Wu Limits to Growth Models for Public Policy

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Growth Models and Limits-to-Growth Models as Bases for Public Policymaking in EconomicDevelopmentAuthor(s): Chi-Yuen WuSource: Policy Sciences, Vol. 5, No. 2 (Jun., 1974), pp. 191-211Published by: SpringerStable URL: http://www.jstor.org/stable/4603738 .Accessed: 21/07/2013 15:52

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Policy Sciences 5 (1974), pp. 191-211C) Elsevier Scientific Publishing Company, Amsterdam-Printed in Scotland

G r o w t h M o d e ls a n d

Lmts-to-Growth o d e l s a s

B a s e s fo r P u b l i c Policymaking

in Economic DevelopmentCHI-YUEN WUProfessor of Public Adminzistration, ew York University, New York

ABSTRACTThis paper analyses several economic growth models to evaluate their usefulness for policymaking.The assumptions underlying ome of the simple growth models are questionable and they arenarrow in scope. A comparative tatics model is broad in scope, but it fails to deal withmechanisms of adaptation and adjustments or with cases of discontinuity, ncreasing returns, and

unlimited growth. The dynamic growth models tend to give undue emphasis to capital and labour.The Malthusian model has proven historically wrong. The Meadows model is broader n scope,but its assumptions are mostly not scientifically stablished and its use of quantitative data iscareless. The above models are also defectivebecause of over-aggregations nd under-specifications.They all fail to take fully into account technological and institutional changes, which have beenresponsible or four-fifths of economic growth n the past and are expected to help overcome thelimits to future growth. Needed are models based on an acceptable growth theory, which takeinto account all basic factors (including echnological and institutional changes) as interrelatedelements and give adequate attention to the mechanisms of adaptation and adjustments.

1. In this paper an attempt will be made o analyse he major economic growth models,including limits-to-growth models, and to evaluate their possible contribution opublic policymaking. Economic growth s defined as annual increase n per capitaincome n real terms.' It is suitable or quantitative nalysis. Special attention will begiven to mathematical rowth models. The form and substance of each of the impor-tant models, heir strengths nd weaknesses s instruments f policymaking, he basicproblems and major difficulties nvolved n their use for public policymaking, s wellas possible omissions, deficiencies and pitfalls for which policymakers must watchcarefully, will be examined.

2. As the number of mathematical rowth models is large, we have to be veryselective,dealing only with those which have the greatest nfluence n current develop-ment literature. n particular, we shall fully cover the Meadows Report,2 because ofthe very wide attention t has received.

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3. Quantitative data and mathematical models are among the most powerful, andat the same time most dangerous, ools in public policymaking. This is especially ruein the economic field, as economic phenomena are largely quantitative n nature.Public policymaking n the economic field would be highly deficient f quantitativedata and mathematical models were not used and used effectively. On the one hand,such models speak in a language of clarity and precision, characterized y logicalconsistency and compactness, onducive o orderly and rigorous hinking, and oftenguided by the principles of accuracy, ntegrity and rationality. They are very usefulto policymaking. On the other hand, excessive reliance on and improper use ofquantitative and mathematical nstruments could lead to disastrous results. Thishappens when policymakers nd the general public religiously believe that mathe-matical statements epresent "eternal ruth" or assume hat a policy decision reachedon the basis of quantitative data and using mathematical methods s more accurateand more acceptable. n using mathemetical models, policymakers hould bear in

mind that figures do not always tell the truth. Incorrect and misleading quantitativedata constitute one major category of "lies" n human history. Even when basic dataare reliable and correct, the way in which they are handled, categorized, or inter-preted, may be questionable. t should also be borne n mind that a model is only anordered set of assumptions about a system and no model can be better than theassumptions built into it. Policymakers hould always nsist that models presented othem as bases for decision should have their assumptions iven in clear, explicit, andprecise details. If a model s so complicated hat its computation an only be handledby a computer, he use of the computer does not make a model more reliable, although

it does make t appear more "respectable." computer-run model s always governedby a fundamental rinciple about computers, .e. the principle of "garbage n-garbageout" (GIGO). In any case, policymakers hould be firmly n control over economicdevelopment olicies of the country and should not be mystifiedby the mnathematicallanguage of the experts.

Simple Growth Models and Trend Projection Models4. There are various ypes of economic growth models. A simple growth model dealswith a singleaggregate ariable as a function of time and is based on a certain assump-tion(s) or law(s) governing he trend of its growth. The population rowth model s anexample of this type of model. This model has been formulated s follows: "Popula-tion, when unchecked, oes on doubling tself every twenty-five ears, or increases na geometrical atio."3The aggregate ariable here s population ize.The basic assump-tion is the so-called biological law of natural ncrease n population size that a re-producing biological species (man being one such species) increases ts populationnaturally at a geometric progression with the rate of growth depending mainly on themechanism f reproduction. uch a simple growth model (or similar models based oncertain aws in natural sciences)cannot alone serve as a basis for policymaking itherin the field of population or in the general ield of economic development. First of all,it is a "fatalistic model" and doesnot by itselfprovide he basis or a population olicy.4Second, t does not, by itself, present, defineor clarifyany problem or decisionmaking.

