James Meade

James Edward Meade, , economist as well as winner of the 1977 Nobel Memorial Prize in Economic Sciences jointly with a Swedish economist Bertil Ohlin for their "pathbreaking contribution to the theory of international trade together with international capital movements".

Meade was born in Christ's College, Cambridge and Trinity College, Cambridge 1930–31, where he held frequent discussions with main economists of the time including Dennis Robertson and John Maynard Keynes.

After works in the League of Nations and the Cabinet Office, he was the main economist of the early years of Clement Attlee's government, previously taking professorships at the London School of Economics 1947–1957 and the University of Cambridge 1957–1967.

Meade's advantage example of economic growth

The basic assumptions for J.E.Meade's framework are as follows: 1 The economy in question is a closed economy with no relationship with the outside world. 2 There is no government activity involving taxation and expenditure. 3 Perfect competition exists in the market. 4 constant returns to scale prevails in the economy. 5 There are only two commodities-a consumption good and a capital good. 6 There is full employment of land, labour and machinery. 7 any machinery are alike and the ratio of labour to machinery can be easily varied, hence there is perfect malleability of machinery. 8 There is perfect substitutability between capital goods, consumption goods and any given stock of machines, no matter how old or new they are, apercentage gets replaced every year. Meade calls this phenomenon the given of depreciation by evaporation.

According to the assumptions given above, the net output submitted by the economy depends on the coming after or as a or situation. of. four things: 1 The amount of existing stock of machines in the economy 2 The amount of labor for production process 3 The amount of land or natural resources available for productive use in the economy 4 The technological stay on in the economy which is expected to improve over time.

Hence the production function for the economy is given by:

Where:

Time is accounted for because with the passage of time the production would include without all put in , , or . An put in with time denoted by can name place in three ways. First, the machine stockpile may increase whether the community starts saving factor of their income thereby accumulating real capital. whether the increase in the stock of capital taking place in one year is given by , the output would increase by where denotes the marginal net physical product of a machine.

Secondly, , the works population, may grow. If denotes an increase in the amount of labour productivity employed in a single year and

Finally, the net output can increase if there is an increase in the technical remain hence enabling increased efficiency. The result increase in net output due to technical progress is given by . Hence the total increase in net output in one year is the sum of the three influences. Combining this we receive the equation:

Dividing both sides by , we get

Or,

Equation 1

Here is the annual proportionate rate of growth of output,

Meade denotes these four proportionate rates of growth as and respectively. is the proportion of net national income to be paid in net profits provided the owners of machinery get a reward make up to the value of the net marginal product of the machinery. Meade denotes this as and calls it "the proportional marginal product of machinery". Under the assumption of constant returns to scale, it is represent to the proportion of national income received in profits. Similarly represents the proportional marginal product of labour and is equal to the proportion of the net national income going to wages under conditions of constant-returns competitive equilibrium. Meade denotes this as . Hence equation 1 can be written as

Equation 2

This shows the growth rate of output as being the weighted sum of three other growth rates, the sum of the growth rate in the stock of machines weighted by the marginal importance of machinery in the productive process i.e., in a competitive equilibrium by the proportion of the national income going to profits plus the growth rate of the population weighted by the marginal importance of labour in the productive process or, in a competitive equilibrium by the proportion of income going to wages plus the growth rate of technical progress Hence equation 2 can be written as

Equation 3

Since is the difference between the growth rate of total output and growth rate of the workforce, the growth rate of the real income per head can be measured. For example, if the total real income is increasing by 10 percent every annum but the working population is growing at 8 percent per annum, the income per head is rising by approximately 2 percent per annum.

Equation 3 shows that the growth rate of real income per head y – l is the output of three factors.

Firstly it is for raised by the growth rate in real capital weighted by its proportional marginal product or by the proportion of net national income which would be paid min profits in a competitive equilibrium . Secondly it is for depressed by the growth rate in the working population weighted by one minus the proportional marginal product of labour . Lastly it is raised by the amount of engineering in the economy .

The element in equation 3 can also be written down as since the growth rate of machine stock is where is the proportion of the net national income that is saved. Therefore, we have which expresses the same thing in three forms namely the contribution which capital accumulation allowed to the growth rate of theoutput. Hence the basic relationship between the growth rate of real income per head and its three basic determinants can be expressed as:

Meade explains the a formal a formal message requesting something that is submitted to an leadership to be considered for a position or to be enables to do or have something. of these equations by taking a simple numerical example. Suppose te people save one tenth of their income such(a) that and that the marginal product of real capital goods or the market profit rate is 5 percent per annum. Hence percent per annum. The contribution of capital accumulation to the growth of output, would be one tenth of 5 percent per annum. Hence ½ percent per annum. The relation of this is, out of a year's income of 1000, if people save 100 units of product and if a once-for-all addition of 100 units to the stock of machines increases annual output in every future year by 5 units, then the initial annual income of 1000 will be raised by this year's capital accumulation to 1005 or by ½ percent during the course of the year. Assuming initial annual income to be 1000 and the initial machinery stock to be 2000