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This is wrong on a profound level. GDP is Gross Domestic Product. In other words, all the goods and services produced. The price level and quantity are deeply t

by maratd 14y ago

This is wrong on a profound level. GDP is Gross Domestic Product. In other words, all the goods and services produced. The price level and quantity are deeply tied to demand and for most goods/services, demand is tied to the population. More people means more goods/services sold at a higher quantity and price. Economic growth is largely population growth. The Japanese economic stagnation is largely caused by their population stagnation and will certainly not be fixed by it.

yummyfajitas 14y ago
More people means more goods/services sold at a higher quantity and price. Can you explain why more people causes price to go up? Quantity will certainly go up, but only in proportion to population, thus having no net effect on GDP per capita.
- maratd 14y ago
  > Can you explain why more people causes price to go up? Sure. As you know, price is the intersection of supply and demand. An increase in a population is, in economic terms, an increase in demand. This will cause the price level to increase. Over time, supply will increase to match the new demand level, but to what extent and more importantly, the time frame involved, will be dependent on the good/service in question. The supply for some goods and especially most services, isn't easily increased. There is a finite number of lawyers, doctors, etc. to provide services and it take time to train more. Regulations get in the way, licensing, etc. And, of course, there are pressures on the raw materials used to manufacture goods.
  - yummyfajitas 14y ago
    So you are postulating a world where more people compete for a fixed set of goods and services? Sounds like a Malthusian nightmare. Of course, in this world price goes up but quantity remains flat (in gross terms, not per capita). Real GDP per capita drops even if inflation drives up nominal GDP per capita.
    - maratd 14y ago
      > So you are postulating a world where more people compete for a fixed set of goods and services? Is that what I said? I thought I said there's a delay between an increase in demand and an increase in supply, which results in an increase in the price level. In a world of constantly increasing demand you have a constantly increasing price level. In other words, real inflation. In a world of stagnating population growth, you'll have stagflation at best, and deflation at worst. Guess what's happening in Japan? http://en.wikipedia.org/wiki/Deflation#In_Japan http://en.wikipedia.org/wiki/Deflation#In_Japan
      - yummyfajitas 14y ago
        You were describing a world in which regulatory and material constraints prevent growth in supply to meet demand. As a simplified model, consider an economy consisting of only medical services (one of your supplied examples). Then: Real GDP per capita = gross medical services provided / population If population goes up but gross medical services stay flat, real gdp per capita falls. Nominal GDP per capita can rise of the elasticity of demand of medical services is greater than one. Being temporary just means that real GDP per capita will eventually reach it's previous level - a temporary Malthusian nightmare rather than a permanent one.
        maratd 14y ago
        > Being temporary just means that real GDP per capita will eventually reach it's previous level - a temporary Malthusian nightmare rather than a permanent one. Human beings aren't static units of consumption and production. Most productivity gains which result in real GDP per capita growth can only manifest themselves at specific economies of scale. Economies of scale realized after specific demand levels are reached as a result of growing populations. The pressures which lead to innovation are directly tied to the pressures caused by additional demand and insufficient supply. Can you name a single country with a decreasing population and a growing GDP? Or even a growing per capita GDP?
        RyanZAG 14y ago

by maratd 14y ago

yummyfajitas 14y ago

More people means more goods/services sold at a higher quantity and price. Can you explain why more people causes price to go up? Quantity will certainly go up, but only in proportion to population, thus having no net effect on GDP per capita.

maratd 14y ago
> Can you explain why more people causes price to go up? Sure. As you know, price is the intersection of supply and demand. An increase in a population is, in economic terms, an increase in demand. This will cause the price level to increase. Over time, supply will increase to match the new demand level, but to what extent and more importantly, the time frame involved, will be dependent on the good/service in question. The supply for some goods and especially most services, isn't easily increased. There is a finite number of lawyers, doctors, etc. to provide services and it take time to train more. Regulations get in the way, licensing, etc. And, of course, there are pressures on the raw materials used to manufacture goods.
- yummyfajitas 14y ago
  So you are postulating a world where more people compete for a fixed set of goods and services? Sounds like a Malthusian nightmare. Of course, in this world price goes up but quantity remains flat (in gross terms, not per capita). Real GDP per capita drops even if inflation drives up nominal GDP per capita.
  - maratd 14y ago
    > So you are postulating a world where more people compete for a fixed set of goods and services? Is that what I said? I thought I said there's a delay between an increase in demand and an increase in supply, which results in an increase in the price level. In a world of constantly increasing demand you have a constantly increasing price level. In other words, real inflation. In a world of stagnating population growth, you'll have stagflation at best, and deflation at worst. Guess what's happening in Japan? http://en.wikipedia.org/wiki/Deflation#In_Japan http://en.wikipedia.org/wiki/Deflation#In_Japan
    - yummyfajitas 14y ago
      You were describing a world in which regulatory and material constraints prevent growth in supply to meet demand. As a simplified model, consider an economy consisting of only medical services (one of your supplied examples). Then: Real GDP per capita = gross medical services provided / population If population goes up but gross medical services stay flat, real gdp per capita falls. Nominal GDP per capita can rise of the elasticity of demand of medical services is greater than one. Being temporary just means that real GDP per capita will eventually reach it's previous level - a temporary Malthusian nightmare rather than a permanent one.
      - maratd 14y ago
        > Being temporary just means that real GDP per capita will eventually reach it's previous level - a temporary Malthusian nightmare rather than a permanent one. Human beings aren't static units of consumption and production. Most productivity gains which result in real GDP per capita growth can only manifest themselves at specific economies of scale. Economies of scale realized after specific demand levels are reached as a result of growing populations. The pressures which lead to innovation are directly tied to the pressures caused by additional demand and insufficient supply. Can you name a single country with a decreasing population and a growing GDP? Or even a growing per capita GDP?
        RyanZAG 14y ago