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prediction and for policymaking, without any qualification r reservation. Further-more, recent population data seem to indicate a) that the birth rate of most developedcountries has come down much faster than anticipated; b) that the birth rate of thedeveloping ountries s likely to start declining arlier han expected, and (c) that thegrowth rate of world population may begin to decrease well before the end of the

present decade. Should these expectations urn out to be correct, hen the populationgrowth model should be revised drastically.7. Another simple growth model is an industrial rowth model, which envisages a

sustained ncrease n industrialization t an exponential rate. The single aggregatevariable here is industrial production. The assumption governing he changes n thisvariable s sometimes given as the theory that once industrial development eaches acertain stage it becomes self-sustaining nd automatically ncreases at an exponentialrate. Actually, this theory is just a restatement of the model itself and cannot beconsidered as its basic assumption. This type of model s, in fact, a projection often

statistical) of the future based on the rate of growth n a past period of time. The basicassumption underlying uch a model s that the future rate of growth will continue hepast and present rends. If industries grow at a compound nterest rate of r% a year,the assumption s that in the future hey will continue o grow at r % a year, compoun-ded annually. Such a basic assumption s questionable. The rates of industrial rowthof a country are not the same at different tages of its economic development. n the"post-industrial" ountries uch as the U.S.A., future economic growth may take the-form of a shift from manufacturing ndustries o the production of "services," n-cluding those services which are not normally ncluded n the statistics of industrialproduction. n the developing ountries he very essence of economic development sto change (increase) he rate of industrial growth. It is, therefore, unacceptable oproject he future purely on the basis of the past and present growth rates. Further-more, industrial rowth s often not continuous; t is marked by discontinuity due totechnological nnovations. This element has not been taken into consideration n theindustrial growth models. For these reasons, t would not be advisable o accept suchindustrial growth models as a sound basis for policy consideration without havingcarefully examined all relevant aspects.

8. In constructing trend projection model, t is necessary o select a base period asthe starting point and use the growth rate of that period to calculate extrapolatedvalues for future years. The base period must be "normal," n order to avoid dis-tortions and misleading results. (It may also be noted that the same trend functionoften yields different rend values f the initial and terminal years selected differ or if-the period covered varies.) A conspicuous example showing how ridiculous resultsmay come from a careless use of the extrapolation method may be found in theMeadows Report (p. 43) when the figures for extrapolated gross national product(GNP) per capita (in U.S. dollars) are presented or ten countries or the year 2000.In the case of China, obviously the growth rate of the base period selected (0.3 %)must be one from periods of abnormally ow income and difficult postwar and post-revolution readjustments. or those periods, most of the national income estimatesfor China were based on questionable ata and tended o underestimate rastically tsGNP in real terms. On that basis, the extrapolated GNP per capita for China for the

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year 2000 is given n the Meadows Report as U.S. $100,which s less than 1% of thatof the U.S.A. and 4000 of that of Pakistan. There s no need to show further howridiculous he estimate s, except o point out that according osomestudents fChinesedevelopment, ne would have difficulty n classifyingChina as a developing countryin the year 2000. In the case of Japan, from a very low level of GNP in the period

immediately after the war, the country was able to achieve a spectacular ate ofrecovery and growth 9.9 % per year). This was partly due to the great efforts made bythe Japanese people as a united, defeated ountry and partly due to a great number ofexceptionally avourable conomic actors, ncluding xtensive aid from the U.S.A.;the possibility of concentrating n economic reconstruction nd development withoutwasting money for military purposes; high productivity ue to the fact that old capitalequipment was dismantled by the Allies and old organizations were dissolved (andnew equipment nd more effective organizations were subsequently uilt); significanttechnological rogress; more-or-less ree access o certain mportant oreign markets;

and the beneficial economic effects to Japan of the Korean and Vietnamese wars.Using this spectacular ut abnormal ate of recovery nd growth a rate due to manyfactors which will not, and cannot, be duplicated n the future), an extrapolated GNPper capita amounting o $23,200was given in the Meadows Report (p. 43) for Japanfor the year 2000, which would be more than double hat for the U.S.A. and over 380times that for Nigeria. This is another example llustrating he danger of a ridiculousmisuse of the extrapolation method to project the future. One should question notonly the validity of such extrapolated igures,but also the usefulness of models basedon such figures even as a basis for policy discussion. t would be difficult o estimatefully the dangers nvolved, should the government f an important power use suchcountry igures or the year 2000as a basis or evaluating herelative conomic trengthof the major countries n the next generation and formulate ts long-term oreignpolicy accordingly. t would be equally misleading, f one should try to build anaggregate er capita ncome growth model or the world as a whole by adding countryfigures of this kind, which are also basically not comparable.5

9. Another simple growth model may also be mentioned, .e. thefood growth model.There are two ways of constructing growth model for food production. One is touse a specific heory or hypothesis. Malthus, or example, used a hypothesis based oncertain physical or technical characteristics elating o the nature of agricultural ndfood production. On the basis of this hypothesis, Malthus presented n his First Essayon Population (pp. 21-22) a model of linear growth hat food or the means of subsis-tence "increase n an arithmetical atio," an increase every twenty-five years by aquantity equal to what s presently produced. Historical xperience n the last one anda half centuries has indicated hat the Malthusian model is far too pessimistic nd itsassumption ncorrect. Another way is to base the model on past and present growthrates. If one accepts he population growth model given n paragraphs and 5 above,and if one further assumes that the food production per capita in the developingcountries s holding constant at its present nadequate evel (the Meadows Report,p. 48) and the food production per capita n the developed ountries has increased, tlogically ollowsthat the projected rowth n food production hould be at an exponen-tial rate at least as high as that of population growth. This appears o be the model

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herence and mutual consistency of various quantitative ssumptions n an economicdevelopment lan. Its usefulness o policymaking epends ery much on the possibilityof verifying he various assumptions n the macroeconomic models which, in turn,depends on the availability f necessary quantitative ata of acceptable quality.

