Essay on the Population Theory According to the Classical and the Neo-Classical Schools

From the early years of the nineteenth century to the end of the First World War in 1918, the classical and neo-classical schools of thought contributed greatly to the development of population theory.

The classical school of thought was founded by Adam Smith. Such illustrious personalities as David Ricardo, Thomas Malthus, Nassau Senior, John Stuart Mill and J.B. Say were associated with it.

These political economists believed that economics functioned better under a free and private initiative and in an atmosphere of vigorous competition rather than under government control.

The classical theory was based on the notion that the production, consumption and distribution of wealth are determined by economic laws.

At this point, it is necessary to distinguish between the classical and neo-classical schools of thought. The latter was founded by William Jerons, Carl Menger and Leon Walrus and had as its leaders Alfred Marshall, John Bates, Clerk, Irving Fisher and Wilfred Pareto.

The neo-classical school of thought placed a greater emphasis on mathematical economics and the analysis of the psychological background and/or consumer demands, decisions and actions. ⁶¹

The contribution of both the classical and the neo-classical schools of political economists to population theory concerned an examination of the controversial issue of the inter-relationship between population and production.

As pointed out earlier, two opposing streams of thought were propagated in the nineteenth century. According to the first, increasing population was an asset to production, resulting in improved standards of living.

The other maintained that population increase led to a lowering of production. The controversy arose mainly because the increase in population was considered by the former in terms of the number of hands that produce, leading to economic well-being, whereas the latter viewed population growth exclusively in terms of the number of mouths to be fed.

Neither of these opposing views was conclusively proved because of the lack of both empirical and theoretical evidence. It was difficult to evaluate the net influence of population on production, as people have to be viewed both as producers and consumers, contributing to both aspects of production, that is, supply and demand.

The point therefore is whether population growth, while adding to the number of producers and consumers, simultaneously leads to a proportionate increase in supply and demand. The crucial question, therefore, was “How is the per capita productivity affected by population size?”

This issue appeared to be resolved when the principle of diminishing returns was formulated in the second decade of the nineteenth century.

According to this natural law based on agricultural production, successive additions of capital to a fixed quantity of labour would result in an increase in output, but subsequently the marginal output and later the average production associated with the variable factor would begin to drop.

This law of diminishing returns also supported the Malthusian doctrine, for it stated that population growth tends to depress per capita production adding to demand, thereby meaning that, after the ratio of workers to resources reaches a certain point, any further increase Population would cause a fall in the average production per

Though the classical economists accepted the principle of the returns as one of the basic economic laws and gave it better of a natural law, the controversy over the relationship between population and production continued to rage at two levels empirical and the theoretical.

As the nineteenth century the advanced, it became increasingly clear, that empirically speaking, the general well-being of the people and population growth went hand in hand. This observation was, of course, used to discredit both the Malthusian theory and the principle of diminishing returns.

At the same time, some writers, say, for example, did sound a note of caution that the current advancement in production was because of several inventions, greater use of power and machinery and other efficient devices, and that the same rate of advancement could not be guaranteed if population continued to grow rapidly.

John Stuart Mill and Henry Sedgwick were of the opinion that population had already reached the point of diminishing returns and that many countries would be better off with smaller numbers.

The question was also extensively discussed on the theoretical level. Though the majority accepted the principle of diminishing returns, some economists Gray, Chalmers, Burn and Wirth asserted that an increasing number of people would stimulate production.

As the nineteenth century advanced, the production theory itself underwent several changes. Such economists as Godwin, Revenstone. Sedler, Edmonds, Scrope and Ricardo struck at the very base of the current production theory by attempting to disprove the very principle of diminishing returns.

A neo-classical economist like Marshall pointed out that this law was applicable mainly to agricultural and not to industrial production.

It was clarified that as industries offered greater opportunities for division of labour and as there was continuing technological advancement, the law of constant or increasing returns rather than that of diminishing returns, was widely applicable to the manufacturing industries.

This new development in the theory of production again raised questions regarding the relationship between population and production.

It was soon realised that the total and per capita production depend not only on population but on several other factors in the economic system, such as resources, labour, capital and technology.

The role of the population variable, therefore, had to be studied within the framework of the total economic system. It was asserted that the per capita production was a direct function of land and other resources referred to above, and was inversely related to the number of people.

The population variable was thus seen to play a dual role one, as a factor of labour supply and the other, as a divisor of the total product.

It is, however, worth noting that not much attention was paid either to the ratio of workers to the total population, or to the producer-consumer ratio, though some consideration was given to the quality of workers in terms of skills.

The possibility of population interaction with the factors of technology and capital was, however, not explored.

One interesting made by these classical economists was that it was the factor of capital which influenced the size and growth of population and not the other way round, indicating that the problem of capital formation did not receive much attention from them.

By the end of the nineteenth century, the population variable was given a place of less importance even in the theory of distribution, for it was realised that this theory could not be based only on one or a few simple forces.

Marshall, in his work on the production and distribution phenomena, paid little attention to the population factor. Some writers even completely ignored it.

It is thus possible to observe the change in the thinking of intellectuals from Malthus at the beginning of the nineteenth century to Marshall at the end of the century a change from a position of considering population as an important factor influencing economic growth to that of thinking of it as being of doubtful significance.

This change in thinking may be understood against the background of actual facts. During the century, economic growth in the Western world kept pace with population growth.

It was only natural that this factual experience should negate the gloomy picture painted by Malthus and make it appear as if it related to some distant unknown future.

In the later years of the nineteenth century, however, some economists continued to view the increase in the number of people as a threat to rising standards of living in the long run.