Lecture 3. The Law of Diminishing Returns]
Recommended reading : 【Economic History】 Economic History Table of Contents
1. Malthusian Theory
2. Critiques of Malthusian Theory
1. Malthusian Theory (Malthusian theory; a “survival-of-the-fittest” population theory)
⑴ Europe at the time the Malthusian theory emerged
① The logic of mercantilism and the Enlightenment was dominant.
② Around the publication of the first edition of An Essay on the Principle of Population, European society became a crucible of extreme turmoil and miserable living conditions—such as the American Revolutionary War, the French Revolution, and the Industrial Revolution.
③ Malthus developed his own original theory about population problems, contributing to the development of modern population theory.
⑵ Assumption 1. The amount of land has a physical limit. In other words, there is a limit to food production.
① Population growth will eventually exceed the population that can be supported by food production.
⑶ Assumption 2. There is no technological progress. In other words, there is no increase in the efficiency of land use.
⑷ Assumption 3. Human reproductive power is assumed to be indefinitely greater than the power of land to produce food for humans.
① Food is necessary for survival.
② Sexual desire between the sexes is necessary and will remain almost as it is now in the future.
⑸ Conclusion : Population growth, constrained by land limits, ultimately reduces income and eventually stops.
① Food production increases arithmetically : 1, 2, 3, ···
② Population increases geometrically : 1, 2, 4, ···
③ The point where population growth stops is called the Malthusian equilibrium.
④ In any social group, the birth rate and the death rate must be the same.
⑤ In any social group, the population exists up to the level that food production can support.
⑥ In any social group, wages must be fixed at the cost of subsistence.
⑦ Malthus argued that, for humans to survive despite food scarcity, there must be “checks” that restrain population growth.
⑧ Population growth ultimately increases the labor force, but in turn causes wage declines and poverty—providing a basis for the “iron law of wages.”
⑹ Application 1. Social influence
① Helped the development of Charles Darwin’s theory of evolution by natural selection.
② Influenced by Malthus’s population theory, the British Parliament enacted the Census Act in 1800 and conducted a census every 10 years starting in 1801.
⑺ Application 2. The mechanism by which population growth declines
① Preventive checks (moral restraint) : The birth rate is controlled (contraception, late marriage, celibacy, abstinence, etc.).
② Positive checks (active restraint) : The death rate is controlled (war, disease, famine, etc.).
2. Critiques of Malthusian Theory
⑴ Critique 1. Historical population trends : The increase in world population unfolded in a way that cannot be explained by the Malthusian law.
① Under Malthusian theory, the population growth rate should be 0.
② World population changed as follows:
○ 6–8 million (10,000 BC)
○ 250 million (AD 0)
○ 1 billion (AD 1800)
○ 6 billion (AD 2000)
○ Up to the mid-19th century, Europe’s population increased over the long run.
④ After the decline of the Roman Empire : Europe’s population temporarily fell sharply but recovered quickly.
⑤ After the mid-14th-century Black Death : Europe’s population temporarily fell sharply but recovered quickly.
⑥ After 1750, population increased meaningfully.
○ Before the demographic transition : high total fertility and low life expectancy
○ After the demographic transition : low total fertility and high life expectancy
○ Factors behind declining mortality : assumed to be advances in medical technology, improved nutrition, and increased immunity. Not clearly established.
○ Factors behind declining fertility : contraception; substitution effect when wages rise; reduced child mortality; whether childrearing costs can be externalized; risks of equal partition inheritance.
○ It is difficult to explain why fertility declined earlier in France than in industrializing Britain.
⑵ Critique 2. Historically, the flow “population increase → decline in per-capita income → population decline” is not observed.
① After the Neolithic Revolution : agricultural technology limited the amount of cultivable land, but population did not decline.
② After the collapse of the Roman Empire or after the Black Death : population declined, but even though much land was abandoned, income did not increase.
③ In the 17th–18th centuries : population reached pre–Black Death levels, but there was no decline in per-capita income.
⑶ Critique 3. If Malthusian theory holds, marginal product and wages should be constant.
① However, the marginal product per unit of land continued to increase.
② Wages also did not remain at the subsistence level : cultural differences, differences in living standards, and differences in the Engel coefficient indirectly reveal this.
⑷ Critique 4. The effects of technological progress—such as Huang’s law or Moore’s law—have continued to appear since the start of agrarian society.
① Example 1. Land-use intensity
○ Primitive land-use intensity : 0.05
○ Modern Europe : 1
○ Modern Asia : 2
② Example 2. Empirical knowledge about fertilizers and the adoption of the heavy plow
⑸ Critique 5. Trade and proximity to urban centers : Another explanation in which population growth itself can lead to increased output.
① Trade contributes to using land in better ways.
② Urban manure resolves nitrogen shortages.
③ New knowledge from cities spreads quickly.
④ Diverse urban demand enables diversified cultivation portfolios, acting as insurance against natural disasters.
⑤ Philip Hoffman’s research on total factor productivity (TFP)
○ He estimated TFP for early modern (ancien régime) French agriculture from 1522 to 1789.
○ He noted that developing resources and opportunities well requires interregional trade and proximity to major urban areas.
⑹ Critique 6. Livi-Bacci’s long-run Malthusian population trajectory
① Expected result : population grows rapidly at first; when land scarcity begins, the population growth rate falls and eventually becomes 0.
② Actual result : the long-run trend remains positive, rejecting the long-run Malthusian population trajectory.
⑺ Critique 7. The long-run decline of real wages in England as population increased again after the Black Death
① This has been used as representative evidence for the Malthusian law.
② In fact, it is empirically shown that changes in temperature caused changes in grain output.
⑻ Critique 8. Galor’s unified growth theory : An attempt to reconcile and provide an alternative explanation by compromising with Malthusian theory
① Malthusian stagnation : technological progress is absorbed by population growth, so there is no increase in per-capita income.
② Post-Malthusian period : the rate of technological progress exceeds population growth, leading to modest per-capita income growth alongside high population growth.
③ Modern economic growth : quality of children is preferred over quantity; increased investment in children’s education lowers fertility → per-capita income rises rapidly.
④ Criticism 1. In the Malthusian stagnation period (i.e., up to 1500), income levels did increase persistently.
⑤ Criticism 2. The theory is too simple to capture the dynamic development of the real world.
⑼ Critique 9. Cointegration tests by Møller and Paul Sharp on data from 1560–1800
① Conclusion 1. Preventive checks existed even before the population reached a maximum; there is no evidence that positive checks existed.
○ Evidence : Western Europe’s culture of late marriage; adjusting birth spacing based on expected child mortality; the fact that population growth did not suppress wages
○ Malthus and contemporary scholars did not view fertility strategies as the result of household optimization.
○ Modern economists and economic historians view fertility strategies as the result of optimal behavior.
② Conclusion 2. There is no evidence that population growth reduced real wages.
③ Final conclusion : 1560–1800 appears to be a post-Malthusian period, raising questions about the historical validity of Malthusian theory.
⑼ Summary : The only period in which Malthusian theory is believed to have held was the hunter-gatherer period.
Entered: 2019.07.04 19:06