12. As an instrument or analysing conomic growth, he comparative tatics model

has serious methodological eficiencies nd s based on a number fassumptions whichare open to question. From a methodological point of view, a transition rom oneequilibrium tate to another nvolves an adaptation process as well as various timelags. In the process of adaptation, and partly because of the time lags, the conditionsof equilibrium may themselves be altered and certain nternal changes n the systemmay be generated. n this connection, wo kinds of time lags may be mentioned. First,if one change follows another n rapid succession, t often happens that before thesystem has time to adjust o the first change, new adaptation has to begin n responseto subsequent hanges. Second, there may be a number of time lags and the length

of each may differ considerably. he combination f various kinds of time ags greatlycomplicates he matter and may alter he conditions of equilibrium nd create nternalchanges n the systemwhich may significantly ffect he final state of equilibrium whenit is eventually allowed to be established. n such a process of adaptation, many ofthe convenient assumptions of the equilibrium chool, including he assumption of"other hings being equal," hat of neutrality f money and credit, and that of perfectforesight, cannot be taken for granted. f one accepts he view that in the process ofadaptation to changes, the conditions of equilibrium may be altered and internalchanges n the system may be generated, ne can no longer be sure of the universalvalidity of the policy of balanced economic growth advocated by the equilibriumschool and may, from time to time, have to turn to an "unbalanced heory" of econo-mic development, uch as that advanced by Hirschman.8 Furthermore, when thesubject matter s economic growth, one can no longer accept without critical examina-tion the assumption of continuity or that of the absence of increasing eturns, wobasic assumptions f the equilibrium chool. We are witnessing n age of discontinuity,especially rom the viewpoint of technology. The assumption f continuity s no longerconsistent with reality. Even further rom reality s the assumption of the absence ofincreasing eturns. The modern economy s characterized y the dominating ole ofincreasing eturns. Once the real role of increasing eturns s recognized, one has toaccept the possibility hat forces causing changes may be engendered rom within theeconomic system and that such changes (especially conomic growth) may becomecontinuous without resting at an "equilibrium evel." In other words, under ncreasingreturns, a) there may be endogenous orces engendering hanges; b) the changes soengendered may propagate hemselves n a cumulative way; (c) such changes maydestroy the very foundation of the equilibrium approach and lead to continuousgrowth, and (d) among the endogenous actors resulting rom increasing eturns andsignificantly nfluencing conomic growth has been the rise of big and giant economicorganizations with monopolistic or oligopolistic power to influence the working ofthe market ystem.9

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Dynamic Growth Models13. Harrod's article on dynamic heory and Domar's article on growt:h epresent adifferent approach o the problem of economic growth.10 he Harrod-Domar heoryis based on the Keynesian heory instead of the equilibrium heory. The Keynesiantheory focussed attention on the aggregate output and the aggregate demand n aneconomy and revolutionized conomic hinking by recognizing he importance f thedivergency between these two aggregates and the disequilibrium esulting rom it,and thus rejecting he equilibrium heory hat the working of the market orces with-out interference an be depended pon to establish, maintain, and restore quilibrium.The Harrod-Domar pproach uses the aggregates and tries to determine aggregateoutput as an explicit function of the aggregate nput of labour and/or capital. In asimplified orm, the model may be stated as Y = I( Y/I), in which Y is output, I isinput, and (Y/I) is the productivity of the input. In such dynamic growth models,economic growth s not treated as a gap between wo successive tatic equilibria, butrather as a continuous process of increase n per capita ncome, without ever reachinga maximum evel. There were two important versions of this model. One highlightslabour and reads the model to mean that output is equal to labour times labourproductivity. Another, .e. the Harrod-Domar model, emphasizes capital and readsthe model to mean that output s equal to capital divided by capital-output-ratio. nthe former, capital, and, and other factors affect output mainly hrough abour pro-ductivity; n the latter, labour, land and other factors, affect output through eithercapital or capital-output-ratio. ometimes, abour and capital are combined n fixedproportions, and I therefore epresents oth labour and capital. This type of growth

model is logically sound and has been used as a point of departure rom which modi-fications are made. The main difficulty s that only one factor of production or afixed combination of two factors) s explicitly considered. As long as one remembersthat labour productivity or capital productivity capital-output-ratio) s a partialproductivity nd depends on many other factors, which should be taken fully intoconsideration, hen he model sacceptable. fnot, then one may draw some unbalancedand unacceptable onclusions uch as the following: hat capital s the main factor neconomic growth or that economic growth depends mainly on labour. While bothlabour and capital have important roles to play in economic growth, no economic

growth model can overlook other actors. Some of them are actually no less important(if not more important) han labour and capital. Historically peaking, according oKuznets, the high rate of increase n aggregate product characteristic of moderneconomic growth ranging rom 20 to about 50 Y. each decade, or 15 to 30% on a percapita basis) was too high to be explained, except in small part, by rises in inputs(or inputs per head). Kuznets estimates hat increase n inputs per head (labour andmaterial capital combined) accounted or less than a fifth of the secular rise in pro-duction per capita, and for a decreasing raction n recent decades."

