Classical Growth Theory - Explained
What is Classical Growth Theory?
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Table of ContentsWhat is Classical Growth Theory?Why is Classical Growth Theory Important?Academic Research on Classical Growth Theory
What is Classical Growth Theory?
The Classical Growth Theory is an economic theory that maintains that an increase in population growth leads to a decrease in economic growth. According to this theory, economic growth ceases when there is a rise in population, this is because when population increases, resources become limited causing a decline in economic growth. Proponents of this theory belief that population explosion or increase is caused by a temporary increase in the real gross domestic product of a country. However, when there is population explosion, there is a higher demand and limited resources which will in turn cause the end of an economic growth.
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Why is Classical Growth Theory Important?
Generally, classical growth theories focus on the concept of economic growth and population growth. The predominant classical growth theories were developed by Adam Smith and Thomas Malthus. These theories explored the impacts of population increase on economic growth. For instance, in the early days, there are sufficient amount of lands for families, this is where they work and get their livelihood. At some point, all good and productive lands were occupied and as the number of people increased, the available lands required more efforts and produced little harvests. Land became a limitation for the population and productivity diminished. This outplay of situations gave the belief that when humans continue to reproduce and increase in population, hunger and war is at hand. Thomas Malthus stated the major controls of population which are;
- Abstinence from sex which he described as a form of 'moral self-restraint.'
- Sexual practices with no intention of procreation or reproduction, and
- Hunger, diseases and wars.
Being a Reverend, Malthus placed more emphasis on the first solution. However, there are many classical theory ideas that do not resonate with the belief of Thomas Malthus, different classical theories emerged in the eighteenth century when a massive growth occurred. According to Ricardo and Marx, a major factor for economic growth is capital. An increase in the number of workers influence capital, workers also increase when there is an accumulation of capital.
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