Keynes On Malthus And Ricardo Theories

Keynes on Malthus and Ricardo

Present-day interest in the controversy between Malthus and Ricardo over Say's Law and in Malthus's economic ideas, apart from his population thesis, is in large part a result of J. M. Keynes's macroeconomic theory and his praise of Malthus and criticism of Ricardo. Keynes presented his views on Malthus and Ricardo in a paper about Malthus that is most easily found in Keynes's Essays and Sketches in Biography and in The General Theory. Keynes's opinions raised three related issues: (1) the Malthus-Ricardo controversy over Say's Law; (2) the methodology appropriate to economics; and (3) the effect of Ricardo's triumph over Malthus with regard to both these issues on the subsequent development of economics as a discipline. In The General Theory Keynes states:

The idea that we can safely neglect the aggregate demand function is fundamental to the Ricardian economics, which underlie what we have been taught for more than a century. Malthus, indeed, had vehemently opposed Ricardo's doctrine that it was impossible for effective demand to be deficient; but vainly. For, since Malthus was unable to explain clearly (apart from an appeal to the facts of common observation) how and why effective demand could be deficient or excessive, he failed to furnish an alternative construction; and Ricardo conquered England as completely as the Holy Inquisition conquered Spain. Not only was his theory accepted by the city, by statesmen and by the academic world. But controversy ceased; the other point of view completely disappeared; it ceased to be discussed. The great puzzle of Effective Demand with which Malthus had wrestled vanished from economic literature. You will not find it mentioned even once in the whole works of Marshall, Edgeworth and Professor Pigou, from whose hands the classical theory has received its most mature embodiment. It could only live on furtively, below the surface, in the underworlds of Karl Marx, Silvio Gesell or Major Douglas. The completeness of the Ricardian victory is something of a curiosity and a mystery. It must have been due to a complex of suitabilities in the doctrine to the environment into which it was projected. That it reached conclusions quite different from what the ordinary uninstructed person would expect, added, I suppose, to its intellectual prestige. That its teaching, translated into practice, was austere and often unpalatable, lent it virtue. That it was adapted to carry a vast and consistent logical superstructure, gave it beauty. That it could explain much social injustice and apparent cruelty as an inevitable incident in the scheme of progress, and the attempt to change such things as likely on the whole to do more harm than good, commended it to authority. That it afforded a measure of justification to the free activities of the individual capitalist, attracted to it the support of the dominant social force behind authority.

In his essay on Malthus, Keynes praises Malthus's understanding of an economy's difficulties in maintaining full employment, quoting letters from Malthus to Ricardo "to show Malthus's complete comprehension of the effects of excessive saving on output via its effects on profit."17 Historians of economic thought agree that Keynes has read too much into Malthus's vague notions about the inability of an economy to reach full employment. Although Malthus's intuition may have been correct, his criticism of Ricardo was vague and deficient and, as Keynes correctly notes, he had no alternative theoretical construction to offer in place of Say's Law.