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Towards a Disequilibrium Theory of Endogenous Economic Growth

  • Robert Ayres

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    This paper discusses the need for a new approach to economic growth theory. The standard theory of growth-in-equilibrium driven by exogenous, uncaused, productivity gains has an implication that is both unjustified and perverse from a policy perspective: that government intervention of any kind can only introduce constraints and reduce option space, thus decreasing potential growth. It is argued that growth theory should (1) acknowledge the importance of natural resources, especially fossil fuels, as a driver of past and present economic growth, (2) incorporate an explicit recognition that growth is a consequence of technological innovation, especially radical innovation, that often responds to natural resource scarcities or other societal needs and (3) explicitly reflect the fact that the important (i.e. scarce) factors of production in economics can and do change over time, i.e. from a rural ‘cowboy’ economy of the past to an urbanized ‘spaceship’ economy of the future. In short, it should reflect the fact that ‘necessity is the mother of invention’. The first and third of these modifications have been proposed before, but not in combination. The third seems to be new. Copyright Kluwer Academic Publishers 1998

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    File URL: http://hdl.handle.net/10.1023/A:1008239127479
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    Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

    Volume (Year): 11 (1998)
    Issue (Month): 3 (April)
    Pages: 289-300

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    Handle: RePEc:kap:enreec:v:11:y:1998:i:3:p:289-300
    Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100263

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    1. Heal, G., 1990. "The Optimal Use Of Exhaustible Resources," Papers fb-_90-10, Columbia - Graduate School of Business.
    2. Robert Ayres, 1994. "On economic disequilibrium and free lunch," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 4(5), pages 435-454, October.
    3. Ayres, Robert U. & Miller, Steven M., 1980. "The role of technological change," Journal of Environmental Economics and Management, Elsevier, vol. 7(4), pages 353-371, December.
    4. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
    5. repec:cup:cbooks:9780521297615 is not listed on IDEAS
    6. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
    7. Solow, Robert M, 1974. "The Economics of Resources or the Resources of Economics," American Economic Review, American Economic Association, vol. 64(2), pages 1-14, May.
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