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E-Growth Problem #4 Answers (
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points)
Run the model for all six generations. For each generation, accept all default values
for all five variables: (1) Age of Marriage; (2) Number of Children; (3) Amount of
Research and Development; (4) Public Goods, and (5) Investment Spending. Do
not change any of the default values. When you get to the sixth generation results,
print out or copy the values from this page for future reference. Call this the
“default scenario”.
The default values give the following results:
1)
2)
3)
4)
5)
6)
7)
Population Increase (sixth generation): 0.15
Total Population: 102.22 million
Real GDP: $136.99 billion
Real GDP Per Capita: $1340.13
Real Consumption: $93.29 billion
Real Consumption Per Capita: $912.63
Real Capital Stock: $172
Now, run the model again for all six generations. This time, accept the default
values for the “economic variables,” items 3, 4 and 5 only. This time, change the age
of marriage and the number of children so as to minimize the total population as
much as possible. Try to minimize the growth rate of population and if possible,
reduce the population. When you get to the sixth generation results, print out or
copy the values from this page for future reference. This might be an example of a
nation, such as China, that has enforced strict and harsh measures to minimize its
population.
For this section, I used age of first marriage at 40 years and an average of 1.75 children.
1)
2)
3)
4)
5)
6)
7)
Population Increase (sixth generation): -3.45
Total Population: 7.68 million
Real GDP: $77.09 billion
Real GDP Per Capita: $10,037.19
Real Consumption: 39.38 billion
Real Consumption Per Capita: $5127.21
Real Capital Stock: $172
Run the model again for all six generations. This time, accept the default values for
items 3, 4 and 5 as listed above. This time, however, change the age of marriage and
the number of children so as to maximize the total population as much as possible.
When you get to the sixth generation results, print out this page for future
reference. This might be an example of a developing nation, such as Bangladesh,
that is experiencing runaway population growth.
For this section, I used age of first marriage at 16 years and an average of eight children
(these are not the MOST extreme values).
1)
2)
3)
4)
5)
6)
7)
Population Increase (sixth generation): +104.48
Total Population: 485.42 billion
Real GDP: $148.22 billion
Real GDP Per Capita: $305.34
Real Consumption $103.40 billion
Real Consumption Per Capita: $213.00
Real Capital Stock: $172
Write an essay that compares these three scenarios. Which scenario maximizes
total real GDP? Which scenario maximizes real GDP per capita? Which scenario
maximizes real consumption per capita? Explain the differences between these
three situations using economic theory from your textbook as well as the SimEcon®
module. A high rate of population growth will increase the number of mouths to
feed, but which economic input will be increased as a result? Explain.
Which scenario will generate the most political and military power and why?
Which society has the highest standard of living and why? Which society would you
like to live in and why? How do societal choices affecting population growth
ultimately affect its political, economic and military power and its standard of
living? Explain.
The second example enjoyed a very high increase in per capita GDP. Per capita GDP for
this example was $10,037.19 compared to $305.34 for the third example and $1340.13
for the default values. One might be tempted to conclude that the second example
enjoyed the highest rate of economic growth and that this nation would be the most
desirable place to live. In one sense, this one has the most desirable outcome, but only
for the people who remain. However, note that the decline in population would not have
been due to a high death rate but to a very low birth rate, so while people may have lost
some of life’s joys they did not die young to achieve this result.
Compare the real GDP for the third example with the second example. The third
example has a higher total real GDP ($148.22 billion) compared to the second example
($77.09 billion). At the end of six generations, the third example has a larger economy
and experienced a larger growth in total industrial production. Part of the reason for this
larger economy relates to the increase in population. The second example had a net
decline in population of 92.32%. Raising the age of marriage reduces the number of
children the average household will actually have (as opposed to how many on average
are wanted). That is mostly why population fell so much compared to the default run. The
third example, on the other hand, had a population increase of 73.67%. Note that both, at
the end of six generations, had the same capital stock: $172. The third example had a
much larger economy because the huge increase in population produced many more
workers who could enter the labor market. The size of the labor force, as related to
population increases, represents an economic input as much as capital or land or
enterprise. The third example had a much greater workforce, so it had a much larger
economy.
With a larger economy may come a greater degree of military and political power. A
historical situation highlights this difference. When Germany invaded Russia in World
War II, the American Heritage Illustrated History of World War II states that Russia had
a distinct advantage. Its population was so great that it could lose five soldiers for every
German soldier that was killed and still maintain the same proportion of soldiers on the
battlefield. Another example of this is the long standing political and military conflict
between India and Pakistan. India boasts a large military and a relatively large industrial
base even though for most of the period of conflict is was about as poor as its neighbor.
The third case has a larger economy, but the second enjoys a much higher standard of
living since the second boasts a per capita GDP of $10,037.19 compared to $305.34 for
the third. The second achieved its higher standard of living largely by reducing
population. If the nation greatly reduces population, the a given real output will be
shared amongst a smaller number of people, and there will be more for each of the
remaining few. In addition, diminishing returns means that output will drop by a smaller
proportion than the decline in population (and labor force). Of course the higher age of
marriage in the second increases the proportion of the population in the labor force, so
labor supply fell by less than the decline in population. Power and standard of living are
to some extent separate results. One can have one without the other (though wealth can
buy more and better weapons and training).
Does the second example represent a better place to live? Not necessarily. The second
would have to enforce draconian measures that would destroy human rights to force the
average age of marriage to be 40 and the average number of children to be less than 2.
People may not like these restrictions and might become angry and politically active to
remove these prohibitions.
The first example represents a compromise between the two. It sustains a substantial
increase in per capita GDP (Ending PC GDP = $1340.13) and allows a reasonable age of
first marriage (21 years) and a reasonable number of children (2). Although, after six
generations, the first is still a very poor nation, it is making some progress in economic
growth, and it allows people a reasonable degree of human rights. Which of these three
nations is the most desirable place to live is a value judgment. It depends on whether you
place a higher value on a high standard of living or on political and social freedom.