Classical Unified Growth Theory

Throughout the history of economic thought, there have been numerous attempts to model an early era of "Malthusian" economic stagnation as well as the transition to an era of economic development in one coherent framework, or, in other words, a unified growth theory. In recent years, unified growth models have attracted a large readership among economists, challenging the conventional exogenous neoclassical growth theory. However, in most of these models, an important effect suggested by Malthus has been frequently omitted. By including what he had called "the great preventive check" in the conventional Malthusian trap model, which is based on the principle of population, the principle of diminishing returns and the principle of labor division, the transition can be modeled in a very simple dynamic macroeconomic framework. The correspondingly advanced theory suggests that increasing life expectancy tends to create a demographic structure that is much less prone to overpopulation. This new interpretation of the classical growth model is suggested to be capable of integrating the mechanisms of economic stagnation and economic development. Although the "vaguer intuitions" of the classical economists provided deeper and more profound insights than those of most modern unified growth theorists, the verbal form of their arguments has at the same time tended to be more favorable to misinterpretations. It is the intention of this work to identify these misinterpretations and to restore the main ideas of classical economics by building a basic classical unified growth model.