Other Growth Models14. In spite of its tendency o over-emphasize he importance f labour nput and/orcapital nput, the dynamic growth models are more useful to policymaking han the

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comparative tatics models. More attention, however, hould be given to those models(mainly non-mathematical) which emphasize technological progress and institutionalchanges, uch as the growth models of Karl Marx and Joseph A. Schumpeter. uchmodels are far more important and more relevant than other models for publicpolicymaking n the developing ountries, because modern economic growth has been

due mainly o factors affecting he quality of inputs, such as technological rogress ndinstitutional hanges.15. Attention may also be drawn to those growth models which assume that the

development of each country would follow a definite historical path comprisingdefinite stages of development. One example s the Marxian model of development,which envisages a path from feudalism o capitalism, o socialism and communism.The Historical School has advanced a number of models for stages of economicdevelopment. A more recent example s Rostow's model of stages of economic growth,from a traditional ociety, through a stage of transition in which he preconditions or

take-off are developed), o take-off, o the drive to maturity, and reaching he age ofhigh mass-consumption nd beyond. Such models give the policymakers sense ofhistorical direction. t is, however, mportant o bear n mind, apart rom the questionwhether a particular tages model s correct or not, that one should not over-dramatizethe uniformities n the sequences of economic growth and that in reality he path ofeconomic growth of each country always has its own uniqueness.

Limits-to-Growth Models16. The simple growth models and the dynamic growth models describe a continuousprocess of growth and do not set any limit or any maximum evelbeyond which herecould be no further growth. The general equilibrium model, which takes all deter-mining actors as given, sets its own limits or all the elements n the economic ystem,which are assumed o reach he optimum or equilibrium oints, no more and no less.A position of equilibrium s a stationary point of no-growth. Growth is treated nterms of comparative tatics, moving equilibria, r a change rom one set of limits toanother. t is left to those who advocate he imits-to-growth odels or limits models oraise the question how limits of certain determining actors set the basic limits togrowth.

17. The main themes of limits models are as follows: (a) Certain critical variablesin the world (population and/or others) have been growing at a rapid or an exponen-tial rate, and are expected to continue rapid or exponential growth in the future,unless deliberate ction is taken to slow down or to stop the growth. (b) The world'sphysical resources cultivable and and/or others) are finite and can be increased bytechnology and other means only to a limited extent. (c) The rapid or exponentialgrowth in population and/or other critical variables will reach the physical imits,resulting n such catastrophes s a sudden and uncontrollable ecline n populationand/or other calamities. The policy implication of the limits models is to slow down

or to stop population growth, ndustrial rowth, and/or economic growth as a whole.The scope of limits models varies from one dealing with limits to the growth of asingle aggregate ariable such as population) o one dealing with all major actors of

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economic growth and its overall limits. The Malthusian model is the best knownexample of the former. The "World Model," either Forrester's ormulation n hisWorld Dynamics or the version by Meadows and others in Limits to Growth, s thebest known example of the latter.12 ll are based on the notion that in a finite worldit is not possible to maintain nfinite growth. The basic question s how correct are

the assumptions hat the world is finite and that the growth of population or someother determining actor in the economic system is infinite. Both the Malthusianmodel and the "World Model" will be examined rom this point of view.

18. The Malthusian model s based on the population growth model and his foodgrowth model, as summarized espectively n paragraphs and 11 above. On theassumption hat population grows at an exponential ate and that food or means ofsubsistence ncreases only at an arithmetical atio, the rate of increase n food produc-tion is far below the rate of population growth and the former becomes a limit to thelatter. As the slow rate of growth n food production s due to limited quantity of

land and to its qualities, he real imit o population growth s land or food production.The Malthusian Theory as formulated n his First Essay and summarized aboveactually comprises ive parts: First, population growth, f unchecked, s determinedby a biological aw governing he reproduction f species o be an exponential rowth.Second, the quantity of land for food production s given and cannot be increased.Third, the qualities of land are such that in the application of labour to a fixedquantity of land, food production s governed by the law of diminishing eturns.Fourth, the exponential growth of population cannot be sustained. n other words,"the increase of population s necessarily imited by the means of subsistence" FirstEssay,

p. 140)and

"the superior power of population s repressed, and the actualpopulation kept equal to the means of subsistence y misery and vice" (p. 141). Fifth,the labouring lass and the poor of a country would be kept at the level of subsistenceand misery. In other words, there would be no possibility or mankind o progress"forward with accelerated velocity towards illimitable, and hitherto unconceivedimprovement." n this form the Malthusian model is fatalistic n nature. It is a pro-phecy of doom. It is, in fact, a theory which can be used to justify the poverty of themass, even in an industrialized ountry.

19. The weakness of the assumption of continuous population growth at an ex-ponential rate s described n paragraphs and 5 above. If one deals with a sufficientlylong period of time, it is possible that mankind can succeed n exercising effectivebirth control and family planning due to economic and social changes and to deli-berate government policies. The assumption hat land for food production s givenmay also be questioned. The quantity of land available for food production n acountry often depends on the costs t is willingand able to incur o bring new ands ntocultivation. nmost cases, f the period slong enough and the overall izeof the countryis not too small, it is possible to bring marginal ands into cultivation, f a countryincurs the necessary costs. Even in food production, he law of diminishing eturnsdoes not always apply. Technological and institutional changes, such as the GreenRevolution, land reallocation, and land reform, do often make it possible for theincrease in food production o equal or to exceed the increase n population. Asmentioned n paragraph 9 above, the trend of food production growth during the

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twentieth century has been one of exponential growth and has been, on the average,able to sustain the exponential population growth. The per capita food productiontoday s higher han that n 1800 or 1900. Historically, he prophecy hat the labouringclass would be kept at the level of subsistence nd misery has proven to be incorrect,at least in the industrialized ountries.

