Summary
In this paper it has been examined under what conditions the increasing costs of pollution will put a limit to the growth of output in a growing economy. On the assumption of a certain type of aggregate production function, labour- and land-augmenting technical progress and pollution costs progressively increasing with the stock of capital, the analysis led to the conclusion that only under very restrictive conditions economic development will not peter out in secular stagnation or semistagnation. Only if the rate of land-augmenting technical progress is sufficiently high with respect to the growth rates of capital and effective labour pollution costs will not be a barrier to economic growth.
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References
D. Ricardo,The Principles of Political Economy and Taxation, 3rd ed., London 1821. J. S. Mill,Principles of Political Economy, 6th ed., London 1871, Book IV.
R. M. Solow, ‘A Contribution to the Theory of Economic Growth’,Quarterly Journal of Economics, Vol. LXX (1956), pp. 65–94.
T. W. Swan, ‘Economic Growth and Capital Accumulation’,Economic Record, Vol. XXXII (1956), pp. 334–361.
An alternative assumption — which in our model comes to the same thing — is that pollution is recognized but not prevented. Now the deteriorating quality of life is weighing on the community. The disutilities caused by pollution could in principle be converted into units of output. However, this solution begs the question of how to find a unit of pollution and what price to attach to it. In this article no attempt is made to attack these very important practical and political problems.
A production function, which shows the same characteristics, is used in S. K. Kuipers,De betekenis van vraag- en aanbodfactoren in groeimodellen met één sector, mimeographed doctoral thesis, Groningen 1970. A production function of this type turned out not to be contrary to the facts.
It may be noted that this conclusion is independent of the special specification of the production function (3.1). As the slope of the cost curve is always positive, maximum size of output is always reached in the increasing interval of the gross production curve. More usual productions such as the Cobb-Douglas and the C.E.S. functions would lead to the same result.
As the main aim of this article is to examine the consequences of thedifferences between the growth rates of labour, land — both in efficiency units — and capital, the casess(a 1 −b 1 )=∈=β,s(a 1 −b 1 )=∈ ands(a 1 −b 1 )=β are left out of consideration. It may be noted that under these circumstances the solutions of the differential equation (4.1), differ from solution (4.2). Dr. J. M. Sanders has drawn our attention to this point.
Marginal productivity of labour is not influenced by the availability of land. This is a consequence of the simplifying assumption that only capital is causing pollution and of not including land in the production function of gross output.
D. H. Meadows, c.s.,The Limits to Growth — A Report for the Club of Rome’s Project on the Predicament of Mankind, London 1972. J. W. Forrester,World Dynamics, Cambridge (Mass.) 1971.
Meadows, c.s.,The Limits to Growth — A Report for the Club of Rome’s Project on the Predicament of Mankind, London 1972, pp. 126–127.
Meadows, c.s.,The Limits to Growth — A Report for the Club of Rome’s Project on the Predicament of Mankind, London 1972, pp. 157 ff.
Meadows, c.s.,The Limits to Growth — A Report for the Club of Rome’s Project on the Predicament of Mankind, London 1972, pp. 134.
Meadows, c.s.,The Limits to Growth — A Report for the Club of Rome’s Project on the Predicament of Mankind, London 1972, pp. 135 and 136.
Additional information
We thank Mr. A. F. Gerritsma, Roden, for drawing the figures.
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Kuipers, S.K., Nentjes, A. Pollution in a neo-classical world: The classics rehabilitated?. De Economist 121, 52–67 (1973). https://doi.org/10.1007/BF02367199
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DOI: https://doi.org/10.1007/BF02367199