¹ Smart, William, Economic Annals of the Nineteenth Century, 1801–1820 (London: Macmillan and Company, 1910), 10 ff., 42 ff., 56, 79 ff., 107.Google Scholar

² See Heckscher, Eli F., The Continental System (Oxford: The Clarendon Press, 1922), especially ch. v. Professor Heckscher's excellent study proves that widespread smuggling, Napoleon's “fiscalism,” and new markets obtained by the British destroyed the effectiveness of the Continental System as a means for weakening Britain economically.Google Scholar

³ Speculative ventures in South America became important in 1808. They were facilitated by excessive issues of paper money by the Bank of England. See Heckscher. 240 and 330 ff.; Smart, 184 ff., 203, 263 ff.

⁴ Heckscher, ch. v.

⁵ Smart, ch. xv and p. 320.

⁶ Ibid., ch. xxi.

⁷ Ibid., chs. xxiii-xxviii. Smart explains that the official view of the cause of the depression was that “the distress was due to the transition from twenty-three years of war to the ordinary conditions of peace, with all the disturbance, both to demand and supply, that this necessarily involved—particularly the reduction of the national expenditure in one year from £120,000,000 to £70,000,000, the withdrawal of the one great customer, the government, from the market, and the return of some 300,000 soldiers and sailors to be reabsorbed into the industry of the country” (590).

⁸ Ibid., 563–564.

⁹ Ibid., ch. xxix.

¹⁰ Ibid., 688 ff., ch. xxxii; Smart, William, Economic Annals of the Nineteenth Century, 1821–1830 (London, 1917), chs. i and x.Google Scholar

¹¹ Bonar, James, Malthus and His Work (London, 1885), 290.Google Scholar

¹² There is some question about the origin of the principle that we know today as “Say's Law.” J. H. Hollander states that James Mill in Commerce Defended (1808) used the argument that “goods are the market for goods” (pp. 81, 84–85, 86, and 88), in order to refute the contention of Thomas Spence in Britain Independent of Commerce (1807), that there could occur a general condition of overproduction (p. 34n). See the Editor's Introduction to David Ricardo's Notes on Malthus’ Principles of Political Economy (Baltimore: The Johns Hopkins Press, 1928), lxxxi–lxxxii. Hollander suggests that it is likely that Say obtained the idea from James Mill, with whom he was well acquainted. At any rate, we know that Say did not write his chapter entitled “Des Débouchés” (Treatise on Political Economy, Book I, ch. xv), until 1814.Google Scholar

¹³ Keynes, J. M., Essays in Biography (London: Macmillan and Company, 1933), 144.Google Scholar

¹⁴ An early appraisal of Malthus's importance in the development of economic thought which is typical of the evaluation of his work is that of Walter Bagehot. After having considered Malthus's population theory, he remarked: “To most other parts of Political Economy Mr. Malthus adds very little. And on some he supported errors which were even then becoming antiquated. He was a strenuous advocate of ‘Protection to Agriculture,’ and believed that the supply of all commodities might exceed the demand, which is as much as to say that there is too much of everything. The truth is that Mr. Malthus had not the practical sagacity necessary for the treatment of Political Economy in a concrete way, or the mastery of abstract ideas necessary to deal with it in what we should call a scientific way. He tried a bad mixture of both. There is a mist of speculation over his facts, and a vapour of fact over his ideas.” Bagehot, Walter, Economic Studies (London, 1880), 148.Google Scholar

¹⁵ Treatise on Political Economy (3d American ed.; Philadelphia, 1827), 76.Google Scholar

¹⁶ Ibid.,78.

¹⁷ Ibid., 79. The profits of marginal firms will be wiped out and these firms will be driven out of business.

¹⁸ Ibid., 78.

¹⁹ Ibid., 77.

²⁰ Ibid., 83.

²¹ Ibid.

²² There are several passages in Say's writings to this effect. See ibid., 299; see also, Letters to Thomas Robert Malthus on Political Economy and Stagnation of Commerce by Jean Baptiste Say (London: G. Harding's Bookshop, 1936), 34–36. With regard to hoarding, Say stated: “As to sums accumulated without being productively consumed, for instance, those hoarded up in the miser's coffer, neither Smith, myself, nor any one undertakes to defend this, but they alarm us but little in the first place, because they are very inconsiderable in comparison to the productive capitals of a nation, and in the second place because their consumption is no more than suspended.” Ibid., 35.

²³ Treatise, 304–305.

²⁴ Ricardo, David, Principles of Political Economy and Taxation (London, 1817), 399–400.Google Scholar

²⁵ Ibid., 133–134, 401. The rise in the price of necessaries was inevitable, of course, because of the need for resort to poorer and poorer grades of land as population increased.

