The Encyclopedia of Economic Principals

Chapter 99

Structuralist, Feminist, and Ecological Alternatives

External constraints, care time and material throughput.

Four of the chapter's worked examples, made interactive: growth capped by the balance of payments, the care hours behind extra paid work, durability against throughput, and import capacity when the terms of trade fall. All numbers are the chapter's hypothetical values.

Every example here is a constructed teaching example: it uses the hypothetical numbers of the chapter's worked examples, plus a few values added for comparison and labelled as such in each panel. Nothing here measures a real market, firm or household.

Demonstration 1 of 4

Balance-of-payments-constrained growth

How fast can the periphery grow before imports outrun exports?

Imports rise with income faster than the center's demand for the periphery's exports, so the external balance, not labor, caps growth. Changing what the periphery exports and imports changes the elasticities and lifts the cap.

Equation, written in LaTeX: \eta_x=0.7

Equation, written in LaTeX: \eta_m=1.5

Equation, written in LaTeX: 2.1/1.5=1.4\%

Scroll sideways for the whole equation

Exports and imports both start at 100 billion. The center grows 3 percent; eta_x is the income elasticity of demand for the periphery's exports and eta_m the periphery's income elasticity of imports. g is the periphery's target growth.

Predict first. After structural change (eta_x 1.2, eta_m 0.8), how large is the gap at 5 percent growth?

Your prediction

Choose an example

Scroll sideways for the whole figure

Figure: Balance-of-payments-constrained growth. Two bars against a line at 100: exports 102.1 and imports 107.5 after a year of 5 percent growth.
Export income elasticity: 0.7, Import income elasticity: 1.5, Target periphery growth (%): 5
Constructed example: the chapter's hypothetical values are flows of 100, center growth 3, elasticities 0.7, 1.5, 1.2 and 0.8 and a 5 percent target; a 3 percent target is added.

Calculated values

Exports
102.1
Imports
107.5
Gap (imports minus exports)
5.4
Growth consistent with balance
1.4%

Hypothetical teaching numbers, not data. With center growth of 3 percent, exports grow 0.7 x 3 = 2.1 percent to 102.1. Growing 5 percent raises imports 1.5 x 5 = 7.5 percent to 107.5, leaving a deficit of 5.4 billion. Without financing, growth is held to 2.1 / 1.5 = 1.40 percent.

Worked steps

  1. Export growth = 0.7 x 3 = 2.1%, so exports = 102.1
  2. Import growth = 1.5 x 5 = 7.5%, so imports = 107.5
  3. Gap = 107.5 - 102.1 = 5.4
  4. Balance-constrained growth = 2.1 / 1.5 = 1.40%

Use the idea

Compare the growth target with export growth divided by the import elasticity before planning on growth that must be financed abroad.

Where the conclusion applies

Constant elasticities, no capital flows or reserves and unchanged relative prices, as in the chapter's stylized case.

Check your understanding: With eta_x 1.2, eta_m 1.5 and a 3 percent target, what are the gap and the constrained growth rate?
Exports 103.6, imports 104.5, gap 0.9; constrained growth 3.6 / 1.5 = 2.4 percent.

Chapter 99 source: section "Center-periphery structuralism".

Demonstration 2 of 4

Paid hours need replacement care

When Ana takes 15 more paid hours, where do the care hours come from?

The care need does not vanish when paid hours rise. Without replacement care the hours come out of someone's rest; a purchased service relaxes the time constraint at a cash cost.

Equation, written in LaTeX: h_i+c_i+r_i=T_i.

Scroll sideways for the whole equation

For each adult, h is paid work, c unpaid care and r rest in a week of T = 112 waking hours. The home needs 50 care hours. Ana earns $20 an hour, Ben $25; a service can supply 15 care hours for a family charge.

Predict first. Ana takes the 15 extra hours and no care is bought. Whose rest falls in this reader?

Your prediction

Choose an example

Scroll sideways for the whole figure

Figure: Paid hours need replacement care. Two stacked 112 hour bars. Ana: paid 40, care 20, rest 52. Ben: paid 40, care 15, rest 57. Net cash change $240.
Ana's extra paid hours: 15, Purchased care hours: 15, Family charge for service ($): 60
Constructed example: the chapter's hypothetical values are 112 hours, a 50 hour care need, Ana's 35 care and 25 paid hours at $20, Ben's 15 and 40 at $25, and 15 service hours for $60; a $120 charge is added.

Calculated values

Weekly earnings
$1,800
Net cash change
$240
Ana's rest (hours)
52
Ben's rest (hours)
57

Hypothetical teaching numbers, not data. Ana works 40 paid hours and gives 20 care hours, so her rest is 112 - 40 - 20 = 52 hours. Ana's 20 and Ben's 15 own care hours plus 15 purchased hours meet the 50 hour need. Earnings are $1,800; after the service charge of $60, household cash changes by $240 a week.

