years of human economic experience provides the evidence to support the argument that such a vision can be maintained. And that argument is what Smith and Malthus agreed upon, despite the difference in the perspectives they started from.
My defense of the argument that Smith and Malthus agreed in large measure, despite their different outlooks, is founded on a claim that the late Nathan Rosenberg, Stanford economic historian, once made about Smith. The Wealth of Nations, Rosenberg argued, was a “search for an institutional scheme which will establish and enforce an identity of interests between the public and private spheres” (1960, 567). My argument is simple: while Smith pursued an “optimal institutional structure” (Rosenberg 1960, 570), Malthus spent his life examining the many existing (and historical) civilizations, in order to understand how different institutional structures, cultural mores, habits of the heart, family patterns, etc., affect economic performance over time. In the end, both Smith and Malthus believed that economic growth could be consistent with rising real wages if, and only if, markets operated within a set of familial, social, political and economic institutions that were conducive to encouraging prosperity. Perhaps their main difference emerged from their relative degrees of optimism that such an institutional context could be developed. As we know, Smith was optimistic about that prospect. I argue that Malthus was cautiously optimistic, in part because every civilization he examined – including Great Britain, America and France – fell short of producing sustainable prosperity. But Malthus held out hope for the future, and recognized in many civilizations a core of institutions that did provide such hope.
Behind the argument regarding Smith and Malthus’s similarities lies an examination of the additional chapters Malthus added in the new editions of his Essay on the Principle of Population (1798; see 1803), which rendered editions two to six at least three times longer than the original edition. The structure of these chapters and the careful wording of the conclusions Malthus draws about each civilization lead one to realize that the two postulata with which he began the Essay are not empirical propositions, but rather a thought experiment that informs an analysis of the “institutional scheme” (Rosenberg’s phrase) or “degree of civilization” (my phrase) for each society he examined.
How might one compare the shepherding societies of North Africa, and Central/Eastern Europe, with the foraging societies of island societies in the South Pacific and elsewhere? The former had family ties that supported marriage even if it was early in women’s life, property rights were well-established within group, and shepherding groups provide security for the group members’ capital assets (sheep and goats, for example). The latter had weaker versions of the same connections, governance structures and productive assets. While the former had the institutional framework to protect capital assets over time, the latter lived day-to-day with little prospect for saving and building capital. Roving bandits were a problem in the shepherding societies, but these also had greater security that, over time, had reduced the likelihood of bandit attacks.
At the other end of the spectrum, Malthus compares, for example, Sweden and Norway (Malthus had a soft spot for Norway). Sweden was a more industrial and economically advanced economy. Yet the loss of social and familial institutions in the hinterland had led to extreme urban poverty, unemployment and dependence on state support, which was never adequate. Norway might be expected to be in worse shape because it was less urban and industrial, but Malthus thought its prospects better, because several aspects of social life promoted the delay of marriage. Conscription into the army, to protect the nation against Sweden, was mandatory for all males above the age of 18. Marriage while in the army was discouraged, a mandate supported by the national Lutheran church, as well as the social practice of young women entering household service in the “great houses” for several years before getting married.
In short, Malthus’s study of civilization among the nations provides an examination of the world’s peoples from the perspective of the constitutional elements which define the basic system of laws, social conventions, and rules that structured people’s decisions about economic activity and family life. Malthus’s study of each society’s degree of civilization provided him with the means of both comparing societies’ institutional (and hence, economic) success. Indeed, the extra material in the subsequent volumes is almost entirely composed of these civilization studies. And, as important as the treatment of each civilization was, his rank ordering of them in terms of their prospects for economic success makes the book an expansion of Smith’s arguments about human nature, institutions, and economic prosperity. In short, civilizations that incentivize individuals to take a long view toward the future, that get people into markets rather than strand them in non-market settings, and provide people with the means to learn about, and take advantage of, opportunities that increase their economic prospects, can grow both in terms of population and economic well-being.
As we know, Smith’s discussion of the mercantilist “policy of Europe” is an obvious example of his look at the institutional features of nations. That discussion had two parts, only one of which is usually mentioned. The part we know is Smith’s argument that hoarding gold through a deliberate policy of promoting exports and discouraging imports (today known as policies that promote running a trade surplus) is counter-productive. The second part of Smith’s argument – that labor specialization was limited by the extent of the market – is usually considered today in terms of international trade. But for Smith, the labor specialization argument was more about internal trade and a nation’s institutional features than it was about external trade. Breaking down internal regulations, in the form of land tenure and guilds, was of great concern to Smith. This internal focus is something Malthus shared with Smith. In the first edition of his Essay, Malthus remarked that removing barriers to trade and labor mobility within Great Britain would enhance productivity and increase incomes. The barriers were so bad that Malthus thought Godwin’s proposal for ending all property rights in land would definitely produce a positive increase in agricultural production in the short run (echoing language from Smith about the intelligence and industry of small proprietors), despite longer-term problems arising from Godwin’s advocacy of eliminating families and any connection between children and their parents. Malthus’s concerns about parish laws echo those of Smith, who argued that the arbitrary tie between a person and the place they were born was an unnecessary restraint on the person’s economic prospects. The argument Malthus made there carries over to arguments he makes in later editions while discussing other civilizations. Pastoral nations, he argued, had many civilizational advantages that could be built upon for enhancing prosperity via economic liberty, but their “habits of war” (embodied in roving tribal warlords) constantly undermined their actual prospects.
