Malthus opposes the postulate that supply and demand are identical with a detailed critique in chapter vi of his Definitions in Political Economy.[224] In his Elements of Political Economy, James Mill had declared:
‘What is it that is necessarily meant, when we say that the supply and the demand are accommodated to one another? It is this: that goods which have been produced by a certain quantity of labour, exchange for goods which have been produced by an equal quantity of labour. Let this proposition be duly attended to, and all the rest is clear.—Thus, if a pair of shoes is produced with an equal quantity of labour as a hat, so long as a hat exchanges for a pair of shoes, so long the supply and demand are accommodated to one another. If it should so happen, that shoes fell in value, as compared with hats, which is the same thing as hats rising in value compared with shoes, this would simply imply that more shoes had been brought to market, as compared with hats. Shoes would then be in more than the due abundance. Why? Because in them the produce of a certain quantity of labour would not exchange for the produce of an equal quantity. But for the very same reason hats would be in less than the due abundance, because the produce of a certain quantity of labour in them would exchange for the produce of more than an equal quantity in shoes.’[225]
Against such trite tautologies, Malthus marshals a twofold argument. He first draws Mill’s attention to the fact that he is building without solid foundations. In fact, he argues, even without an alteration in the ratio of exchange between hats and shoes, there may yet be too great a quantity of both in relation to the demand. This will result in both being sold at less than the cost of production plus an appropriate profit.
‘But can it be said on this account’, he asks, ‘that the supply of hats is suited to the demand for hats, or the supply of shoes suited to the demand for shoes, when they are both so abundant that neither of them will exchange for what will fulfil the conditions of their continued supply?’[226]
In other words, Malthus confronts Mill with the possibility of general over-production: ‘... when they are compared with the costs of production ... it is evident that ... they may all fall or rise at the same time’.[227]
Secondly, he protests against the way in which Mill, Ricardo and company are wont to model their postulates on a system of barter: ‘The hop planter who takes a hundred bags of hops to Weyhill fair, thinks little more about the supply of hats and shoes than he does about the spots in the sun. What does he think about, then? and what does he want to exchange his hops for? Mr. Mill seems to be of opinion that it would show great ignorance of political economy, to say that what he wants is money; yet, notwithstanding the probable imputation of this great ignorance, I have no hesitation in distinctly asserting, that it really is money which he wants....’[228]
For the rest, Malthus is content to describe the machinery by which an excessive supply can depress prices below the cost of production and so automatically bring about a restriction of production, and vice versa.
‘But this tendency, in the natural course of things, to cure a glut or a scarcity, is no ... proof that such evils have never existed.’[229]
It is clear that in spite of his contrary views on the question of crises, Malthus thinks along the same lines as Ricardo, Mill, Say, and MacCulloch. For him, too, everything can be reduced to barter. The social reproductive process with its large categories and interrelations which claimed the whole of Sismondi’s attention, is here completely ignored.
In view of so many contradictions within the fundamental approach, the criticism of Sismondi and Malthus have only a few points in common: (1) Contrary to Say and the followers of Ricardo, they both deny the hypothesis of a pre-established balance of consumption and production. (2) They both maintain that not only partial but also universal crises are possible.