Resource Depletion, Growth, Collapse, and the Measurement of Capital

Torsten Heinrich

MPRA Paper from University Library of Munich, Germany

Abstract: Growth is often treated as something like a general property of any well-managed economic system, but the sustainability of this has been called into question since the 1970s. The current paper argues that the main problem with growth statistics - measured in income or capital - lies in the way the measures are constructed. Any measure of the total value of capital relies on a common denominator of that value, a numeraire, the choice of which also determines the dynamic development of the value statistics. In some cases the resulting patterns may differ sharply. One such case is the depletion of natural resources. The current paper develops a simple model of a 4-good economy (two resources, two final products) with the slow (exogenous) depletion of resources. It is shown that the choice of the numeraire determines the form of the capital statistics. This result is confirmed for both Walrasian, heuristic, and local pricing models in a computer simulation.

Keywords: capital; economic collapse; resource depletion; price level; limits to growth (search for similar items in EconPapers)
JEL-codes: C63 D24 E01 Q32 (search for similar items in EconPapers)
Date: 2014-01-28
New Economics Papers: this item is included in nep-gro
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