ECON10020 Principles of Macro Topic 2 Tech, Pop and Growth 202425 BRTSPC

UCD Ireland’s Global University - Principles of Macroeconomics

Overview of Course

• Course Code: ECON10020

• Instructor: Dr. Alan de Bromhead

• Focus: Technology, Population, and Growth

  • Unit Duration: 2024-25

Recap of Unit 1

• Key Transformations: Living standards have improved significantly over recent centuries, albeit unevenly, leading to increased inequality both within and between countries.

• Capitalism's Role: Defined by private property, markets, and firms as critical factors.

• Growth Drivers: Technological progress and specialization are primary growth drivers but come with environmental implications.

Unit 2: Technology, Population and Growth

• Motivations Behind the Study: Understanding economic models and their implications for population and technology.

• Models Covered in This Unit:

  • Malthusian Model

  • Allen’s Model

Economic Models

• Purpose of Economic Models:

  • Simplify complex interactions among individuals, firms, and governments.

  • Assist in predicting economic outcomes based on assumptions.

  • Enhance communication regarding economic theories.

• Characteristics: Models clarify actions, interactions, and outcomes, based on equilibrium, and depict how changes affect these conditions.

The Malthusian Model

Key Concepts

• Stagnant Living Standards: According to Thomas Malthus, population growth leads to diminishing returns in income, forcing living standards to subsist near a minimum level.

• Population Dynamics:

  • Higher living standards initially contribute to increased family sizes.

  • Ultimately, as living standards rise, population also rises, maintaining income at subsistence levels.

• Technological Impact: Technological advancements can increase the population but don’t inherently lead to higher living standards.

Escape from the Malthusian Trap

• Transitioning from stagnation requires technological advancements to outpace population growth, altering the Malthusian equilibria.

Allen Model of Technological Change

Framework for Technological Innovation

• Structure: Addresses labor and coal as primary production inputs for generating cloth.

• Decision-Making in Firms: Firms will select production technologies based on cost minimization, influenced by input prices and resource availability.

• Relative Prices: Changes in relative prices of inputs can trigger shifts in technology use and innovation incentives.

• Innovation Rents: High relative wages in the British context promoted the adoption of innovative technologies, leading to the Industrial Revolution.

• Creative Destruction: Dynamics of competition drive innovation, leading to advances in productivity and economic growth.

Conclusion and Future Topics

• Recap highlights the importance of understanding economic models to grasp complexities of economic behavior, specifically how they elucidate the historical transformations of living standards and economic growth.

• Upcoming Units will focus on Labor Market Dynamics, including wage-setting behaviors and the economic implications of government policies on unemployment.