Evaluating Modeling Choices for Economic History
An economic historian is creating a model to explain the economic history of a pre-industrial society. For centuries, this society experienced stable population levels and subsistence living standards. Then, a series of rapid technological improvements occurred, leading to a sustained increase in both population and average income.
The historian is considering two ways to represent 'technology' in their model:
- As an exogenous variable, where technological improvements are treated as unpredictable events that come from outside the economic system.
- As an endogenous variable, where the rate of technological improvement is determined by factors within the model, such as the size of the population or the level of income.
Evaluate the strengths and weaknesses of each approach. Which approach is better suited for explaining the long period of economic stagnation, and which is better for explaining the eventual escape from it? Justify your answer by explaining how each choice affects the model's internal logic and its conclusions about long-run economic development.
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CORE Econ
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Related
Consider an economic model designed to explain long-run living standards. The model operates as follows:
- The level of available technology is taken as a given input.
- The size of the population determines the total output produced, according to the given technology.
- Total output and population size together determine the average income per person.
- The average income per person, in turn, causes the population to either increase or decrease.
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