Population: cause or consequence of economic change?

There are some theories to explain how the population is related to the economic change. We are going to expose two theories: the pessimist, from Malthus, and the optimist, from Boserup.

Thomas Malthus (1766 - 1834): the main ideas about their theory are included on "an essay on the principle of population" where the malthusian trap is the base of his principles:

"Population, when unchecked, increases in a geometrical ratio. Subsistence increases only in an arithmetical ratio. A slight acquaintance with numbers will shew the immensity of the first power in comparison of the second."

The population grows steadily whenever there are resources, however the productivity could be increased whenever the law of diminishing returns allows it.

To explain this, the author uses two factors: land and work.

The main critique to this theory is that the author does not take into consideration neither the technology nor the demographic changes that could have any kind of consequence on technology or production.

Ester Boserup (1910 - 1999): The production could be increased as an answer to a demographic growing.  In a following step, the jump from a small society to another big one will be determined by resources increase, at consequence, the population could increase more.

Her arguments are defended through the scale economics that appears when the population grows. The scale economics allows to develop the specialization and the trade.

However with this growth, it appears a unequal distribution of incomes.  There is more habitants by area.  As consequence the value of the land will be increased, and the propietaries of land will have more incomes.

Bibliography:

Cameron R. (1992).  Historia Económica Mundial.  Alianza.  Capítulo 1.

North, D.C.,  y Tomas, R.P. (1989).  El nacimiento del mundo occidental.  Una nueva historia económica (900-1700).  Capítulos 1 y 2.

Offer and Demand factors

We can not undersantd the economic development in historical perspective without the mention of offer and demand factors (population, capital, natural resources, organization, incomes,... and so on).

Offer factors:

• Population: when the population is growing the offer of the work market is also increasing. Apart of this, we have take into consideration other factors:

• Demographic structure: developed countries have less young population that undeveloped countries.  This issue affects to the amount of active population.

• Employed population structure: it is regarding the amount of people working in primary sector, secondary or tertiary.

• Capital - investments:  the investment depends of savings.  In pre-industrial countries the accumulation of capital is small.  Regarding the capital we must distinguish two kind of capital: fixed capital (it is normally used during the production: machinery) and changeable capital which is used only one time (for example the raw materials, the existences or the surplus or excedents).  Inside the investment, we have to take into consideration the human capital investment, to adquire more skills, knowing or capacitations.

• Natural resources: it depends of the demand, the technology used to extract them, respect for sustainable development, etc.

• Technology: it is included next to capital and shows us the way that the production is achieved. Inside the technology we must distinguish innovation from invention: 

• invention is the development of something new or different, meanwhile
• the innovation is the difusion of the new technology or invent something.

• Economical organization: the organization gives an incentive structure.  This structure allows people to produce, more and better, or less and worse, or the same level.

Demand factors:

• Population: the amount of population produces an increase of demand.  This demand produces also an increase of the offer.  As consequence, more quantity produced induces a decrease in the prices at the long term.

• Per capita income: an income increase produces a demand increase.  When the richness is growing the consequence is a decrease of primary products and an increase of secondary products (for example luxury goods): "the smaller is disposable income, the higher the proportion spent on food"(Engel's law).

• Distribution of income: for example if the income is equally distributed and the population is not very rich, the savings are smaller.

• Savings-Investments: in undeveloped countries the interest type is higher than in developed countries, because of the lack of savings and high demand. If saving flows into investing the financial system will work properly.

• Market organization: the emergence of cities entails the concentration of the population, and thus the existence of physical markets where trading (at the begginig of Industrial Revolution London concentrated the 10% of the consumption).

Bibliography:
Cameron R. (1992).  Historia Económica Mundial.  Alianza.  Capítulo 1.
North, D.C.,  y Tomas, R.P. (1989).  El nacimiento del mundo occidental.  Una nueva historia económica (900-1700).  Capítulos 1 y 2.