Classical Economics: Malthus, Ricardo, and Mill Key Concepts

MALTHUS: list all terms

Principle of population (2 postulates, 2 ratios) · Positive & preventive checks · Poor laws · Godwin's perfectibility · Malthusian trap & escape

RICARDO: list all terms

Principal problem · Functional distribution · Diminishing returns · Margin of cultivation & differential rent · Rent as effect of price · Natural price of labor · Falling profit & stationary state · Corn Laws · Comparative advantage · Marcet & Martineau

MILL: list all terms

Production vs. distribution · Supply/demand as equation, 3 classes of goods · Reciprocal demand · Wages fund & recantation · Stationary state · Economic man · Tyranny of the majority · Harm principle · Free speech · Individuality, experiments of living, despotism of custom · Character & self-culture · Proper sphere (Taylor) · Self-dependence & co-ops · Mill's program · Libertarian paternalism (Thaler & Sunstein)

Numbers press on food; the pressure never lets up

Principle of population (Malthus)

Food is necessary; passion between the sexes stays constant

Two postulates (Malthus)

Population grows geometrically, food arithmetically

Two ratios (Malthus)

Foresight of a family's costs; delays marriage; all ranks; ends in vice

Preventive check (Malthus)

Works on deaths; mostly the poor; ends in misery

Positive check (Malthus)

Relief raises prices, not food; "create the poor which they maintain"

Poor laws (Malthus)

No known limit to human improvement; misery from government and property

Perfectibility (Godwin; answered by Malthus)

Population outgrows food, wages fall, cycle repeats

Malthusian trap (Malthus)

Income outgrows population for good: technology, fewer births

Escape from the trap (Malthus)

Finding the laws that divide the produce

Principal problem in political economy (Ricardo)

Produce split by income type: rent, profit, wages

Functional distribution (Ricardo)

Each extra unit of labor and capital yields less

Diminishing returns (Ricardo)

Worst land in use; pays no rent

Margin of cultivation (Ricardo)

Surplus of better land over the margin

Differential rent (Ricardo)

Rent is paid because corn is high, not the reverse

Rent as effect, not cause, of price (Ricardo)

Wage that keeps workers' numbers constant; set by habits and customs

Natural price of labor (Ricardo)

Rent and wages squeeze profits until accumulation stops

Falling rate of profit & stationary state (Ricardo)

1815 ban on foreign wheat below 80s

Corn Laws (Ricardo: repeal; Malthus: protect)

Specialize where you give up least; both gain

Comparative advantage (Ricardo)

Political economy taught through stories for ordinary readers

Political economy for the people (Marcet & Martineau)

Production follows nature; distribution follows institutions

Laws of production vs. distribution (Mill)

Price adjusts until quantity demanded = quantity supplied

Supply and demand as an equation (Mill)

Limited / constant cost / rising cost

Three classes of goods (Mill)

Each country's demand for the other's goods sets the terms of trade

Reciprocal demand (Mill)

Wages = fixed pot ÷ workers; later a ceiling set by bargaining

Wages fund & 1869 recantation (Mill)

Capital and population stop growing, but life keeps improving

Stationary state (Mill's version)

Abstraction: max wealth, least effort; science not art

Economic man (Mill)

Each ruled by all the rest, through law and opinion

Tyranny of the majority (Mill)

Power only to prevent harm to others

Harm principle (Mill)

Diffuse loss to society; no duty broken

Constructive injury (Mill)

Duty broken; assignable person hurt

Definite damage (Mill)

Silenced opinion may be true, partly true, or sharpen truth

Four arguments for free speech (Mill)

Different ways of life tested like opinions

Experiments of living (Mill)

Custom chooses for people; blocks progress

Despotism of custom (Mill)

Faculties grow only by making your own choices

Character & self-culture (Mill)

No one decides another's place; needs liberty of choice

Proper sphere (Taylor)

Workers own capital and elect managers

Self-dependence & co-operation (Mill)

Laissez-faire with exceptions; tax unearned land rent; reform property

Mill's program (Mill)

Defaults that steer, with opt-out

Libertarian paternalism (Thaler & Sunstein)