Lecture 11: Scarcity and Population (Malthus)

what are the two kinds of value that Smith points out?

use and exchange value

what is the source of all value for Smith?

labor

how are wages set?

supply and demand (if supply goes up then wages will go down)

must be above the price of subsistence/reproduction (staying alive)

waged goods

the goods that make up the minimum necessary subsistence food, housing, etc)

if food gets cheaper, what happens to wages?

can decrease because food is a waged good

in a market economy, producers have to compete, what does this cycle look like?

producers try to lower cost of production so there is motivation to innovate ways to lower costs; this leads the firm to gain a competitive advantage, increasing profits and marketing share, driving other firms out of business unless they adopt the innovations that increase efficiency

what is the dismal science?

economics; its premise evolves around scarcity

evaluating infinite wants in the face of finite resources is the logic of economics

what is the empirical definition of scarcity?

a material shortage

scarcity

the quality or state of being scarce; especially: want of provisions for the support of life

how does scarcity function in a theoretical way?

scarcity used as a premise to develop a model

model assumes the behavior of individuals is governed by the logic of allocating finite resources

how does scarcity function in an epistemological way?

scarcity used as a lens through which one perceives their circumstances

view of things as scarce

what is Smith’s "invisible hand” for labor?

if wages increased, people would reproduce more, this would increase the population, which lowers wages and allows for higher profits; higher profits increase accumulation and investment which then increases the demand for labor, this then increases wages leading to more population growth

Smith believed ______ growth could sustain population growth

economic

what is Smith’s view on population?

population growth is an indication that your nation is economically healthy; if the wealth of the nation increases larger populations can be supported

in the 1500s, the general tendency is for the price of food and ______ rates to rise together; why?

death; as the price of food rises people will ration more, affecting nutrition,

deaths are likely deaths of the elderly, infirm, young, and those with weak immune systems

real wages

the purchasing power of wages; wages adjusted for the cost of living

in the 1500s, if food prices increase, what happens to real wages?

it declines

in the 1500s, if real wages are higher, what happens to fertility?

it increases since families can afford to support more

in the 1500s, lower wages can trigger a period of _____ life expectancy

lower

how do grain prices respond to population?

when the population increases, demand for grain increases causing grain prices to increase

when did scarcity take hold in the popular press?

1790-1800 on the heels of the French Revolution, food prices were increasing (fear among elite classes)

Poor Laws

a set of laws in England during the 19th century designed to provide aid to the poor and regulate welfare provision, often criticized for encouraging dependency

what are the two main acts of the Poor Laws?

Settlement Act and Speenhamland Act

Poor laws were administered through ________

parishes

Settlement Act (1662-1834)

required the poor to register and remain in their home parish

people had to go to their own parish to receive aid, but this meant they could not move to find work

Speenhamland Law (1795-1834)

passed in response to period of increased food prices

increase in welfare support→ people will get assistance based on the size of family and price of bread and if your wages are less than an established cutoff

what is the implication of the Speenhamland Law?

employers no longer had to pay a living wage→ people would get the difference through the poor laws

what are the effects of the Poor Laws?

reduction in real wages, employees didn’t need a job to feed their families, productivity went down because workers were indifferent to their work, employers hired fewer people because they weren’t trying, precluded labor mobility

overall increase in poverty

Edmund Burke

famous conservative statesman, economist and philosopher

critic of French Revolution

what is Burke’s view on labor?

labor is a commodity that can be bought and sold, and should not be subject to government interference

middlemen is the agent of market mediation of supply and demand→ you want them looking for more food which will encourage farmers to produce more

Burke is advocating for what?

free market; market will spur people to produce more of things that are in demand

Malthus thinks the ____ _____ are the problem, why?

Poor Laws; if aid goes up and down the price of bread keeps, prices can keep increasing because people will receive more aid to be able to afford the bread

producers have no incentive because they are receiving a high price for their goods

what are the two postulata of the Principle of Population?

food is necessary to the existence of man

people will reproduce

from the two postulata, what does Malthus conclude?

population increases in a geometric ratio, which subsistence growth arithmetically

population grows faster than the food supply

who does Malthus believe will suffer due to the imbalance between population and food supply?

the poor will suffer

will cause misery (hunger, disease, etc) and vice (immorality of the poor)

what is the feedback that Malthus is establishing?

population growth leads to low wages and high unemployment, this leads to misery and vice, which serves as a check on population (Smith believes this would increase wages)

what happened in the 19th century with real wages and population?

European population grew in a climate of declining prices and increasing wages; economic and demographic growth became complimentary forces

the principle of population is _______ but neither right nor wrong, because it cannot be proved or disproved empirically

flawed

true or false: there is empirical support for Malthus’s ideas before his time

true

true or false: there has been empirical evidence for Malthus’s ideas since 1800

false

what is the reality of the relationship between food supply and population?

food supplies have grown faster than population ever since 1800

what did Malthus believe about high food prices?

it was a good thing because it would cause misery and hunger, which would motivate people to work and induce good moral behavior

in arguing against the Poor Laws, Malthus was advocating for what?

a national labor market where people could move to find work

effective demand

refers to the quantity of goods that consumers are willing and able to purchase at a given price, influencing production and resource allocation (demand backed by the ability to pay- effective because it will cause the market to respond)

the marginal revolution

reorientation of economics around marginal utility

scarcity is the organizing principle of human behavior

enclosure is what kind of scarcity?

it is manufactured, epistemological

how has scarcity become epistemological?

scarcity is how we think about the world

rationality has become about arbitrating our desires with our needs

everything can be seen through a scarcity lens

scarcity of land is produced by

private property

how can scarcity serve as a governmentality?

the logic of governing embraced the idea that there will always be losers because you have let the market dictate winners/losers

there will be people without food because you let the market dictate who has food