Limits to Growth Concepts in Classical Economics
39 Pages Posted: 28 Sep 2005 Last revised: 15 Sep 2020
Date Written: February 1, 2008
Neoclassical economics seems to have ignored the concept of physical limits to growth by assuming that the market and the technological advances invoked by it will make it possible to tap new resources and create substitution of production factors, while it has outright excluded limitations invoked by the political, psychological and social institutions in its analyses. Classical economics, on the other hand, appears to have been cognizant of a multitude of limitations to growth, including demographic, environmental, and social. In this paper, I reconstruct classical economic growth models using system dynamics method and explain their behavior using computer simulation. The paper not only demonstrates that system dynamics can be used with advantage for constructing models of theoretical concepts in economics and experimenting with them, it also makes a case for taking a pluralistic view of the growth process and reincorporating a multitude of institutions driving it into our models to arrive at realistic policy options.
Keywords: Economic growth, classical economics, system dynamics, computer simulation, environment, limits to growth
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