The Four Postulates

The Four Postulates

Those "few sentences" to which Senior alluded took the form of four basic postulates, or axioms, on which economic theory is based. These propositions are presented here in his own words:

1 That every man desires to obtain additional wealth with as little sacrifice as possible
2 That the population of the world, or in other words, the number of persons inhabiting it, is limited only by a fear of a deficiency of those articles of wealth which the habits of the individuals of each class of its inhabitants lead them to require
3 That the powers of labour, and of the other instruments which produce wealth, may be indefinitely increased by using their products as the means of further production
4 That, agricultural skill remaining the same, additional labour employed on the land within a given district produces in general a less proportionate return, or, in other words, that though, with every increase of the labour bestowed, the aggregate return is increased, the increase of the return is not in proportion to the increase of the labour (Political Economy, p. 26).
The second and fourth postulates present, respectively, Senior's guarded affirmation of Malthus's population principle and the classic law of diminishing returns, but not without important modifications of each. Senior was willing to accept Malthus's population principle in the abstract, but he had little faith in its empirical validity. His main argument was that man's desire to better his position in the world is at least as important as his sexual desire and that by not realizing this, Malthus overlooked a strong, additional check on the growth of population.

Senior's optimism on the population question might also be linked to his in­terpretation of the laws of increasing and decreasing returns in industry and agriculture. In his fourth postulate, Senior rendered the law of decreasing re­turns more exact (in its modern sense) by adding the proviso that technology must be held constant. Ricardo undoubtedly recognized that the validity of this law rests on the constant-technology assumption, but he never explicitly stated it. In explaining his fourth postulate, however, Senior voiced his con­viction that the normal state of affairs in industry is increasing returns. He based this view on the questionable assumption that labor skills tend to in­crease in some sort of relation to increased population and capital, a view that runs counter to the orthodox Malthusian doctrine but that was nevertheless accepted by a surprisingly large number of writers in Senior's day.

Our attention shall be focused on the first and third postulates, however, because in his elaboration of each, Senior advanced the classical and Ricardian theories of exchange value. In his discussion Senior also adumbrated a much improved theory of capital and interest.