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The Malthusian Model of Income Determination and Its Contemporary Relevance

Published online by Cambridge University Press:  07 November 2014

Harold G. Vatter
Harold G. Vatter*
Affiliation:
Carleton College, Minnesota
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Extract

A formal representation of Malthus' views on the short-run expansion and contraction of income and employment, as discussed in the Principles, has not, so far as I know, been published. Aside from any pedagogical usefulness inherent in the attempt made here to do this, it might also be worth while to examine the model with a view to its possible relevance for the contemporary scene.

Malthus' concern with effective demand produced a classification of the major categories of spending which has interesting implications for the advanced, mixed economies of our time.

It will be recalled that his flows of spending are set up somewhat as follows:

1. Consumption by the productive classes, consisting of

(a) spending for necessaries by labourers;

(b) spending for necessaries, conveniences, and luxuries by capitalists.

2. Investment spending (chiefly by capitalists), composed of

(a) circulating capital inputs, mainly necessaries contained in the wages fund;

(b) fixed capital inputs.

3. Spending by unproductive consumers, largely for conveniences, luxuries, and non-material personal services, that is, by

(a) private persons out of rentier incomes (e.g., rents and interest income on the public debt);

(b) government out of public funds raised through taxation or borrowing.

4. Foreign demand.

Type
Articles
Information
Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique , Volume 25 , Issue 1 , February 1959 , pp. 60 - 64
Copyright
Copyright © Canadian Political Science Association 1959

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References

1 In this discussion foreign demand will be ignored for the sake of simplicity.

2 Hansen, Alvin, Business Cycles and National Income (New York, 1951), 243–4, 245.Google Scholar

3 See Schumpeter, Joseph, Business Cycles (New York, 1939), I, 108–9.Google Scholar

4 The short-run schedule of the propensity to reduce costs would be an inelastic inverse function of income; whereas that for commodity extensions would be an inelastic direct function.