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

Marcel R. de la Fonteijne

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Technical Progress; Growth Model; Maximum Profit Condition; Production Functions; General Technological Progress; Capital-Labor mix; Elasticity of Substitution; Normalized CES Functions, inconsistency; homogeneous CES production function; Total Factor Productivity; DSGE Model; Solow Model; Hicks; Harrod (search for similar items in EconPapers)
JEL-codes: E00 E20 E23 E24 (search for similar items in EconPapers)
Date: 2024-08-31
New Economics Papers: this item is included in nep-eff and nep-gro
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