²⁶ Ibid., 405–406.

²⁷ Ibid., 401–402.

²⁸ Ibid., 403–404.

²⁹ Ibid.

³⁰ Ibid., 404–405.

³¹ For the reasons why Malthus rejected the position of Ricardo and Say see below, 190–200.

³² Sec p. lxxxv of J. H. Hollander's Introduction to David Ricardo's Notes on Malthus’ Principles of Political Economy.

³³ lbid., 162.

³⁴ Ibid. Ricardo states: “If of the two things necessary to demand, the will and the power to [purchase] the will be wanting, and consequently a general stagnation of trade has ensued, we cannot do better than follow the advice of Mr. Malthus, and oblige the Government to supply the deficiency of the people. We ought in that case to petition the King to dismiss his present economical ministers, and to replace them by others, who would more effectually promote the best interests of the country, by promoting public extravagance and expenditure….”

³⁵ See Letters of David Ricardo to Thomas Robert Malthus, 1810–1823, edited by Bonar, James (Oxford, 1887), 101, 169–170; Notes on Malthus’ Principles of Political Economy, 160 ff.Google Scholar

³⁶ He stated, for example: “Mr. Malthus never seems to remember that to save is to spend, as surely, as what he exclusively calls spending.” Notes on Malthus’ Principles, 245; and “We agree too that effectual demand consists of two elements, the power and the will to purchase; but I think the will is very seldom wanting where the power exists, for the desire of accumulation will occasion demand just as effectually as a desire to consume; it will only change the objects on which the demand will exercise itself.” Letters to Malthus, 43. For additional assertions to the same effect, see Notes on Malthus’ Principles, 164, 173–174; Letters to Malthus, 45, 54.

³⁷ Letters to Malthus, 174.

³⁸ Ricardo's Notes on Malthus’ Principles, xxi.

³⁹ Malthus, T. R., Principles of Political Economy Considered with a View to Their Practical Application (London, 1820), Introduction particularly, 20–24.Google Scholar

⁴⁰ Ibid., 10–11, 518.

⁴¹ See below, 193–195. I have already pointed out the degree to which Malthus anticipated parts of Keynes's general theory. See “Malthus and Keynes,” The Journal of Political Economy, L (1942), 901–919.Google Scholar

⁴² In making an abstract of Malthus's general theory, one is confronted with many of the same difficulties that had to be faced by those who constructed “models” of Keynes's general theory. Malthus's general theory must be pieced together from the various arguments he made against the classical position.

⁴³ Principles, 16.

⁴⁴ Keynes, Essays in Biography, 139–140 (letter of Malthus to Ricardo, January 26, 1817). In his Essays, Keynes has quoted from several unpublished letters of Malthus to Ricardo which were discovered by Mr. Piero Sraffa (see Essays, 138).

⁴⁵ Ibid., 139; also, Malthus, Principles, Introduction and 521–522.

⁴⁶ See below. 193–195.

⁴⁷ Principles, 76–78.

⁴⁸ Ibid., 308–309.

⁴⁹ Ibid.

⁵⁰ Ibid., 334–335.

⁵¹ Ibid.

⁵² Ibid., 306–307, 317, 325–330.

⁵³ Ibid., 374, 450–451, 464–466, 487–488. Thus he stated, “With regard to the capitalists who are so engaged [in production], they have certainly the power of consuming their profits, or the revenue which they make by the employment of their capitals; and if they were to consume it, with the exception of what could be beneficially added to their capitals, so as to provide in the best way both for an increased production and increased consumption, there might be little occasion for unproductive consumers. But such consumption is not consistent with the actual habits of the generality of capitalists. The great object of their lives is to save a fortune, both because it is their duty to make a provision for their families, and because they cannot spend an income with so much comfort to themselves, while they are obliged perhaps to attend a counting-house for seven or eight hours a day” (465).

⁵⁴ Ibid., 365–366.

⁵⁵ Ibid., 365.

⁵⁶ Ibid., 469.

⁵⁷ Ibid., 516.

⁵⁸ Ibid.

⁵⁹ Ibid., 465–466. “Almost all merchants and manufacturers,” he said, “save, in prosperous times, much more rapidly than it would be possible for the national capital to increase, so as to keep up the value of the produce. But if this be true of them as a body, taken one with another, it is quite obvious that, with their actual habits, they could not afford an adequate market to each other by exchanging their several products.”

⁶⁰ Ibid., 353–354.

⁶¹ Ibid., ch. vii.

⁶² Ibid., 8–9, 352 ff.

