25The Industrial World in the Twenty‐First Century
Alain A. Vertès
London Business School, NW1 4SA, UK
NxR Biotechnologies GmbH, Basel, Switzerland
25.1 Introduction: Energy and Sustainability
The neoclassical economic growth model developed in 1956 by Robert Solow and Trevor Swan computes exogenous economic growth by computing changes over time in the level of output of an economy as a result of the deployment of (i) capital, (ii) labour, and (iii) technology (or ‘effectiveness in labour’) (Solow 1956). Notably, at steady‐state, the economic growth rate can only be further increased through innovation. While both fundamental and intrinsically useful, this model does not fully account for a critical parameter, that of energy supply. Recent studies have demonstrated that when energy is scarce (i.e. expensive) it strongly impacts economic growth (Stern 2011). On the other hand, when energy is abundant and thus cheap, it has a much reduced effect on economic growth (Stern 2011). The distortion generated by the parameter energy to the predictions of the ...
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