## Macro-economic modeling (2)

### April 25, 2010

Refer to an earlier post for background.

Baseline + technology

One of the farmers develops an agricultural machine. Using the machine one farmer can farm 10 plots of land rather than 1. The technology is perfectly renewable – the machine is built and powered using certain types of plants that can be cultivated. Amortized over the entire lifetime of the machine, building, running and disposing of the machine requires the output of 5 plots of land.

The landowner, who wishes to minimize the land being used, strikes a deal with the farmer-engineer by which he is allowed to use the new machine and in return will supply the inventor with 3000 calories per day (who will build the machine and maintain it). The landowner then trains and employs one farmer, who, using the machine, cultivates 10 plots of land, produces the materials for the machine and, in addition, 10,500 calories in food per day. The landowner and the farmer-engineer get 3,000 calories per day each and the farmer-operator gets 2,000 calories (leaving some 2,500 calories surplus per day).

Compared to the baseline, only a third as much land is cultivated, and only a 10th as many people are fed by the food economy.

Baseline + bargaining

The farmers bargain collectively with the landowner and manage to reach a deal which grants each farmer being employed by the landowner 2070 calories per day. As a result, the landowner, who still wishes to consume 3000 calories per day, employs 100 farmers. Compared to the baseline, each of the farmers employed enjoys higher income and at the same time, more farmers are employed.