Smith & Ricardo vs. Malthus, Bentham, Senior, J.S. Mill and Say - Essay Example

Introduction The history of economic thought deals with the different economic thinkers that have shaped the field of economics from ancient world to present day. These will be discussed in this essay including Smith, Ricardo, Malthus, Bentham, J.S Mill and Say. Adam Smith (1723-1790) An Inquiry into the Nature and Causes of the Wealth of Nations (1776) and Theory of moral sentiments (1759) shaped economics. His theory has three main features: Division of labor (DOL), price allocation and nature of economic growth.

DOL is the result of man’s desire to be free, and propensity to truck, barter and exchange (Smith n.p). It leads to increased productivity and consequently greater output, high wages and income per capita thus opulence of nations (Ekelund & Hebert 129). Natural harmony exists in economy due to the mechanism of the ‘invisible hand’ which drives individuals’ self-interests to promote greater good hence there is no need for government intervention. Competition in the market is vital and money is just for making trade more flexible.

David Ricardo (1772-1823) in his Principles of political economy and taxation (1817) was concerned with distribution of wealth within Smith’s analytical framework. Like Smith he advocated for competition without restraint. He also acknowledged existence of use value and exchange value but concentrated on the natural exchange value which is determined by scarcity and labor cost of production (Bhatia, 116). Since rent is not part of the cost (its value in excess of real production) and capital is past labor, this leaves labor cost to determine relative value of commodities (Ekelund & Hebert 156).

However, different types of labor are adjusted in market by relative rates of rewards and wages gravitate towards subsistence. If more than subsistence then population (labor supply) increases depressing wages and vice versa (p. 120). Thomas Robert Malthus (1766-1834) focus was on population. Unlike Ricardo, he saw an imbalance between population and means of subsistence hence ineffective demand. For Malthus population increased in geometrical progression while means of subsistence increased in arithmetic progression hence population was bound to outstrip supply of means of subsistence if not checked (Bhatia 135).

Population growth thus needed to be checked through preventive and positive checks such as delayed marriage, celibacy, moral restraint, floods, droughts, famine, disease and war. For Smith and Ricardo, demand for labor determined rate of population increase and was always kept at equilibrium by natural mechanisms such as child mortality. Jeremy Bentham (1748-1832) was founder of utilitarianism. Like Smith he claimed individuals are driven by self-interest but while Smith’s interests had natural identity, Bentham’s interests had an artificial identity as they were brought about by legislators and were about maximizing pleasure and minimizing pain (Bhatia 144).

Happiness results from pleasure and absence of pain while unhappiness is existence of pain and absence of pleasure. Human rationality for Bentham makes men to work towards achieving “the greatest happiness of the greatest number” (Bhatia, 145) For Smith, the good of all is an unintended consequence of the invisible hand and not a deliberate choice by rational economists. John Stuart Mill (1806-1873) like Smith was concerned with the nature of wealth. He stresses the importance of labor and differentiates production of goods and services and views services as not contributing to productive capacity of the economy thus the only vital element in production is productive labor (Bhatia 154).

Unproductive consumption like unproductive labor does not contribute anything to production. Like Smith, he views division of labor as advantageous but limited by the extent of the market. He recognized existence of wage differences resulting from labor immobility and lack of competition and not the presence of competition (Montgomery 210). Mills was also an advocate of government intervention in ensuring good for the society. Jean Baptiste Say (1767-1832) developed Say’s law of markets in his Treatise on political economy.

According to this law “it is production which opens a demand for products…a product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value” (Bhatia 139). As such, there can never be a question of demand crisis in the market as claimed by Malthus and Mill. Prices adjust supply in response to demand thus output cannot be more than population. Works citedBhatia, HL. History of Economic Thought 4ed. New Delhi: Vikas, 2007.Ekelund, Robert B, Jr and Hebert, Robert F.

History of Economic Theory and Method. 6ed. Long, Grove IL: Waveland Press, Inc, 2013.Montgomery, M. J.S Mill’s Road to Leviathan II: The Principles of Political Economy, In Jurgen, G, Ed, Handbook of the History of Economic Thought: Insights on the Founders of Modern Economics, New York: Springer, (2011): 205-240Smith Adam. An Inquiry to the Nature and Causes of the Wealth of Nations, Edwin Cannan (ed). New York: Modern Library, 1776.