Playing Fast and Loose with the Facts about the Writings of Malthus and the Classical School

Abstract

Sometime after Second World War ended and Cold War heated up, fields of growth and development came of age. The efforts of United States to help rebuild Europe, as well as long list of third-world ethnic groups battling to emerge as independent nation-states, worked to generate scholarly interest in these topics. National economic development and growth-modeling were fertile grounds for a spate of college textbooks helping to define these emerging college electives (Arndt 1989)) In recent years, Professor Hendrik Van den Berg published an original that (in his words) would not be just another development text but something different and original. Van den Berg has organized best materials from both standard growth models courses and economic development courses into one master under title Economic Growth and Development (2001). (2) It is a clever and strikingly original approach to growth and development. An enormous amount of analysis and empirical evidence is marshaled together in order to provide an answer to question, Why do some economies provide their citizens with high standards of living and many opportunities for advancement while others do not seem to be able to satisfy most simple human wants or offer people very many options for change? (Van den Berg 2001: vii). This important question is answered by treating growth and development literature of postwar period as essentially a series of responses to an older, outdated growth model attributed to nineteenth-century classical school writers and, most significantly, Reverend Thomas Robert Malthus. This was done in order to make this come alive and to provide a coherence to multitude of technical issues presented along way. Unfortunately, many of interpretations of nineteenth-century model that pave way for Van den Berg's discussions are themselves misinterpretations, based on older and outdated interpretations of classical school that have been provided by historians of economic thought and (as I shall show below) are now firmly embedded in standard textbooks on growth modeling. Setting record straight will not be an easy matter at all. The architecture of requires that student first master the classical model of growth that supposedly dates back to 1798, when Reverend Thomas Robert Malthus presented his gloomy forecasts about overpopulation and planetary misery in his Essay on Principle of Population. (3) This Malthusian growth model was allegedly driven by claims that investment on land produces diminishing marginal returns and that, since land is limited in amount, future prospects of mankind are limited and stark. According to Van den Berg and other writers, Malthus's doomsaying allegedly dominated classical school thinking about economic growth and development until twentieth century. In this thinking, as population increases and land is harvested more intensely, food prices rise, real wages fall, and profit rate sinks until economy reaches some sort of zero growth in per capita GDP. In this stationary state existing level of per capita income is at its starvation level and growth process is at a dead end. The growth model literature typically shifted its focus to twentieth century. Now, new rays of light appear. Roy Harrod's growth model moved attention away from land by emphasizing reproducible capital goods and productivity but stuck with a fixed proportions growth model that was simply too unrealistic for rest of profession to swallow. As Van den Berg states, Joseph Schumpeter as early as 1912 (sic) brought in clustering of inventions and innovative entrepreneurs, but these remarkable insights remained outside standard growth model literature, which centered about work of Robert Solow. (4) Solow's 1956 growth model (like Harrod's) dropped land scarcity idea of classical school completely but was still welded to idea of diminishing marginal returns (Solow 2000). …