Worked steps

  1. Ana: rest = 112 - 40 - 20 = 52
  2. Earnings = 40 x 20 + 40 x 25 = 800 + 1,000 = 1,800
  3. Net cash change = 1,800 - 1,500 - 60 = 240

Use the idea

Before counting extra earnings as a gain, write each adult's time budget and say which hours replace the care that paid work displaces.

Where the conclusion applies

Fixed hours, wages and care need, and purchased care that fully substitutes for home care, as in the chapter's hypothetical household.

Check your understanding: With the service at a charge of $120 and Ana's 15 extra hours, what is the net cash gain?
15 x 20 - 120 = $180.

Chapter 99 source: section "Social reproduction and unpaid care".

Demonstration 3 of 4

Durability versus throughput

Can longer-lasting dwellings keep material use under an ecological ceiling?

Throughput is replacements plus net additions. Durability lowers replacements, but if the saving funds extra building the stock grows and throughput rises again.

Equation, written in LaTeX: \Delta K_p=I_p-dK_p.

Scroll sideways for the whole equation

K_p = 4,000 dwellings, d the depreciation rate, I_p dwellings built and Delta K_p the change in the stock. Each dwelling built uses 100 tonnes of virgin material; the ceiling is 5,000 tonnes a year.

Predict first. With 1% depreciation and 20 rebound dwellings, is the ceiling respected?

Your prediction

Choose an example

Scroll sideways for the whole figure

Figure: Durability versus throughput. Bars of material used for replacement (8,000 tonnes) and extra building (0 tonnes) and a total bar of 8,000 tonnes, against a ceiling line at 5,000.
Depreciation rate: 2%, Extra dwellings built (rebound): 0
Constructed example: the chapter's hypothetical values are 4,000 dwellings, depreciation of 2 and 1 percent, 100 tonnes per dwelling, a 5,000 tonne ceiling and 20 rebound dwellings; 1.5 percent is added.

Calculated values

Replacements
80
Throughput (tonnes)
8,000
Against ceiling
3,000 tonnes over the ceiling
Stock change Delta K
0

Hypothetical teaching numbers, not data. At 2.0% depreciation the town replaces 0.020 x 4,000 = 80 dwellings a year; with no extra dwellings throughput is 8,000 tonnes, 3,000 tonnes over the ceiling. Durability cuts throughput only if the stock is held fixed; extra building is growth, not a steady state.

Worked steps

  1. Replacements = 0.020 x 4,000 = 80
  2. Throughput = (80 + 0) x 100 = 8,000 tonnes
  3. Delta K = 80 - 80 = 0

Use the idea

Judge an efficiency program by total material throughput and the change in the stock, not by the life of each unit alone.

Where the conclusion applies

A constant population and fixed material per dwelling, as in the chapter's hypothetical town.

Check your understanding: At 1.5% depreciation and no rebound, what is throughput?
0.015 x 4,000 = 60 replacements x 100 = 6,000 tonnes, 1,000 over the ceiling.

Chapter 99 source: section "Steady-state economy".

Demonstration 4 of 4

Terms of trade and import capacity

Can exporting more cocoa make up for cheaper cocoa?

When commodities get cheaper relative to manufactures, more physical exports buy fewer imports. Extra volume can only partly offset the price fall.

Equation, written in LaTeX: 0.8\times10{,}000=8{,}000

Equation, written in LaTeX: 0.8\times11{,}500=9{,}200

Scroll sideways for the whole equation

P_C is the cocoa price index, P_M = 100 the machinery index and T = P_C / P_M the terms of trade. Q is cocoa export volume; import capacity is T x Q machinery units.

Predict first. Does raising exports by 15 percent (to 11,500) offset a fall in T to 0.8?

Your prediction

Choose an example

Scroll sideways for the whole figure

Figure: Terms of trade and import capacity. Three bars: original 10,000, T = 1 path 11,500 and actual import capacity 9,200.
Cocoa price index: 80, Export volume: 11,500
Constructed example: the chapter's hypothetical values are indices 100 and 80 and volumes 10,000 and 11,500; an index of 70 is added.

Calculated values

Terms of trade T
0.80
Import capacity
9,200
Against original 10,000
800 fewer
Loss against T = 1 path
2,300

Hypothetical teaching numbers, not data. With the cocoa index at 80 the terms of trade are 0.80, so 11,500 units of cocoa buy 0.80 x 11,500 = 9,200 machinery units, 800 fewer than the original 10,000 and 2,300 below what the same exports would buy at T = 1.

Worked steps

  1. T = 80 / 100 = 0.80
  2. Import capacity = 0.80 x 11,500 = 9,200
  3. Against the T = 1 path: 11,500 - 9,200 = 2,300

Use the idea

Measure an export drive by the imports it buys at current terms of trade, not by volume.

Where the conclusion applies

Fixed machinery prices and all export receipts spent on machinery, as in the chapter's hypothetical economy.

Check your understanding: With P_C = 70 and 11,500 units exported, what is import capacity?
0.7 x 11,500 = 8,050, which is 1,950 below the original 10,000.

Chapter 99 source: section "Prebisch-Singer hypothesis".