20. Much broader n scope is the "World Model" as formulated by Forrester,Meadows, and others. In this World Model, the critical variables growing exponen-tially nclude not only population, but also industrial roduction nd food production,as described n paragraphs , 7, and 9 above. The finitephysical esources f the world,which set the limits to growth, are (a) arable and, (b) non-renewable atural esources(such as aluminum, oal, iron, natural gas, petroleum, and other minerals), and (c)the world's capacity o absorb pollution. The Meadows Report estimates he world'ssupply of arable and to be fixed at about 3.2 billion hectares p. 50). It considers ucha level (up to now) to be much more than sufficient o meet actual need. For all ofhistory, there has been "an

overridingxcess of

potentiallyarable

and." However,because of exponential rowth n population, "within 30 years (or about one popula-tion doubling ime), there may be a sudden and serious shortage of arable and" (p.51). This shortage would be further worsened by a gradual shift of land use, fromagricultural o nonagricultural urposes, and land loss through erosion. By aboutthe year 2000, because of the exponential growth of demand or food due to popula-tion growth and of the decrease n available arable and, all arable and would havebeen used. Even on the assumption hat no arable and would be used for non-agri-cultural purposes, he point at which all arable and would have been used would onlybe delayedby about en years to the year 2010).Even oday, the best half of the world'spotentially arable and is already cultivated. Because of the high cost of opening upnew land, there have already appeared ymptoms of crisis, in the form of thousandsof deaths attributable o malnutrition p. 52). A collapse would occur around theyear 2000 when population growth might be finally halted by a rise in the death ratedue to decreased ood and other causes (p. 124). Besidesarable and, there are otherpossible imits to expansion n food production, uch as the availability f fresh water(p. 53). While the arable land and fresh water (both renewable natural resources)constitute he main limits to food production growth, he availability f non-renew-able natural esources fuels and minerals) ets a limit to industrial rowth, ncludingthe growth of capital goods. Using the data on non-renewable esources publishedby the U.S. Bureau of Mines in the 1970edition of its Mineral Facts and Problems,the Meadows Report takes the estimated reserves as given and extrapolates heBureau's 30-year exponential demand projections ndefinitely nto the future. Onthat basis, most of the reserves would be depleted very rapidly. The result would beonly a short delay of the time of the collapse, f one allows for a definite ncrease nthe reserves say, doubling or even increasing by five times). "Given present esourceconsumption ates and the projected ncrease n these rates, the great majority of thecurrently mportant non-renewable esourceswill be extremely ostly 100years from

now" (p. 66). If the population and industrial output should continue o grow afterthe year 2000, then a collapse would occur because of the depletion of non-renewableresources p. 125).Another key limiting actor, according o the Meadows Report, s

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the pollution absorption apacity of the planet. In the process of industrial develop-ment and economic growth, many effluents f such activities are dispersed nd pollutethe air, the soil, and the water n the planet. When such effluents re released and builtup in the human environment n a large enough scale, they could become harmfuland increase he death rate of the human species. Although few kinds of pollution

have been actually measured over time, "virtually every pollutant that has beenmeasured as a function of time appears to be increasing exponentially" p. 71).Exponentially ncreasing pollution would soon saturate the pollution absorptioncapacity of the planet, cause an increase n the death rate and a decline in foodproduction, and lead to a collapse n the system p. 127). The Meadows Report drawsthe conclusion "with some confidence hat, under he assumption f no major changein the present system, population and industrial rowth will certainly top within thenext century, at the latest" (p. 126),due to one or more of the three imits mentionedabove. Because of these imits, according o Forrester in his World Dynamics, p. 12),

"there may be no realistic hope of the present underdeveloped ountries reaching hestandard of living demonstrated y the present ndustrialized ations," and the stateof poverty which he developing ountries re now in may represent "better balancewith the environment han the countries hey try to emulate." The Meadows Reporturges that steps be taken to alter the growth trends and to establish a condition ofenvironmental nd economic tability hat s sustainable ar nto the future. The soonerwork begins to attain t, the greater he chance of success.

21. There are many similarities s well as basic differences etween he Malthusianmodel (as given in his First Essay) and the Meadows World Model as given n Limitsto

Growth). They both deal with long-term rends. They both assume an exponentialgrowth on the demand side of resources and between inear and zero growth on thesupply side. They are both fatalistic. They both prophesy doom or the inevitabilityof the ending of the exponential growth on the demand side and the emergence f astate of no growth in which population and/or industrial growth would stop. Theconclusion reached by Malthus s "that the great obstacle n the way to any extra-ordinary mprovement n society, s of a nature hat we can never hope to overcome"(First Essay, p. 346). The conclusion eached n the Meadows Report s the inevitable"transition from growth to global equilibrium," ither through collapse in thegrowth system or through deliberate policy changes Limits to Growth, p. 24). Thetwo models differ, however, n scope and in approach. The Malthusian model dealswith only two factors population nd and) and their nterrelationship mainly hroughfood production). The Meadows World Model is a global system, dealing with variedbut interdependent omponents, especially (a) population, food, and industrialproduction on the demand side of resources, and (b) renewable and non-renewableresources, as well as pollution absorption apacity of the planet as part of resources,on the supply side. It treats all these elements as interconnected n many ways andpays special attention o their nterrelationships nd "feedback oops."'3 The MeadowsReport quantifies uch relationships nd, with the computer, calculates "the simul-taneous operation of all these relationships ver time" (p. 90). The major differencebetween he Malthusian model and the Meadows model s in the nature of their majorquantitative elationships. n the Malthusian system, both the population growth

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model and the food production model are based on certain physical "laws" or theore-tical assumptions, as explained n paragraphs and 9 above. The Meadows Reportuses only trend projection models in which the authors extrapolate uture trends upto the year 2100 from data collected or estimated or the period 1900 to 1970.Thequestions which should be asked about such an approach nclude whether he data

for 1900-70 are dependable nd acceptable, nd whatare hejustifications or assumingthat the future trends of growth up to 2100 would be at the same rates as those from1900 to 1970. According to the Haq Report (report by a task force of the WorldBank) on the Meadows Report, "many assumptions n the model were not scienti-ficallyestablished nd the use of data was often carelessand casual."14 conspicuousexample of such careless and casual use of data was given in paragraph 8 above.Another serious defect n the Meadows Report s the inconsistency n its approach othe question of trend projections. For the critical variables on the demand side ofresources, the Meadows Report assumes exponential growth; but for the criticalvariables on the

supply sideof

resources, t assumes inear or zero growth. No realjustification s given for such a divergence n approach.22. The reliability f data and assumptions n the MeadowsReport may be examined.

