This document provides an overview of Malthusian theory of economic growth. Malthus believed that population growth would outpace food production, leading to increasing poverty. He argued that population grows geometrically while food production grows arithmetically, resulting in a widening gap between the two. This "Malthusian trap" could only be escaped through population controls or negative checks like famine that reduce population levels. While criticized for its pessimism, Malthusian theory remains relevant for less developed countries with high population growth straining limited resources.

1. Malthusian Theory
of Growth
Lecture 2
Prof. Prabha Panth

2. 223-Sep-13
Malthusian model
 “Essay on the Principle of Population”
1798,
 Unlike Smith, he looked not at wealth, but
at poverty,
 Economic growth is not automatic,
 It is not smooth, but has fluctuations,
 Population growth will overtake growth of
food, leading to increasing poverty.

3. 323-Sep-13
Assumptions
 Capitalist economy,
 Three classes – workers, landlords and
capitalists,
 Total supply of land is fixed,
 Diminishing returns on land,
 Growth of population is directly related to
the wage rate (w).
As w increases, population increases,
and if w decreases, population decreases.

4. 423-Sep-13
Economic growth
 Capitalists invest,
 Workers and landlords only consume
 Increase in investment, leads to increase
in capital,
 Increase in capital increases output and
growth.
 Per capita income also increases.
 But Malthus felt this will not continue
forever.

5. 523-Sep-13
Population Growth
 Population growth is a function of wage
rate.
 When wage rate increases, birth rate also
increases, population increases
 When wage rate decreases, death rate
increases, population decreases.
 So with more growth, more output, and
wages increase,
 This cannot be sustained, due to
population growth.
Prof. Prabha Panth

6. 623-Sep-13
Rate of population growth
 Population grows geometrically
(exponentially),
 But food production grows arithmetically
(linearly).
 So as economic growth continues, the gap
between food and population will widen,
 This will eventually lead to fall in standards
of living, and increasing poverty.
 This is known as the “Iron Law of Wages.”

7. 723-Sep-13
Population and food growth
Time Population
g=a x 2
Food
g=b+2
y1 10 10
y2 20 12
y3 40 14
y4 80 16
y5 160 18
mn
Time
0
Food
Population

8. 823-Sep-13
 This is known as the “Malthusian Trap”
 When economic growth takes place, it will
not improve the conditions of workers,
 Higher growth, leads to increase in wage
rates,
 Higher wage rates leads to increase in
population. Demand for food rises,
 But food does not grow at the same rate
as population.
 The increasing gap, leads to
poverty, hunger, death, more misery.

9. 923-Sep-13
Solution
 Malthus suggests that population growth should
be controlled.
 This can be done by „Voluntary‟ or „Positive‟
checks,
 Such as birth control, late marriages, family
planning.
 Otherwise, there will be „Negative‟ checks to
population growth –
 Famines, floods, wars, diseases will increase
death rate, and bring population down to
manageable levels.

10. 1023-Sep-13
Criticism
 Pessimistic view of the economy
 Data of developed countries shows that as
PCY increased, birth rates automatically
decreased.
 Called “demographic transition”
 Output of food has also increased, due to
improved technology
 Imports and free trade of food can take
place, Malthus was for Protection.

11. 1123-Sep-13
 But:
 Malthusian theory is still applicable to less
developed countries.
 Increasing population is consuming all the
surplus, nothing available for investment.
 Inferior land is used, and output falls,
 Technology is inferior,
 In recent times, the depletion of natural
resources, has shown the importance of
Malthusian theory of exponential growth in a
finite world.