After his discussion surround GDP, Smith touches on the works
of three of the most influential economists that have shaped both how people
see economics, and how economists think and tackle problems on a global scale:
Robert Malthus, David Ricardo, and John Stuart Mill. First on the menu is
Malthus- who many see as one of the main reasons that economics has been dubbed
‘The Dismal Science’- is often considered to be the first ever economics
professor as he took up a role in 1805 in the East India Company as a
‘professor of modern history and the political economy’. He, very early on in
his life, released a 50.000 word ‘Essay on Population’ that outlined his view
that because “Population, when unchecked,
increases in geometric ratio... [and] Subsistence only increases in an
arithmetic ratio.” The human race will eventually run out of food unless
populations are kept in check. With the benefit of hindsight, Malthus may have
probably reconsidered his argument as it has been proved that food levels can
be increased in a geometric manor as humans do not just eat crops, but also animal
produce which can be bred at alarmingly high rates. This was not his only
insight, however- Smith makes a point of highlighting his theorising of the
‘Law of Diminishing Returns’. This means that the marginal gains in output from
using more factors of production reduce over time. Finally, Smith details
Malthus’ thoughts around overproduction. Jean-Baptiste Say proposed that
‘Supply creates its own demand’, but Malthus argued that in the case of the
labour market, for example, there was often a large surplus in the form of
unemployment (this effect is amplified by price floors). Once again, guys, if you have any questions feel free to ask below, and make sure that you subscribe!
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