Econ notes from 2-24-09

Econ Notes February 24, 2009 I. Chapter 6 A. The Consequences of High Fertility: Some Conflicting Opinions 1. Classical Conclusion a. rapid population growth (RPG) led to serious development problems b. Two opposing view on the impact of RPG: 1) Not a real problem 2) a real problem c. Not population growth that is the problem, but the following issues: 1) Underdevelopment: development should be the goal because it will generate economic progress and other social mechanisms that will automatically regulate population growth. 2) World Resource depletion and Environmental Destruction: developed nations should lower their high consumption standards before asking developing nations to restrict population growth. 3) Population distribution a) Main problem is the spatial distribution of population. b) Governments should reduce rural-urban migration to being about a more efficient population distribution in term of available productive resources. 4) Subordination of Women a) Population growth is a natural outcome of women?s lack of economic opportunity b. empowerment of women (greater opportunities for employment will slow down population growth) d. Rapid population growth is an issue that is deliberately contrived 1) Population growth is an issue intentionally created by dominant rich country agencies and institutions to keep LDCs in their under ?developed status. 2) Excessive concern of MDCs with MDC population trends is an attempt to slow down the LDC development process to maintain the favorable international status quo e. population growth is a necessary phenomenon Y = AF (K,L) ?Y > 0 ?L 1) Population growth is an essential ingredient to stimulate economic growth because larger populations provide: Consumer demand to reach the economies of scale in production to lower unit production costs Sufficiently large low-cost labor force to achieve higher output levels f. It?s a real problem 1) Extremist argument a) Unrestrained population growth is the principal cause of poverty, low levels of living, malnutrition, poor health conditions, environmental degradation, etc. b) Population stabilization is the most immediate task even if it required sever and coercive measures imposed on LDCs 2) Theoretical argument (population-poverty cycle theory): a) Population growth delays the economic growth process by lowering the national savings via- Household savings: will decrease with the more children one has; reduced private savings. Public savings: the government will have to spend more the support the basic needs of the increasing population; bigger % of the tax receipts will be spent; reduced public savings. b) Lower aggregate savings slow down the capital accumulation process resulting in low levels of investment and slower economic growth. 3) Empirical argument: recent research documents the negative consequences of RPG on: a) Economic growth (RPG lowers per capita income growth in most LDCs) b) Poverty and inequality (negative consequences of RPG fall most heavily on the poor) c) Food (given RPG trends, feeding everybody gets more difficult) d) Environment (RPG leads to faster environmental degradation) g. Three propositions constitute the principal components of the consensus opinion: 1) Population growth is not the principal cause of lower living levels, gross inequalities, and limited freedom of choice. 2) Its not only about numbers but also about the quality of life. 3) Rapid population growth intensifies the problems of underdevelopment. h. Three policy objectives/goals to deal with the problems associated with RPG: 1) Policies should target not only the population variable but also the underlying social and economic conditions of underdevelopment (absolute poverty, widespread unemployment, malnutrition, etc.) 2) Family planning programs should provide education and technological means to regulate fertility 3) Developed countries have the additional responsibility to reduce their excessive use of non-renewable world resources.