Playing Fast and Loose with the Facts About the Writings of Malthus and the Classical School

Sometime after the Second World War ended and the Cold War heated up, the fields of growth and development came of age. The efforts of the United States to help rebuild Europe, as well as the long list of third-world ethnic groups battling to emerge as independent nation-states, worked to generate scholarly interest in these topics. National economic development and growth-modeling were fertile grounds for a spate of college textbooks helping to define these emerging college electives (Arndt 1989)) In recent years, Professor Hendrik Van den Berg published an original text that (in his words) would not be "just another development text" but something different and original. Van den Berg has organized the best materials from both the standard growth models courses and the economic development courses into one master text under the title Economic Growth and Development (2001). (2) It is a clever and strikingly original approach to growth and development. An enormous amount of analysis and empirical evidence is marshaled together in order to provide an answer to the question, "Why do some economies provide their citizens with high standards of living and many opportunities for advancement while others do not seem to be able to satisfy the most simple human wants or offer people very many options for change?" (Van den Berg 2001: vii). This important question is answered by treating the growth and development literature of the postwar period as essentially a series of responses to an older, outdated growth model attributed to the nineteenth-century classical school writers and, most significantly, the Reverend Thomas Robert Malthus. This was done in order to make this text come alive and to provide a coherence to the multitude of technical issues presented along the way. Unfortunately, many of the interpretations of the nineteenth-century model that pave the way for Van den Berg's discussions are themselves misinterpretations, based on older and outdated interpretations of the classical school that have been provided by historians of economic thought and (as I shall show below) are now firmly embedded in the standard textbooks on growth modeling. Setting the record straight will not be an easy matter at all. The architecture of the text requires that the student first master "the" classical model of growth that supposedly dates back to 1798, when the Reverend Thomas Robert Malthus presented his "gloomy" forecasts about overpopulation and planetary misery in his Essay on the Principle of Population. (3) This Malthusian growth model was allegedly driven by the claims that investment on land produces diminishing marginal returns and that, since land is limited in amount, the future prospects of mankind are limited and stark. According to Van den Berg and other writers, Malthus's doomsaying allegedly dominated classical school thinking about economic growth and development until the twentieth century. In this thinking, as population increases and the land is harvested more intensely, food prices rise, real wages fall, and the profit rate sinks until the economy reaches some sort of zero growth in per capita GDP. In this "stationary state" the existing level of per capita income is at its starvation level and the growth process is at a dead end. The growth model literature typically shifted its focus to the twentieth century. Now, new rays of light appear. Roy Harrod's growth model moved attention away from land by emphasizing reproducible capital goods and productivity but stuck with a fixed proportions growth model that was simply too unrealistic for the rest of the profession to swallow. As Van den Berg states, Joseph Schumpeter as early as 1912 (sic) brought in the clustering of inventions and the innovative entrepreneurs, but these remarkable insights remained outside the standard growth model literature, which centered about the work of Robert Solow. (4) Solow's 1956 growth model (like Harrod's) dropped the land scarcity idea of the classical school completely but was still welded to the idea of diminishing marginal returns (Solow 2000). …