Session 9

Question 1

Malthusian view and the key assumptions?

Answer 1

although technological innovation temporarily improves living standards, the resulting population increase would bring down wages to basic subsistence levels in the long run

Assump.
- Decreasing average product of labor: population growth leads to less-than proportional growth in production
- Wealthier households have more offspring

Question 2

Marginal Product of labor

Answer 2

The additional output produced with one more unit of labor (holding other inputs constant)

Question 3

Average product of labor

Answer 3

Total output divided by a labor point

Question 4

Issues with Malthus and defence of malthus

Answer 4

Exogenous technology: technological innovation is treated as exogenous and independent
- “Exogenous” means coming from outside the economic model

This overlooks the possibilities that:
- A growing population spurs more innovation
- One innovation leads to more subsequent innovations

Def:
- Malthus was not merely short-sighted given the historical context
- His observations were consistent with data of his time: the Malthusian epoch spanned roughly 99.9% of human history, dating back 300,000 years (Change with ind revolution!)

Question 5

Key narratives of Galor 2011 Unified growth theory

Answer 5

Look at Graphs!
- Initial period of Malthusian stagnation
-> A small population, slow technological progress, minimal investment in education
- Increasing importance of human capital (e.g. education) over time
-> As population increases, technological progress accelerates
-> After some threshold level of technology this creates industrial demand for education
- Demographic transition (decline in fertility rate)
-> Greater importance of education makes parents focus more on the quality of children and less on quantity
- Shift to sustained economic growth
->A virtuous cycle: human capital drives technological advancement, further raising human capital demand…