On the demand side of resources, population growth, industrial development, andfood production were discussed n paragraphs -7, and 9 respectively. Data andassumptions elating o pollution n the World Model, according o the Haq Report,"are the weakest part of the model. In many cases they are not established on anyscientificbasis" (the Haq Report, p. 10).The authors of the Meadows Report clearlyrecognized hat they had only sparse and incomplete data on pollution. As its pollu-tion model was based on Forrester's model in World Dynamics, one can examine hecorresponding art of the latter. In doing so, the Haq Report came to the conclusionthat pollution due to industrialization ould be less than he crisis evelenvisaged n theWorld Model. "If the ratio of pollution generation o capital stock in the ForresterModel were to be reduced hree-eighths hevalue originally ssumed-an adjustmentwell within the error range of the data-the prediction of catastrophe would beerased" pp. 11 and 48). In addition, he highly aggregated epresentation f pollutionin the World Model has many difficulties: a) a pollutant having important effectsin one sector (say, health), may be unimportant n another sector (say, agriculturalproductivity); b) the combined ffectof two pollutants s often different rom he sumof the effects applied separately, phenomenon known as synergism p. 47). On thesupply side, the data and assumptions elating o the three limiting factors are alsonot on solid ground. Here again, the pollution aspect n the Meadows Report s veryweak. There s no scientific vidence, either n the Meadows Report or elsewhere, osupport any specific imit to the amount of pollution he world can absorb n a year.According o some recent estimates, about 80-90 percent of present pollution can beremoved "at a relatively ow cost" (Haq Report, p. 12). In any case, much moreresearch will be needed before one can define he pollution absorption capacity withclarity and confidence. While we recognize hat harmful effects of pollution do exist

and are important, we agree with the Haq Report in that a world collapse due topollution going beyond he absorption apacity "is not necessarily nevitable ven withcontinued conomic growth" p. 55). Regarding rable and we question, n paragraph

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19 above, the assumption hat the quantity of arable and is fixed and agriculturalproduction s necessarily ubject o the law of diminishing eturns. The concept ofresources n the Meadows Report, both for land resources and for non-renewableresources, s basically static in nature. If a dynamic approach s adopted, then oneshould allow not only for the possibility of increasing he supply of resources by

incurring additional costs and by discovery and exploitation, but also for better andmore productive use of resources. As pointed out in the Haq Report, "the dynamicsof resources xpansion and creation warn against the fixing of potential resources atany, even generous, multiple reserves" p. 40).

23. One of the major mistakes n the Meadows Report s its treatment of mineralresources. t limits "known" mineral esourcesmainly o those in the land which havealready been surveyed nd found o be promising or exploitation nder urrent marketconditions. According o a so far unpublished tudy by the United Nations Resourcesand Transport Division, the forecast of imminent mineral depletion s "the result

of an astonishing series of false assumptions about virtually all the factors that gointo the metal supply: he geology of the earth's crust, he nature of 'known' reserves,the interplay of market orces n the availability f a given metal at a given time, andthe unthinking application of the principle of exponential growth to a field in whichit is not applicable over the long term."'5 f one takes into consideration he mineralresources of the sea, then one can hardly come near the coDclusion hat mineralresources may become depleted around he year 2000or limit economic growth n theforeseeable uture. According o studies of resources of the sea, "there s, in general,sufficient mineral resources n the earth's crust to support a world population of anyreasonable predicted number."'6 The earth's crust (a layer which can be exploitedto a depth of several miles) is so rich in mineral deposits of all types that one cubicmile of rock is estimated o contain over 600,000 ons of copper, about 900,000tonsof nickel, almost a billion tons of aluminium, nd other ores in similar quantities. nrelation to current consumption, he Pacific Ocean nodules alone are estimated ocontain the copper, nickel, and titanium equal to over a half million years, 150,000years, and two million years respectively f the current annual consumptions eeds ofthe United States, he largest mineral onsuming ountry n the world.'7 t is true thatmany mineral deposits can be exploited only with low yields at high costs. But theyare there to be exploited f man is willing and able to pay a high enough price. Theyshould therefore be included n the known mineral resources n any discussion oflimits to economic growth. n this connection, one must not exaggerate he difficultiesin exploiting mineral esources f the sea. Such difficulties re mainly egal and politicalin nature. Technologically, ocean mining offers many possible advantages overtraditional and mining, as the minerals of the sea can be explored completely withcameras prior to mining, as they are available "without removing any overburden,without the use of explosives,and without expensive drilling operations or samplingand ore breakage," nd as they can be mined with new, flexible, and highly efficientequipment. n fact, the sea-floor nodules "should prove to be a less expensive ourceof manganese, nickel, cobalt, copper, and possibly other metals han our present andsources."18 ven on the assumption hat one can ignore the resources of the sea, thetreatment of mineral resources of the land by the Meadows Report s inadequate. As

