In Thomas Malthus' time, there was a dispute over the corn laws (which were tariffs on imported grains imposed in the early 1800s). Landlords favored the corn laws, and though the landlords were the most powerful class at that time, they were coming under increasing attack from the rising merchant and industrial capital classes. Why the conflict?
The tariffs raised the price of corn, something the landlords favored, but since corn was a key component of the subsistence workers relied upon to survive, the price of labor - the wage rate - would reflect the price of corn. If the price of corn was high, wages would be high, and when the price of labor rises merchants and capitalists would have a more difficult time selling their goods profitably. The fear was compounded by the end of the Napoleonic wars and the threat of large imports of cheap grain from France.
So what was the effect of the corn laws on the price of corn, on wages, on the welfare of the poor, and so on? Finding an answer to this question, as well as the answer to what impact poor laws have, and what causes gluts (recessions) drove both Malthus and Ricardo to develop theoretical models that could guide them to the answer and hence to the correct policy prescription. Thus, their analytical contributions to economics were driven primarily by the important social questions of the time.
Here's more on Malthus:
Malthus blogging on the Corn Laws, by Daniel Little: I think that Thomas Malthus would have been very much at home in the blogosphere. He weighed in on the issues of the day, bringing careful logical analysis of economic theory to bear on the policy issues that were up for debate. And he was very interested in making the connection between economic principles and real empirical evidence. This is particularly true in his contributions to the debate on the Corn Laws in 1814 and 1815. Malthus authored pamphlets on these issues in 1814 ("Observations on the effects of the corn laws"; link) and 1815 ("Grounds of an opinion on the policy of restricting the importation of foreign corn"; link), and they repay scrutiny today; they are powerful instances of a very smart economist probing the theory and the facts surrounding a complex policy issue. (Here is a nice survey of Malthus's theories; link.)
The Corn Laws might be thought of as a form of "stimulus package" for the British economy in the early nineteenth century. By setting a high tariff on the import of wheat and other grains, Parliament aimed to protect the agricultural sector and to encourage the expansion of grain production to make Britain more independent from external grain providers. One might also compare the debate to the NAFTA debate or to policy deliberations in the 1960s concerning "import substitution" strategies. Opponents argued that removal of the tariffs would bring down the price of grain, a central component of the wage basket; this would help the poor and would also permit a significant reduction of the wage as well. So the issue divides the interests of land owners, industrialists, and the poor.
Malthus's position in the two essays is somewhat different. In the first article he promises to lay out the issue dispassionately, dispelling false opinions about what the effects of the proposed policy might be and diving into the advantages and disadvantages of the policy. He writes that "some important considerations have been neglected on both sides of the question, and the effects of the corn laws, and of a rise or fall in the price of corn, on the agriculture and general wealth of the state, have not yet been fully laid before the public." A bit further on, he writes:
My main object is to assist in affording the materials for a just and enlightened decision; and whatever that decision may be, to prevent disappointment, in the event of the effects of the measure not being such as were previously contemplated. Nothing would tend so powerfully to bring the general principles of political economy into disrepute, and to prevent their spreading, as their being supported upon any occasion by reasoning, which constant and unequivocal experience should afterwards prove to be fallacious.
So--"let's do rigorous and systematic analysis based on the principles of political economy and our best understanding of the facts." Good advice for a policy debate.
Quite a bit of the analysis is devoted to refuting an idea that Malthus attributes to Adam Smith ... [...continue reading...]