Question

1. why were the classical economist after Adam Smith pessimistic about the growth and development process

2. what have been the major finding production function studies of the sources of growth in developing countries

3. analyze the special properties of the Cobb-Douglas production function, and how might the function be used to calculate the source of growth

Answer 1

Q1) The classical growth theory states that economic growth will reduce or end, owing to an increasing population and scarce resources. Classic theory economists had their beliefs that temporary increases in the real GDP per person would lead to a population explosion which would consequently decrease the real GDP. This pessimistic theory was developed during the industrial revolution and has been proved wrong by modern progress in the later years. The pessimist economists had an idea of 'subsistence level' which implied to the minimum amount of income that is required by an individual in order to survive. The economists had a belief that if real GDP increased over this subsistence level of income, it would lead the population to increase and push down the real GDP back to the subsistence level. Alternatively, if the real GDP decreased than the subsistence level, a part of the population would die and the real income would increase and attain the original subsistence level. Their theory believed that there is a clash between an exploding population and scare resources, which would eventually bring the end of economic growth. This is because the increasing population reduces the amount of capital per labour hour , so eventually, the labour productivity and real GDP per person would decrease, leading to reduction in economic growth and developement. This is because classical economist after Adam Smith, like T.R. Malthus were pessimistic in this matter.

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