principles of macroeconomics day 4 - malthus dr. andrew l. h. parkes “a macroeconomic...

Principles of Principles of MacroeconomicsMacroeconomics

Day 4 - MalthusDay 4 - Malthus

Dr. Andrew L. H. ParkesDr. Andrew L. H. Parkes““A Macroeconomic Understanding for use in A Macroeconomic Understanding for use in

Business”Business”

卜安吉卜安吉

April 8, 2010April 8, 2010 Principles of Macroeconomics, Day Principles of Macroeconomics, Day 4 - Malthus4 - Malthus

22

Thomas Robert MalthusThomas Robert Malthus An Essay on the Principle of PopulationAn Essay on the Principle of Population as it as it

Affects the Future Improvement of SocietyAffects the Future Improvement of Society (1798): (1798):

In this famous work, Malthus posited his In this famous work, Malthus posited his hypothesis that (unchecked) population growth hypothesis that (unchecked) population growth always exceeds the growth of means of always exceeds the growth of means of subsistence due to the subsistence due to the fixed land resourcesfixed land resources in in the world. the world.

Malthus was a Classical Economist along with Malthus was a Classical Economist along with Adam Smith, David Hume and David RicardoAdam Smith, David Hume and David Ricardo


33

Mathus’ LogicMathus’ Logic ““Food is necessary to the existence of Food is necessary to the existence of

ManMan””

““The Passion between the sexes is The Passion between the sexes is necessary and will remain nearly in its necessary and will remain nearly in its present statepresent state””

His conclusion:His conclusion: ““The power of population is infinitely The power of population is infinitely

greater than the power in the earth to greater than the power in the earth to produce subsistence for manproduce subsistence for man.”.”


44

Thomas Robert MalthusThomas Robert Malthus

Malthus' hypothesis implied that Malthus' hypothesis implied that actual actual population always has a population always has a tendencytendency to push to push above the food supply due to arable land above the food supply due to arable land availableavailable..

The only Check on population growth The only Check on population growth was “misery and vice.”was “misery and vice.”


55


http://cepa.newschool.edu/het/profiles/malthus.htm

An English minister, 1766-1834


66


Actual (checked) population growth is Actual (checked) population growth is kept in line with food supply growth kept in line with food supply growth by "positive checks" (starvation, by "positive checks" (starvation, disease and the like, elevating the disease and the like, elevating the death rate) and "preventive checks" death rate) and "preventive checks" (i.e. postponement of marriage, etc. (i.e. postponement of marriage, etc. that keep down the birthrate), both that keep down the birthrate), both of which are characterized by of which are characterized by "misery and vice". "misery and vice".


77

Where did Mathus go Where did Mathus go wrong?wrong?

Growth in Human Ingenuity has offset Growth in Human Ingenuity has offset the effects of a larger population the effects of a larger population growth.growth.

Pesticides, fertilizers, mechanized Pesticides, fertilizers, mechanized equipment, new crop varieties, and equipment, new crop varieties, and other technological advances.other technological advances.

One of the resources for the above is N. Gregory Mankiw’s book, One of the resources for the above is N. Gregory Mankiw’s book, Principles of Macroeconomics, 2007Principles of Macroeconomics, 2007


88

Suppose GDP equals $10 trillion, Suppose GDP equals $10 trillion, consumption equals $6.5 trillion, consumption equals $6.5 trillion, the government spends $2 trillion the government spends $2 trillion and has a budget deficit of $300 and has a budget deficit of $300 billion. billion.

Find public saving, taxes, private Find public saving, taxes, private

saving, national saving, and saving, national saving, and investment. investment.

A C T I V E L E A R N I N G A C T I V E L E A R N I N G 11

A. A. CalculationsCalculations

8


99

Use the numbers from the preceding Use the numbers from the preceding exercise, exercise, but suppose now that the government cuts but suppose now that the government cuts taxes by $200 billion. taxes by $200 billion.

In each of the following two scenarios, In each of the following two scenarios, determine what happens to public saving, determine what happens to public saving, private saving, national saving, and private saving, national saving, and investment. investment. 1.1. Consumers save the full proceeds of the Consumers save the full proceeds of the

tax cut. tax cut.

2.2. Consumers save 1/4 of the tax cut and spend the Consumers save 1/4 of the tax cut and spend the other 3/4. other 3/4.


B. B. How a tax cut affects savingHow a tax cut affects saving

9


1010

The two scenarios from this exercise The two scenarios from this exercise were:were:1.1. Consumers save the full proceeds of the Consumers save the full proceeds of the

tax cut. tax cut.

2.2. Consumers save 1/4 of the tax cut and Consumers save 1/4 of the tax cut and spend the other 3/4. spend the other 3/4.

Which of these two scenarios do you Which of these two scenarios do you think is more realistic?think is more realistic?

Why is this question important?Why is this question important?


C. C. Discussion questionsDiscussion questions

10


1111

SPACESPACE


1212


1313

Given: Given: YY = 10.0, = 10.0, CC = 6.5, = 6.5, GG = 2.0, = 2.0, GG – – TT = 0.3 = 0.3

Public saving = Public saving = TT – – GG = = – 0.3– 0.3

Taxes: Taxes: TT = = GG – 0.3 = – 0.3 = 1.71.7

Private saving = Private saving = YY – – TT – – C C = 10 – 1.7 – 6.5 = = 10 – 1.7 – 6.5 = 1.81.8

National saving = National saving = YY – – CC – – GG = 10 – 6.5 = 2 = = 10 – 6.5 = 2 = 1.51.5

Investment = national saving = Investment = national saving = 1.51.5


AnswersAnswers, , part Apart A

13


1414

In both scenarios, public saving falls by In both scenarios, public saving falls by $200 billion, and the budget deficit rises $200 billion, and the budget deficit rises from $300 billion to $500 billion. from $300 billion to $500 billion.

1.1. If consumers save the full $200 If consumers save the full $200 billion, billion, national saving is unchanged, national saving is unchanged, so investment is unchanged. so investment is unchanged.

2.2. If consumers save $50 billion and If consumers save $50 billion and spend $150 billion, then national saving spend $150 billion, then national saving and investment each fall by $150 billion.and investment each fall by $150 billion.


AnswersAnswers, , part Bpart B

14

principles of macroeconomics day 4 - malthus dr. andrew l. h. parkes “a macroeconomic...

Documents