INDIAN ECONOMY-I

B.A (H.) Economics

BAE 304
III Semester

By
Rajeev Sharma
(ASLA)
 In 1798 Malthus published his book An
Essay on the Principle of Population as It
Affects the Future Improvement of
Mankind, possibly the first formal
THE SIMPLE theoretical underpinning for concern with
the human population problem.
MALTHUSIAN
GROWTH Malthus made the following three
DOCTRINE: postulates:
POPULATION (a) The total amount of land available for
AND agriculture (arable land) is immutably
RESOURCE fixed,
SCARCITY (b) The growth of population is limited
by the amount of food available for
subsistence,
(c) Human population will invariably
increase where the means of subsistence
increase
 THE SIMPLE MALTHUSIAN GROWTH DOCTRINE:
POPULATION AND RESOURCE SCARCITY

 He then stated that if not prevented by some checks, the tendency is for the
population to grow geometrically (2, 4, 8, 16, etc.) while the means of subsistence
grows arithmetically (1, 2, 3, 4, etc.).

 In other words, population growth, if left unchecked, would lead to the eventual
downfall of living standards to a point barely sufficient for survival.

 This has been called the “dismal doctrine” of Malthus, or, more formally, Malthus’s
iron law of wages.
 If we assume that quantity of labor, L, can be used as a proxy for
population size and real output, Q/L, as a measure of per capita
income, Figure 6.1 can be viewed as depicting the relationship
between population size and per capita income.
 This relationship is constructed assuming fixed amounts of
resource (i.e., land) and technology.
 In Figure 6.1, per capita food output, Q/L, was initially rising
with an increase in population. This positive association between
population and per capita food production continued until the
population size (labor force) reached L1. Beyond this, farm
labour productivity started to decline with each successive
addition of labour service in accordance with law od diminishing
marginal product.
 Q*/L*—the thick horizontal line—represents the output per unit
of labor (or real wage rates) barely sufficient for survival, i.e., the
subsistence level of food. Thus, when the labor force (i.e., the
population) has increased to a level L2, the Malthusian margin is
attained.
 This will be a stable long-run equilibrium, because for a
population below L2, unless enforceable public policy measures
are taken to limit population growth (i.e., negative checks),
according to Malthus the natural tendency of the human
population is to continue growing as long as the per capita food
exceeds the minimum food required for a subsistence
life—Q*/L*. On the other hand, any increase of population
beyond L2 would be prevented by positive checks. Thus, in the
long run, disease, malnutrition and famine will bring growth to a
halt at L2 .
 Finally, one interesting feature of the simple model above is its
suggestion of an optimum population size (labor force). In Figure
6.1, the optimum population size is attained at L1, where the per
 CRITICISM OF MALTHUSIAN THEORY

 First, it ignores the institutional factors that affect population growth. There are social and
economic factors that induce humans to check their own population growth under adverse
conditions.
 Second, the Malthusian theory simply overlooks the very important role that technology
plays in ameliorating resource scarcity (Cole et al. 1973; Ausubel 1996; Simon 1996). For
example, according to the traditional Malthusian view, at a given point in time the amount
of land available for food is perceived as fixed (or scarce in absolute terms). But through
improvements in farming technology (for example, finding new crop varieties with genetic
engineering), it may be possible to produce more food from the same amount of land. In
addition, technology may make farming possible in an area where it was impossible before.
 Third, Malthus’s model is considered to be ecologically naive. That is, it does not go beyond
recognizing the existence of absolute limits to natural resources (land), and thereby fails to
explain the effect of economic growth on the natural ecosystem and its inhabitants as a
whole. Thus, the simple Malthusian theory on population and resource is viewed as
incomplete from economic, technological and ecological perspectives.
 Despite its simplicity, however, Malthus’s theory on population and resources and, in
particular, its gloomy prediction about the long-run economic destiny of humankind have
remained an issue of vigorous contention ev
 MODIFIED MALTHUSIAN MODELS: POPULATION,
RESOURCE USE AND
ENVIRONMENTAL QUALITY

 Responding to the criticisms raised by both economists and ecologists, neo-

Malthusians have been able to develop conceptual models that incorporate the effects
of technology and human institutions on their considerations of both population
growth and resource availability (Ehrlich and Holdren 1971; Commoner et al. 1971).
 The essence of these models is illustrated by using a general conceptual framework
that is hereafter referred to as the Ehrlich-Commoner Model.
 Equation (6.1) formally states that, at any given point in time, the total
environmental impact of human activities is a product of the underlying population
size, P, and the per capita damage to the environment,
 MODIFIED MALTHUSIAN MODELS: POPULATION,
RESOURCE USE AND
ENVIRONMENTAL QUALITY

-
POPULATION AND ITS IMPACT ON RESOURCE UTILIZATION
AND ENVIRONMENTAL QUALITY

 He argues that when population

grows, the total impact, I,
increases for two reasons.
 First, the size of the population, P,
will increase.
 Second, per capita impact, F,
increases with successive
additions to population, P.
 Therefore, according to equation
(6.1), the total impact increases
since both P and F grow with
expansions in population.
 This is illustrated in Figure 6.2.
 MODIFIED MALTHUSIAN MODELS: POPULATION,
RESOURCE USE AND
ENVIRONMENTAL QUALITY

 Ehrlich and Commoner addressed the following questions:

 Is population the major contributor to environmental degradation?
 To what extent would an increase in per capita consumption of
resources adversely impact the environment?
 In what ways can technology be used to ameliorate the
environmental impact of economic activities?
 Can technology contribute to further environmental deterioration?
 In the next slides attempts are made to address these specific
questions.
PER CAPITA CONSUMPTION AND ITS INFLUENCE ON THE
POPULATION-RESOURCE-ENVIRONMENT
INTERRELATIONSHIP

 If population, consumer
preference and technology are
held constant, an increase in per
capita consumption, c, could only
result from increased use of
resources.
 Increased resource utilization
implies increased production, and
in the absence of technological
progress this would translate into
increased pollution and perhaps
resource depletion.
 Thus, in general, we would expect
that an increase in per capita
consumption would be associated
with increased per capita damage,
 THE BASIC LESSONS OF THE EHRLICH-
COMMONER MODEL

 First, we observed that population, through its size and growth, has
adverse impacts on resource utilization and the environment. This
statement seems to be supported by a number of empirical studies (Allen
and Barnes 1995; Repetto and Holmes 1983; Rudel 1989).
 Second, even in the presence of a stable population, increases in per
capita consumption could lead to rapid resource depletion and the
deterioration of the environment.
 Third, the assortment of economic activities pursued by a nation, and the
resulting composition of production and consumption in response to
population pressure, could significantly intensify the resource and
environmental problems for a country. As per Commoner, this is the
primary cause for rapid increase of pollution in the United States and
other industrial nations.
 Applications of ill conceived technology could do harm, rather than solve