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Wednesday, May 29, 2013

Population theory

Richard Cantillon's theory of wages is dependent on population in a way that was copied almost word for word by Adam Smith in the Wealth of Nations, which in turn inspired Malthus's famous anti-populationist hysteria. Cantillon's long-run wage theory depends on the supply of labour, which in turn depends on levels and growth of population. In contrast to the later Malthus, however, Cantillon engaged in a sophisticated analysis of the determinants of population growth. Natural resources, cultural factors, and the state of technology he diagnosed as particularly important. He saw prophetically that the colonization of North America would not be a simple displacement of one people by another, but that new agricultural technology would support a far larger population per acre of land. Hence the extent to which existing resources, land and labour, can be utilized depends on the existing state of technology. Thus pre-colonial North America was not ‘overpopulated’ by Indians, as some had believed; instead, the Indian population level had adjusted to the given resources and technology available. In short, Cantillon foreshadowed the modern theory of ‘optimum’ population, in which the size of population tends to adjust to the most productive level given the resources and technology available.

While Cantillon described a pre-Malthusian alleged tendency of human beings to multiply like ‘rats in a barn’, without limit, he also recognized that religious and cultural values can modify such tendencies. An increase in the demand for agricultural products that are land-intensive would tend to reduce the demand for agricultural labour and eventually cause a fall in the supply of such labour and hence of the population as a whole. (Cantillon, it must be remembered, was writing in an age when the overwhelming bulk of the population was engaged in agriculture.) An increase in the demand for labour-intensive farm products, on the other hand, would bring about an increase in the demand for labour and hence of the population. Living, once again, in a country and an era of large feudal landed estates, Cantillon observed that it was the tastes of the proprietary classes that determined the consumer tastes and values of society, and hence the demand for products.

It should be noted that in an unusually sophisticated way, Cantillon pointed out that it was outside the scope of economic analysis to decide whether it is better to have a large population of poorer people or a smaller population of people who enjoy a higher standard of living: that must be for the values of the citizenry to decide.

Professor Tarascio points out that Cantillon's population analysis was far more subtle and modern than that of Smith, Ricardo, or Malthus. Rather than worry about a future unchecked population explosion, Cantillon's theoretical framework accounted for the current cultural change to smaller families in industrialized countries, as well as the likelihood that population will adjust itself downward to any future depletion of resources. Cantillon pointed out, for example, that as ancient civilizations declined, their population size declined along with them. The number of inhabitants of the Roman state in Italy, for example, declined from 25 million to about 6 million over a period of 17 centuries.

Austrian Perspective on the History of Economic Thought (2 volume set)

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