1 / 20

MALTHUS AND RICARDO

MALTHUS AND RICARDO. THE DISMAL SCIENTISTS. INTRODUCTION. Current population trends, especially in developing countries Implications for per-capita income, poverty Similar questions, late 18th century Where is society headed? Is the outcome of growth favorable?

xiu
Download Presentation

MALTHUS AND RICARDO

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. MALTHUS AND RICARDO THE DISMAL SCIENTISTS

  2. INTRODUCTION • Current population trends, especially in developing countries • Implications for per-capita income, poverty • Similar questions, late 18th century • Where is society headed? • Is the outcome of growth favorable? • How will income be distributed? How will different groups in society fare?

  3. Corn Laws controversy; and contemporary versions • Economics seen as relevant to these immediate problems; could provide • Simple, effective method of analysis • Leading to policy recommendations

  4. MALTHUS • Major work: An Essay on Population • Goal: refute optimism of Godwin (and others) about perfectability of society • Core of criticism: confrontation, population growth and growth of food supply

  5. The model: • Begins with Smith’s model: capital accumulation as the motive force underlying growth • Added population theory

  6. Major hypothesis: population can grow geometrically; food supply can grow arithmetically • Corollary: Either positive checks (increasing the death rate) or preventive checks (decreasing the birth rate) are always in operation • Corollary: ultimate check to human reproductive capacity: food supply limitations

  7. So: • Population growth is never restrained for motives other than fear of hunger • There is always population pressure on the food supply • A growing population is incompatible with increasing living standards

  8. Policy implications: attempts to relieve poverty are doomed to failure • Most likely outcome: the Four Horsemen of the Apocalypse ride again • Any hope of relief? • Improved moral, religious habits • Appropriate public policy

  9. Conclude: the power of Malthus’s ideas? • Were simple; seemingly in accord with common sense • Population theory became a key part of classical economic theories; and of the classical theory of economic policy

  10. Problems: • “Apocalyptic fallacy” problem: ignored • Relationship of birth rates to death rates: birth rate may be dependent on death rate, not independent of it • That is: checks to population growth may be dependent on changes in the population • Ignored the possible importance of technology

  11. Another economic theory of fertility and population growth: an application of rational choice theory • Children as consumption, investment goods • Implication: family size a function of • Income • Tastes

  12. Opportunity cost/relative prices • Example: rural vs. urban net returns to having children • Recent decrease in fertility, population growth in U. S.? • Higher consumption aspirations • Increasing real wages, especially for women

  13. DAVID RICARDO • Major work: Principles of Political Economy and Taxation • Goal: to explain, systematically • The process of economic growth • The distribution of income • The linkages between growth and income distribution

  14. The growth model: • Elements: • Technological shocks • Capital accumulation • Population theory • Diminishing returns

  15. How does the model work? • Something (changing technology, perhaps) changes profit expectations • This encourages capital accumulation • Output grows, increasing the demand for labor • Wage rate rises: population grows • Demand for food rises: food prices increase; workers added to less-productive land

  16. Profits fall, eventually to zero; capital accumulation stops • Wages go to subsistence level • “The stationary state”: diminishing returns expected to dominate changing technology in a (basically) agricultural society/economy

  17. What drives the system? Capital accumulation • Population changes? Part of the adjustment process to a new equilibrium • Who gains? Landlords: why? • Rising wheat prices • Bring less-fertile land into cultivation • Increase production costs • Increase wheat prices further

  18. Price exceeds production costs on better land: differential rent • Example: • Wheat price = $5 per bushel • Production cost, worst land = $5 per bushel • Production cost, best land = $3 per bushel • Rent? $2 per bushel on best land • Outcome for society: pessimistic; economics as “The Dismal Science”! (Thomas Carlyle)

  19. How well does the classical growth model stand up: do we see the pessimistic outcome? • Different pattern, pace of technological change that expected by Malthus, Ricardo • Birth rate responds to changing economic incentives: not follow Malthusian predictions

  20. Different population growth experiences, different parts of the world

More Related