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The Inada Conditions for Material Resource Inputs Reconsidered

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  • Stefan baumgärtner

Abstract

It is shown that the thermodynamic law of conservation of mass, the so-called Materials-Balance-Principle, implies that the marginal product as well as the average product of a material resource input are bounded from above. This means that the Inada conditions, one of the standard assumptions of economic growth theory, when applied to material resource inputs are inconsistent with a basic law of nature. The analysis is based on a model of multi-level production where intermediate goods are produced from elementary resources, and an all-purpose final commodity is produced from these intermediates. Copyright Kluwer Academic Publishers 2004

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File URL: http://hdl.handle.net/10.1007/s10604-003-5267-5
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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 29 (2004)
Issue (Month): 3 (November)
Pages: 307-322

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Handle: RePEc:kap:enreec:v:29:y:2004:i:3:p:307-322

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: conservation of mass; Inada conditions; materials balance principle; natural resources; production function; thermodynamics;

References

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  1. Daly, Herman E., 1997. "Georgescu-Roegen versus Solow/Stiglitz," Ecological Economics, Elsevier, vol. 22(3), pages 261-266, September.
  2. Heal, Geoffrey M., 1993. "The optimal use of exhaustible resources," Handbook of Natural Resource and Energy Economics, in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 3, chapter 18, pages 855-880 Elsevier.
  3. Berry, R. Stephen & Salamon, Peter & Heal, Geoffrey, 1978. "On a relation between economic and thermodynamic optima," Resources and Energy, Elsevier, vol. 1(2), pages 125-137, October.
  4. Barelli, Paulo & de Abreu Pessoa, Samuel, 2003. "Inada conditions imply that production function must be asymptotically Cobb-Douglas," Economics Letters, Elsevier, vol. 81(3), pages 361-363, December.
  5. Kurz, Heinz D. & Salvadori, Neri, 2003. "Fund-flow versus flow-flow in production theory: Reflections on Georgescu-Roegen's contribution," Journal of Economic Behavior & Organization, Elsevier, vol. 51(4), pages 487-505, August.
  6. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
  7. Barelli, Paulo & Pessoa, Samuel de Abreu, 2003. "Inada conditions imply that production function must be asymptotically Cobb-Douglas," Economics Working Papers (Ensaios Economicos da EPGE) 477, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  8. Noel, Michael, 1978. "Resource extraction and recycling with environmental costs," Journal of Environmental Economics and Management, Elsevier, vol. 5(3), pages 220-235, September.
  9. R. M. Solow, 1973. "Intergenerational Equity and Exhaustable Resources," Working papers 103, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Smith, Vernon L., 1977. "Control theory applied to natural and environmental resources an exposition," Journal of Environmental Economics and Management, Elsevier, vol. 4(1), pages 1-24, March.
  11. Solow, Robert M., 1997. "Georgescu-Roegen versus Solow-Stiglitz," Ecological Economics, Elsevier, vol. 22(3), pages 267-268, September.
  12. Schulze, William D., 1974. "The optimal use of non-renewable resources: The theory of extraction," Journal of Environmental Economics and Management, Elsevier, vol. 1(1), pages 53-73, May.
  13. Dasgupta,P. S. & Heal,G. M., 1985. "Economic Theory and Exhaustible Resources," Cambridge Books, Cambridge University Press, number 9780521297615, October.
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Cited by:
  1. Chatterjee, Partha & Shukayev, Malik, 2008. "Note on positive lower bound of capital in the stochastic growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 32(7), pages 2137-2147, July.
  2. Kronenberg, Tobias, 2010. "Finding common ground between ecological economics and post-Keynesian economics," Ecological Economics, Elsevier, vol. 69(7), pages 1488-1494, May.
  3. Fagnart, Jean-François & Germain, Marc, 2011. "Quantitative versus qualitative growth with recyclable resource," Ecological Economics, Elsevier, vol. 70(5), pages 929-941, March.
  4. Krysiak, Frank C., 2006. "Entropy, limits to growth, and the prospects for weak sustainability," Ecological Economics, Elsevier, vol. 58(1), pages 182-191, June.
  5. Sousa, Tania & Domingos, Tiago, 2006. "Is neoclassical microeconomics formally valid? An approach based on an analogy with equilibrium thermodynamics," Ecological Economics, Elsevier, vol. 58(1), pages 160-169, June.

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