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pointed out in the Haq Report, ts data on reserves re mainly rom the U.S. Bureauof Mines, of which roughly our-fifths ave a confidence evel of less than 65%. Someof the estimates are seriously out of date. Some resources whose existence s certainare not included n the estimates (the Haq Report, p. 41). Normally, the so-calledproven reserves vary directly with the pressing need for them. Should the demandexpand, a moderate ncrease n price can raise the level of economically minablereserves ignificantly nd an increase n exploration an raise proven reserves. n fact,"reserves f a number of minerals have risen exponentially n the past, in many casesfaster than consumption" p. 41). For example, world reserves f bauxite ncreasedseven times from 1950 to 1970,and iron ore five times n twelve years. There are alsostrong possibilities of (a) substitution, b) new resources uch as solar energy, and (c)technological nnovations which lead to more efficient use of minerals and fuels.What characterizes he resource picture s therefore not finiteness, but uncertainty.The question is whether the policymakers are using adequate data, are planningsufficiently ahead, and are taking the necessary action to enable needs to be met

indefinitely.

Some Methodological Problems24. In recent studies of economic growth, here s a tendency o be more rigorous, olean more on model construction, o emphasize nterrelationships f various elementsin the system, and to use statistical verifications. The Meadows Report, in a way,represents uch a tendency. The authors do make a positive contribution n dealingwith a variety of interrelationships imultaneously, n linking human and physicalfactors within a

system,and in

usinga

greatdeal of statistical

data. But the MeadowsReport ails to present a rigorous model and is defective n the ways n which quantita-tive data are selected, used and interpreted. The Meadows approach s basicallydeductive and not inductive. The authors of the Meadows Report built their limitsmodel first and all conclusions ould be derived rom the model before hey began tocollect statistical data.19They used statistical data only to confirm heir model. Onthe demand side of resources, as pointed out by the Haq Report, "if one looks atdata with exponentiality n mind, then exponentiality s what one is likely to come outwith" (p. 59). On the supply side, they assumed a finite world. All they could seewas agiven quantity of resources or a multiple two to five times) of it. No matter whetherone uses a lower or a higher imit (one to five times of givenresources), he exponentialgrowth of demand will soon or later have to stop, because of the limits imposed by afinite world. The Meadows Report is a clear example of fitting the data (with littlescientific ustification) o a predetermined odel,whicha student believing n a rigorousand scientific approach hould try to avoid.

25. The Meadows World Model, like the Malthusian heory, the Harrod-Domartheory, some of the equilibrium models, and many other growth models, s a simplisticand highly aggregated model. In many ways, the over-aggregations r under-specifica-tions involved are unacceptable. a) It is too much a simplification o lump togethermany components f a different ature nto a singleaggregate, uch as lumping olid,liquid, and gaseous pollution ogether, or lumping all minerals and fuels together, or

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main engine of growth. The general quilibrium chool and the World Model attemptto take all factors under (a) and (b) into consideration nd try to find simultaneoussolutions to all such factors. With the exception of those mentioned n paragraphs14-15 above, all have missed the importance of (c) and (d). In fact, as mentionedabove, technological and institutional actors have been responsible or over 80%

of the spectacular conomic growth of the developed countries. These are also thefactors o overcome whatever "limits" mankind may face in future economic growth.If one is allowed o make a projection n the same way as the Meadows Report, thenone can, with more ustification, project a growth model for technological hanges ata super-exponential ate.21 There is no reason to follow the Meadows Report inallowing only for a doubling or even a five-fold ncrease n resources due to techno-logical changes. The history of mankind s a story of man's successful fforts o over-come the limits nature puts in the way of growth and progress, or rather to makeuse of the opportunities provided by nature or overcoming uch limits. It was theexponential growth in technology (together with continuous nstitutional mprove-ments) which caused the exponential rowth n food, in industrial production, and inpopulation. There s no sound reason to project continuance of the latter (effect) atthe same exponential rates, without allowing for continuance of the former (cause)at the same rates. This amounts o projecting ollapse or breakdown n the system.If it were possible to quantify institutional changes, then a mathematical growthmodel for such changes would also be super-exponential n nature.

28. For policymaking oncerning economic growth, it is important o take intoaccount all the four key determining actors mentioned n the last paragraph. When apolicymaker xamines a growth model, one of the first questions he should raise iswhether uch a model includes all these factors. If not, it is important o examine howthe omissions would affect the policy implications f the model.

29. Most important of all, policymakers hould always bear n mind the importanceof technological and institutional hanges. This is not only because historically heyhave played a very important role in accelerating conomic growth, but becausetechnological and institutional hanges are the key to the conquering f the limits togrowth. When one takes such factors nto consideration, ne is dealing with factorscharacterized y discontinuity nstead of continuity, and with cases of increasingreturns nstead of decreasing eturns. A case of discontinuity nd increasing eturnscannot be handled by the models of the general quilibrium chool or the limits models.The time has come for students of economic growth to intensify he efforts alreadystarted by Marx, Schumpeter nd others to formulate growth models emphasizingtechnological and institutional changes. In this connection, one should not ignorethe warnings ounded by the Malthusian School and by the Limits to Growth. Theyare important actors which must be taken into account.22 either should one forgetthe importance f capital, as emphasized y the Harrod-Domar roup. However, hesolution of the questions of "limits" and capital eventually depends on technologicalinnovations and institutional hanges, both in the broadest ense of the terms.23

30. In any case, neither he conclusion n Malthus' First Essay that the labouringclass must remain at the level of subsistence r misery nor the suggestion mplied nLimits to Growth that the developing countries must remain at the level of poverty

