In this thread Rebecca West and I sidetracked into a discussion re: population growth vs economic growth.She said:
quote:
Maybe twenty years ago, even ten. But I think that a Keynesian model of aggregate supply and demand economics can only be of limited value in a globalized market. Canada's closed domestic supply-demand loop is getting smaller and smaller as time passes, and all the centrist and right-of-centre economists here are screaming for us to get our heads out of the noose before it throttles us. I'm afraid it's only a matter of time before our economy is completely at the mercy of the unregulated currency and commodities markets of the world and how we spend has as much impact on our domestic economy as a fart in a windstorm.Anyway Doc, this is the wrong place for this discussion. We should either start up another thread in Earning and Spending, or let it go. I wouldn't mind moving it elsewhere, although my economic theory is pretty rusty, and you're probably opening up a big ole can of whoopass right about now.
Prepare to open can of whoop-ass, commander!
Preparing to open, sir!
OPEN IT!
Now I know I linked to this before, but since I'm such a self-aggrandizing pseudofelinoid, here's my primer on the AD-AS model.
(I realize, BTW, that the primer doesn't take into account the SAS and LRAS curves, but we're not going to go into such detail)
If you will visualize the AD curve as being near the point of full-employment GDP, then a sudden drop in population would cause AD to rapidly fall to the left; AS would shift, but more slowly because production does not react instantaneously to consumption. As a result, the price level would drop, and therein lies my assertion that a rapid population decline would see prices fall to much lower levels than before the drop.
BTW, if anything, it is not the centrist and right-wing economists "yelling for us to get our heads out of the noose" - it is the left-wing economists. The right-wing economists would be only too happy to see us deregulate everything under the sun!
The CCPA also has a study that shows that about 60 to 80 percent of our national output is still domestic in origin.
This implies that the use of the domestic AD-AS model is still a good first approximation.
You may say that prices of various products, such as energy, will not respond much to a drop in our population, and you would be correct - BUT prices would have to drop just to clear markets domestically, otherwise there would exist surpluses which would persist for a long time. Food in particular comes to my mind. How long do you think food retailers would let their food sit with nobody buying the product? Spoiled food equals no sales at all.
Email this thread to someone!
posted 21 May 2002 04:08 PM
