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The inconsistency if the production function is a homogeneous degree ν CES function, solving the problem and the presentation of the Modern Universal Growth Theory; The foundation of economic growth theory

Author

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  • de la Fonteijne, Marcel R.

Abstract

The use of a homogeneous not degree 1 CES production function in a simple economic model under conditions of maximum profit leads to an inconsistency. This paper identifies the root of this problem and provides a solution. Building on this, we propose an improved formulation of the Modern Universal Growth Theory, without focusing on all the difference with Solow, Harrod, Hicks, Uzawa and others, eliminating the errors and limitations inherent in earlier models like those developed by Solow in the 1960s. We conclude that approximate 40 % of the existing theory on economic growth is now rendered invalid.

Suggested Citation

  • de la Fonteijne, Marcel R., 2024. "The inconsistency if the production function is a homogeneous degree ν CES function, solving the problem and the presentation of the Modern Universal Growth Theory; The foundation of economic growth theory," MPRA Paper 121867, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:121867
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    File URL: https://mpra.ub.uni-muenchen.de/121867/1/MPRA_paper_121867.pdf
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    References listed on IDEAS

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    1. de la Fonteijne, Marcel R., 2018. "Why the concept of Hicks, Harrod, Solow neutral and even non-neutral augmented technical progress is flawed in principle in any economic model," MPRA Paper 107730, University Library of Munich, Germany.
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    Cited by:

    1. de la Fonteijne, Marcel R., 2025. "The Hidden Adjustment: Re-examining the Capital-Labor-Mix in the Harrod-neutral Growth Model," MPRA Paper 125332, University Library of Munich, Germany.

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    1. de la Fonteijne, Marcel R., 2025. "Balancing Workshare and Profitability within the Modern Universal Growth Theory (MUGT) Framework," MPRA Paper 126079, University Library of Munich, Germany.
    2. de la Fonteijne, Marcel R., 2025. "The Hidden Adjustment: Re-examining the Capital-Labor-Mix in the Harrod-neutral Growth Model," MPRA Paper 125332, University Library of Munich, Germany.
    3. de la Fonteijne, Marcel R., 2025. "Modern Universal Growth Theory (MUGT): A comprehensive upgrade to Solow," MPRA Paper 125134, University Library of Munich, Germany.

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    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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