Session 9 - Malthusian Model Flashcards
Which of the following scenarios best represents decreasing average product of labor?
a. A tech company hires more software engineers, and as a result, the development of a new software speeds up due to enhanced collaboration and problem-solving.
b. A factory adds more workers to the assembly line, and each worker now produces less as they get in each other’s way due to limited space.
c. A farm employs more workers for harvesting season, resulting in each worker picking the same amount of fruit, maintaining a constant output per worker.
d. In a consulting firm, as more consultants are hired, the firm is able to take on more projects, increasing the average output per consultant due to diversified expertise.
Correct: B
Option B is the correct answer. In this scenario, as more workers are added to the assembly line, each worker’s productivity is hampered due to limited space, causing the average output per worker to decline. Options A, C, and D depict situations where adding more workers leads to maintained or improved average productivity, which is contrary to the concept of decreasing average product of labor.
Which of the following claims is not consistent with the Malthusian trap?
a. Technological advancements lead to increases in population, which then consume the surplus, reverting living standards back to subsistence levels.
b. Constant growth in the GDP of a nation leads to constant population growth.
c. An increase in resources or productivity temporarily increases living standards, but population growth will eventually offset these gains.
d. War, famine, and disease act as natural checks on population growth, ensuring that it does not surpass the means of subsistence for an extended period.
Option B is the correct answer. In a Malthusian scenario, growth in GDP per capita or technological advancements temporarily increase living standards, causing a rise in population that eventually consumes the surplus, bringing living standards back to subsistence levels. However, constant GDP growth doesn’t cause constant population growth in the Malthusian model. The other options more accurately reflect concepts within the Malthusian theory, highlighting the cyclical nature of economic and population growth within the trap.
One of these phenomena is difficult to explain with the Malthusian model:
a. Periodic famines lead to significant population declines.
b. Technological advancements lead to temporary increases in living standards.
c. Declining fertility rates in richer countries.
d. A higher availability of resources leads to population growth.
Option C is correct. The Malthusian model primarily operates under the premise that advancements in technology and resources lead to population growth, which then consumes the surplus, returning the population to subsistence living standards. However, this model struggles to explain the phenomenon of declining fertility rates in richer countries. In wealthier nations, we often observe that as income and living standards increase, fertility rates tend to decrease, a trend contrary to the Malthusian expectation of increased population growth with improved living conditions. The other options align more seamlessly with the Malthusian trap’s concepts, which emphasizes natural checks like famines (Option A), and the consumption of excess wealth through population growth (Options B and D).
New technologies brought about by the Industrial Revolution are purposefully:
a. Energy saving
b. Capital saving
c. Labor saving
d. All of the above
Option C is the correct answer. Technologies introduced during the Industrial Revolution, such as spinning jennies, power looms, and steam engines, primarily aimed at saving labor. These technologies automated and expedited production processes, reducing the reliance on manual labor and increasing overall productivity. While some technologies might have saved energy or capital indirectly, the predominant and direct aim of technological advancements during the Industrial Revolution was to make processes more efficient by saving labor.
Inclusive institutions (in the sense of Acemoglu and Robinson 2011) characterize:
a. A country where the power is held by a benevolent social planner.
b. A country ruled by a group of dynasties that represent proportionally all ethnicities in the population.
c. A country where a single company controls the majority of the market, limiting entry for new firms.
d. A country with well-enforced property rights and a broad distribution of economic benefits and powers.
Option D is correct. Acemoglu and Robinson’s idea of inclusive institutions refers to structures that provide a level playing field where individuals have equal opportunities to pursue their own objectives, leading to a more prosperous society. Such institutions also allow for pluralistic decision-making where power is broadly distributed, and they encourage innovation and economic progress. Options A, B, and C, despite having certain attributes that might seem ‘inclusive’ or ‘benevolent’, do not truly embody the essence of inclusive institutions as they do not necessarily guarantee a broad distribution of economic benefits and powers, or a level playing field that encourages economic prosperity through individual innovation and the protection of property rights.
Clark’s theory of the Industrial Revolution emphasizes:
a. The significance of legal institutions.
b. Major technological innovations.
c. Gradual change in culture and institutions.
d. Access to natural resources, in the country as well as from colonized territories.
Option C is correct. Clark posits that the Industrial Revolution was the result of a slow process of change in people’s preferences, culture, and institutions. He argues that, over time, there was a transmission of preferences and attitudes towards work and economic success due to the reproductive success and survival of economically prosperous individuals. This contributed to creating the cultural and institutional conditions necessary for the Industrial Revolution to occur.
Malthusian Model
What is/are
A. the Background,
B. the main theory and
C. the key assumptions (2)?
Background Industrial Revolution: persistent growth, which took economists by surprise to some extent
Malthusian view: Although technical innovation temporarily improves living standards, the resulting population increase would bring down wage to basic subsistence levels in the long run
Key assumptions:
1. Decreasing average product of labor: population growth leads to less-than-proportional growth in production
2. Wealthier households have more offspring
Draw the line of argument in the malthusian model
In the initial equilibrium, wages are at the subsistence level
* Innovation raises the average product of labour and wages
* As the result of higher wages, the population grows
* With higher population, wages fall due to the decreasing average product of
labor
As wage falls, population growth slows and eventually stabilizes
* Population growth is self-correcting and temporary: there is no permanent population
growth
* In this new equilibrium, the wage reaches subsistence level again, and population
is constant at a higher level
What are issues with the Malthusian Model (2)?
Exogenous technology: technological innovation is treated as “coming from outside the economic model” and independent
- overlooks the possibilities that: A growing population spurs more innovation
- one innovation leads to more subsequent innovations
Humans as bunnies: assumes that population always increases with higher income - this could break down due to the following:
- in many societies, having more children historically served as “insurance”; without formalized social security systems, parents depended on their offspring
- as societies become more prosperous and develop social welfare systems, the insurance motivation for larger families diminishes, potentially reducing population growth
MISSING: Production function
Theories Industrial Revolution - MISSING