⁶³ Concerning the necessary balance between saving and consumption, Malthus wrote: “Adam Smith has stated, that capitals are increased by parsimony, that every frugal man is a public benefactor, and that the increase of wealth depends upon the balance of produce above consumption. That these propositions are true to a great extent is perfectly unquestionable. No considerable and continued increase of wealth could possibly take place without that degree of frugality which occasions, annually, the conversion of some revenue into capital, and creates a balance of produce above consumption; but it is quite obvious that they are not true to an indefinite extent, and that the principle of saving, pushed to excess, would destroy the motive to production. … If consumption exceed production, the capital of the country must be diminished, and its wealth must be gradually destroyed from its want of power to produce; if production be in a great excess above consumption, the motive to accumulate and produce must cease from the want of will to consume. The two extremes are obvious; and it follows that there must be some intermediate point, though the resources of political economy may not be able to ascertain it, where, taking into consideration both the power to produce and the will to consume, the encouragement to the increase of wealth is the greatest.”Ibid., 8–9. In chapter vii, section ix, of his Principles, Malthus applied this idea to the post-Napoleonic situation.

⁶⁴ Ibid., 399.

⁶⁵ Ibid.

⁶⁶ Letters of David Ricardo to Thomas Robert Malthus, 43.

⁶⁷ The Economic Journal, XVII (1907), 275. Malthus's letter to Ricardo of October 9, 1814, is here published with a note by H. S. Foxwell.

⁶⁸ Principles, 9–10, 418–419, 430–431, 479–486, 507.

⁶⁹ See above, 192–193.

⁷⁰ Principles, 351 ff. Like Smith, Malthus defined “productive labor” as that resulting in material objects which satisfy human desires. See chapter i, section ii, especially 49–50.

⁷¹ Ibid., 358–359, 469–470; see also Malthus's letter of January 26, 1817, to Ricardo, in Keynes, Essays in Biography, 140.

⁷² Principles, 359–360.

⁷³ Ibid., 352–353.

⁷⁴ Ibid., 61. Malthus went on to say that “no political economist of the present day can by saving mean mere hoarding” (32).

⁷⁵ Ibid., 369

⁷⁶ There is substantial evidence that Ricardo and Say believed that Malthus's theory of a deficient consumer demand depended on the existence of hoarded funds. See Ricardo's Notes on Malthus’ Principles, 164, 173–174, 225; Ricardo's Letters to Malthus, 43, 45, 54; Say's Letters to Malthus, 34–36.

⁷⁷ Principles, 359.

⁷⁸ Ibid., chapter vii, particularly sections vii and viii.

⁷⁹ Ibid., 417–422.

⁸⁰ Ibid., 13, 158, 318–319, 372–373, 476.

⁸¹ See above, 187–188.

⁸² Principles, 399, 493.

⁸³ Ibid., 361–362n. The same opinion is expressed later. See 444.

⁸⁴ Ibid., chapter vii, especially section viii.

⁸⁵ Ibid., chapter vii, section x. J. M. Keynes has pronounced this section “the best economic analysis ever written of events of 1815–1820,” Essays in Biography, 146.

⁸⁶ Principles, 492–493. It is not always clear whether by “capital” Malthus means “physical” capital or a fund of money.

⁸⁷ Ibid., 493.

⁸⁸ Ibid.

⁸⁹ Ibid., 494.

⁹⁰ Ibid. The increase in the labor supply was caused by the disbanded soldiers and sailors, as well as by the growth of population that the war had stimulated.

⁹¹ Ibid.

⁹² Ibid.

⁹³ Ibid., 496–497.

⁹⁴ Ibid., 498–499.

⁹⁵ Ibid., 499–500.

⁹⁶ Ibid. Malthus pointed out: “If some of the principal governments concerned spent the taxes which they raised in a manner to create a greater and more certain demand for labour and commodities, particularly the former, than the present owners of them, and if this difference of expenditure be of a nature to last for some time, we cannot be surprised at the duration of the effects arising from the transition from war to peace.”

⁹⁷ Ibid., 502–503.

⁹⁸ Malthus was of the opinion that a community characterized by a deficient effective demand required a body of “unproductive consumers”; e.g., “menial servants, doctors, and lawyers.” He included any one whose efforts did not result in material objects available for market sale. He stated, for example, the following: “It has been already shewn that, under a rapid accumulation of capital, or, more properly speaking, a rapid conversion of unproductive into productive labour, the demand, compared with the supply of material products, would prematurely fail, and the motive to further accumulation be checked, before it was checked by the exhaustion of the land. It follows that, without supposing the productive classes to consume much more than they are found to do by experience, particularly when they are rapidly saving from revenue to add to their capitals, it is absolutely necessary that a country with great powers of production should possess a body of unproductive consumers.” Ibid., 463.

⁹⁹ Ibid., 511–512.

¹⁰⁰ Ibid. 512–513.