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The economic growth enigma: Capital, labour and useful energy?

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  • Ayres, Robert
  • Voudouris, Vlasios

Abstract

We show that the application of flexible semi-parametric statistical techniques enables significant improvements in model fitting of macroeconomic models. As applied to the explanation of the past economic growth (since 1900) in US, UK and Japan, the new results demonstrate quite conclusively the non-linear relationships between capital, labour and useful energy with economic growth. They also indicate that output elasticities of capital, labour and useful energy are extremely variable over time. We suggest that these results confirm the economic intuition that growth since the industrial revolution has been driven largely by declining energy costs due to the discovery and exploitation of relatively inexpensive fossil fuel resources. Implications for the 21st century, which are also discussed briefly by exploring the implications of an ACEGES-based scenario of oil production, are as follows: (a) the provision of adequate and affordable quantities of useful energy as a pre-condition for economic growth and (b) the design of energy systems as ‘technology incubators’ for a prosperous 21st century.

Suggested Citation

  • Ayres, Robert & Voudouris, Vlasios, 2014. "The economic growth enigma: Capital, labour and useful energy?," Energy Policy, Elsevier, vol. 64(C), pages 16-28.
    • Handle: RePEc:eee:enepol:v:64:y:2014:i:c:p:16-28
    DOI: 10.1016/j.enpol.2013.06.001
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    References listed on IDEAS

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    1. Robert U. Ayres & Benjamin Warr, 2009. "The Economic Growth Engine," Books, Edward Elgar Publishing, number 13324.
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    4. Allen,Robert C., 2009. "The British Industrial Revolution in Global Perspective," Cambridge Books, Cambridge University Press, number 9780521868273.
    5. Wrigley,E. A., 2010. "Energy and the English Industrial Revolution," Cambridge Books, Cambridge University Press, number 9780521766937.
    6. Vlasios Voudouris & Robert Gilchrist & Robert Rigby & John Sedgwick & Dimitrios Stasinopoulos, 2012. "Modelling skewness and kurtosis with the BCPE density in GAMLSS," Journal of Applied Statistics, Taylor & Francis Journals, vol. 39(6), pages 1279-1293, November.
    7. Kummel, Reiner & Henn, Julian & Lindenberger, Dietmar, 2002. "Capital, labor, energy and creativity: modeling innovation diffusion," Structural Change and Economic Dynamics, Elsevier, vol. 13(4), pages 415-433, December.
    8. R. A. Rigby & D. M. Stasinopoulos, 2005. "Generalized additive models for location, scale and shape," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 54(3), pages 507-554, June.
    9. Wrigley,E. A., 2010. "Energy and the English Industrial Revolution," Cambridge Books, Cambridge University Press, number 9780521131858.
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