MALTHUS-Reading

Global Economic History: The Economics of the Malthusian Trap

Overview of the Malthusian Trap

  • Global economic history is summarized by a "hockey stick" graph showing:

    • Constant living standards (GDP per capita) from the 11th to the 17th century.

    • Steady improvements in living standards post-17th century.

  • Thomas Robert Malthus (1766-1834) provided a pessimistic model for this period, willing to describe dynamics between population growth and resource limitations.

Malthus' Model of Economic and Demographic Development

  • Resources, particularly land, are finite in an agricultural economy.

  • Population pressures on those resources lead to:

    • Catastrophes such as famines, wars, or epidemics when the population exceeds resources.

    • A return to subsistence living standards post-catastrophes.

  • Proposed fertility controls to avoid disasters:

    • Suggested facilitating population decline through natural mortality rather than trying to mitigate its effects.

    • Supported policies that would naturally encourage mortality in the poor based on the principle of natural checks in population stability.

  • Historical consistency with Malthus' theories:

    • Economic cycles during centuries display oscillations between population and resource availability.

    • E.g., income in ancient Greece (400 BC) was on par with that in Britain (1850).

    • Slow population growth pre-1750.

    • Negative correlation between wages and population sizes:

      • Example: The Black Death resulted in increased real wages as population declined.

Breaking the Malthusian Trap

  • The question arises: How did economies break the link between population and resource availability?

  • Analysis of the assumptions of the Malthusian model is necessary to find this out.

Demographic Growth

  • Population changes occur gradually, influenced by:

    • Birth rates (B) vs. mortality rates (M).

    • Simple formula for demographic growth (RDG = B - M).

  • Example:

    • In a specific country, with 20 births and 10 deaths per 1000 inhabitants, the RDG is 1%.

  • Important aspects:

    • Not all deaths impact demographic data similarly (e.g., age at death).

  • Key variables:

    • Fertility Rate (FR): Average number of children per woman.

    • Life Expectancy (e0): Average lifespan indicating health and mortality impact.

  • Societies may transition through three phases based on fertility and life expectancy:

    • High mortality & fertility → Low mortality & fertility phases.

Understanding Malthusian Model Assumptions

  1. Population Growth: In Malthus' view, population grows geometrically while resources grow arithmetically.

  2. Labor Returns: Diminishing returns occur as land/labor increase in saturation:

    • Illustration shows average output diminishing as more farmers crowd the same land.

    • E.g., 800 farmers produce a certain yield; doubling farmers reduces average yield per farmer.

Subsistence Equilibrium