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A Long-Term Growth Model with Endogenous Biophysical and Economic States

Updated: Oct 24, 2018

Carey King

Research Scientist & Assistant Director

University of Texas at Austin

Austin, TX, 78712-1718, United States

careyking@mail.utexas.edu


Abstract

Long-term economic growth models often assume that energy resources and technology are not constraints on the economy. Energy transition scenario models often assume that economic growth will not constraint an energy transition. Both types of models often neglect fundamental dynamics and the influence of debt and subsequent interest payments. This paper discusses a newly-developed dynamic long-term growth model that endogenously links biophysical (population, resources) and economic (debt, wages, capital) states, in a stock-flow consistent manner for resources (energy, matter) and money. The model helps explain very important and broad-scale historical macroeconomic trends such as 1) the tremendous decline in energy spending relative to net output during the fossil energy and industrial transition, and 2) the post-1970s decline in wage share for Western economies.


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