More Malthusian Economics

2.8 of The Economy 1.0 & The Economy #1

What are the 2 key ideas in Malthus’ model?

1: Law of diminishing average product of labour

2: Population expands if living standards increase

What is a subsistence level in a Malthusian world?

-The level of living standards, measured by consumption or income, such that the population will not grow / decline

Apply Malthus reasoning to a human population that has been well fed?

-They would multiply like mice in a barn and eventually fill the nation up

-Further population growth diminishes APL to such a large extent that incomes per head fall drastically

-Falling living standards as a result from loss of income would cause death rates to exceed birth rates.

-Thus, incomes would increase back towards the subsistence level

In Malthus’ model, where is the equilibrium? And if conditions change?

-Where an income level is at a level such that a subsistence level of consumption is achieved

-The variables that stay constant to achieve this is:

Size of the population

Income level of the people

-Any change in conditions would lead to population and income changes, but the economy will eventually return back to a income level at subsistence level.

Using Malthus’ logic, what would happen to the economy if a technological improvement occurred, in the very long run?

-We start at equilibrium. We have a subsistence level of income and a stable population. Now, a technological improvement occurs.

-This improvement boosts the APL of farmers, thus also boosting their incomes. This leads to population growth across the nation

-However, more people on a fixed amount of land inevitably leads to less land per farmer. So the APL falls downwards, leading to incomes falling downwards.

-So the sustainable income prevails yet again, and the population is stable at just a higher level.

Why may the population be higher in the very long run after a technological improvement, according to Malthus?

-Output per farmer, or APl, is now higher for each number of farmers.

-Thus population falling back to its original level means that income would exceed the subsistence level.

-Better technology can provide subsistence income for a larger population.

So, according to Malthus, why may improvements in technology not raise living standards?

-If the APL diminishes as more labour is applied to a fixed amount of land

OR

-Population grows in response in real wages.

Thus, we have unearthed Malthus’ Law

Model Malthus’ argument, about when real wages increases.

-Note that the equilibrium occurs when the growth rate of the population is neutral which occurs on the right-hand graph

Model Malthus’ argument about when a new technology is introduced

-Note that the real wage and population growth is neutral and unchanging, but the absolute population is higher than its original level