But laws of settlement were only part of the concern both authors had for labor laws. Apprenticeships, in particular, bother both of them. Smith pointed out that soldiers and seaman
when discharged from the king’s service, are at liberty to exercise any trade, within any town or place of Great Britain or Ireland. … Let the same natural liberty of exercising what species of industry they please, be restored to all his majesty’s subjects, in the same manner as to soldiers and seamen; that is, break down the exclusive privileges of corporations, and repeal the statute of apprenticeship, both which are real encroachments upon natural liberty, and add to these the repeal of the laws of settlements, so that a poor workman, when thrown out of employment either rin one trade or in one place, may seek for it in another trade or another place, without the feat either of a prosecution or of a removal” (Smith 1976, vol II, Book IV, chapter 2).
Malthus, who served in a rural parish south of London while he was writing the first edition of the Essay on the Principle of Population, argued similarly that rural land tenants should not be arbitrarily tied to the parish they were born and lived in, when job prospects there were much less advantageous than moving to larger centers. Labor mobility was prized by both as a key attribute of a free society.
Finally, both authors were anti-slavery. Malthus’s views on the subject emerged during the Parliamentary debate over ending the slave trade. At the time of the debate, Malthus was in London supervising the printing of the third edition of his Essay on the Principle of Population (Malthus 1806). During the debate, William Cobbett (1806) published a front-page article in his Political Register, saying that Malthus’s population theory implicitly defended slavery. Malthus was incensed, and wrote an 1100-word essay criticizing Cobbett. At the core of Cobbett’s attack was the argument that the societies from which African slaves were coming were the worst-off places on earth, and that serving on a sugar cane plantation in the West Indies provided them access to the enjoyment of a much better society. Malthus’s response showed his civilizational emphasis. He argued first that, according to his studies, the African nations from which slaves came were not, in fact, the worst-off places on earth and had developed institutions and cultural mores that provided the basis for a flourishing society. He then followed with the argument that, in fact, the West Indies slave plantations were as bad as the worst-off places on earth, based on the evidence that male slaves were committing suicide at alarming rates because their situation was significantly worse than what it would have been in their African homeland. He insisted that ending the slave trade would benefit both the individuals who were being taken as slaves by leaving them in their homeland, and the African societies, who could then decide for themselves what civilizational improvements they would make. Malthus’s argument, by the way, appears in the third and subsequent editions of The Essay on the Principle of Population at the very end, in a footnote to the last appendix, because that was the only place the printer could put the response, given that everything else was already typeset.
Like any two great thinkers, there are inevitably differences of opinion between Smith and Malthus. But so much has been made of Malthus’s introduction of the notion of scarcity to economics that his agreements with Smith are overlooked. Both Malthus and Ricardo inherited much from Smith. But where Ricardo became the theoretician whose modeling was important to the classical political economy tradition and the argument for free trade, Malthus expanded upon Smith’s attention to institutional and cultural details that shape the context within which trade occurs. While Smith sought to articulate an optimal civilizational context, Malthus turned his attention to existing arrangements, seeking to learn how institutions like markets, customs, rules, social mores, marriage, government regulation, shaped the civilizational context within which its people carried out the ordinary business of life.
Cobbett, William. 1806. “Slave Trade.” Weekly Political Register, January 18, 1806, Vol. IX, no. 3 edition.
Heilbroner, Robert. 1999. The Worldly Philosophers. 7th ed., rev. New York: Touchstone.
Malthus, T. R. 1806. An Essay on the Principle of Population; or, a View of Its Past and Present Effects on Human Happiness; with an Enquiry into Our Prospects Respecting the Future Removal or Mitigation of the Evils Which It Occurs. 3rd ed. 2 vols. London: J. Johnson.
Malthus, T. Robert. 1798. An Essay on the Principle of Population. London: J. Johnson.
Malthus, Thomas Robert. 1803. An Essay on the Principle of Population; or, a View of Its Past and Present Effects on Human Happiness; with an Enquiry into Our Prospects Respecting the Future Removal or Mitigation of the Evils Which It Occurs. 2nd ed. London: J. Johnson.
Rosenberg, Nathan. 1960. “Some Institutional Aspects of the Wealth of Nations.” Journal of Political Economy 68 (6): 557–70.
Smith, Adam. 1976. An Inquiry into the Nature and Causes of the Wealth of Nations. Edited by R. H. Campbell and Skinner, A. S. 2 vols. Oxford: Clarendon Press.