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and misery should be acceptable or public policymaking. The former has provenhistorically wrong and the latter will no doubt also be proven incorrect by futurehistory. Technological and institutional changes (changes that "grow" at super-exponential ates)which have brought about ncreases n per capita ncome n the pastcan be relied upon to conquer the poverty and misery of the Third World in the

future. It should be emphasized hat the success of economic growth depends verymuch on the confidence man has in the feasibility of conquering he limits imposedon him in the process of development. Any attempt to prophesy doom or the inevit-ability of collapse n man's effort at economic growth s itself a disservice o humansociety, unless the prophecy s based on facts and not on a model mechanically uiltfrom questionable reconceived deas.Politically o government n a developing ountrycan possibly accept the no-growth mplications of the so-called "World Model."For reasons outside the scope of this paper, the national policy of the developingcountries will continue o be one of encouraging nd accelerating conomic growth.24

31. While the economy of any country s constantly affected by outside develop-ments, economic growth policies are handled mainly at the national evel. From thestandpoint of an individual ountry, carcity of domestic resources as so far not beena factor imiting he economic growth of a country, as long as it can buy the necessarymaterials rom outside he country, as the cases of Japan, Hong Kong and Singaporeclearly show. Although t is important o take into account the global supplies ofcertain key resources nd nternational elations n general, policymaking n economicgrowth remains n the hands of national authorities.

32. Regarding conomic growth tself, one major difficultywith both the Meadows"World Model" and the comparative tatics model s that neither of the two is basedon a growth heory. The former only makes projections somebased on wrong assump-tions) and the latter ust deals with no-growth ystems. Both really ellvery ittle aboutthe causes and process of growth or limits to growth. On the other hand, Malthuspresented model emphasizing and as the basic imiting actor. The dynamic growthmodels emphasize capital and/or labour as basic factors responsible or growth.Marx, Schumpeter nd others emphasize echnological nnovations and institutionalchanges including ntrepreneurship) s basic causes for economic growth. A correctgrowth theory should take all these basic factors directly nto consideration. How-ever, the simple growth models, the Malthusian Model, the dynamic growth models,or some of the models emphasizing nly technological or institutional actors mostlydeal only with limited aspects nstead of the system as a whole. The general equili-brium heory and the Meadows Report ake a large number of factors nto considera-tion, deal with their interrelationships, nd try to solve all problems imultaneously,although they fail to give us an acceptable heory of growth. The policymakers neconomic development hould try to base their decisions on an acceptable heory ofgrowth. Such a theory should be comprehensive nough to take all basic factors ntoaccount. It should give adequate attention to the mechanisms of adaptation andadjustment and treat all factors and processes as interrelated lements within the

economic system of a nation, bearing n mind that a nation today is part of an inter-dependent world.

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NOTES

1 It is important o bear in mind that economic growth is a much narrower oncept thaneconomic development. The latter may be defined as the use of moderm echnology nproduction, with such institutional changes as are necessary o provide the frameworkfor such use, and with such increases n capital, growth n entrepreneurship, nd improve-ments in the quality of all resources as are necessary o further technological changes,in order to improve the material well-being of people, through economic growth, fullemployment, nd equitable distribution f income, o be accompanied y industrializationand/or other structural hanges in the economy. Economic growth is only one of thepossible objectives of a government. There are many other economic objectives such aseconomic stability, quitable distribution f income, ull employment) s well as cultural,social and political objectives. The various objectivesmay or may not be consistent witheach other, but they are all interrelated.

2 Donella H. Meadows, Dennis L. Meadows, Jorgen Randers, and William W. BehrensHI, The Limits to Growth: Report or the Club of Rome's Project on the Predicament fMankind New York, 1972). This book will be referred o either as Limits to Growthor as the Meadows Report.

3 Thomas Robert Malthus, An Essay on the Principle f Population s It Affects he FutureImprovement f Society (London, 1798), reprinted and published as First Essay onPopulation, 1798, with notes by James Bonar, London, 1926, p. 21. The exact period oftime for doubling he population 25 years) s not specially mportant o the model. Theterm geometrical ncrease or exponential growth refers to an increase by a constantpercentage ate in a year or in any constant time period. This edition will be referred oas First Essay. In the second edition of the book in 1803, Malthus changed his positionand admitted he possibility of a check on population growth by moral restraint.

4 The term "fatalistic model" is used here to mean that the system as a whole is predeter-mined, and neither he terminal tate nor the inputs and ways for attaining t can be alteredby human action. In other words, under such a system, the occurrence f events is fixedin advance or all time in a way in which human beings are powerless o change and thereis no room for policymaking or choice of alternatives). However, he fact that a certainsystem is predetermined an be an important actor in policy decision on other matters.Thus, if one should accept the Malthusian population growth model as given in hisFirst Essay, there would be no room for a population policy to influence he growth ofpopulation. It would grow exponentially no matter what the government or anyonemight try to do. But the fact that population would grow according o the Malthusianmodel would be helpful to policymaking n such fields as housing. Although a fatalisticmodel is "deterministic" n nature, we would prefer to reserve he term "deterministicmodel" for a broader use, in the sense that the terminal tate of the system is predeter-mined if certain ndependent actors (inputs) are given, or in that the terminal state ispredetermined f the process of change inherent n the model is initiated. In such cases,the policymakers an change the terminal state by interfering with one or more of theindependent actors, or can choose between initiating or not initiating the process ofchange. The term "deterministic model" may also be used to mean a system which pre-scribes ts terminal tate, but allows selection between various ways for reaching t.

5 For a critical review of various forecasting approaches from an economic angle, seeErich Jantsch, "Forecasting and the Systems Approach: A Critical Survey," PolicySciences, Vol. 3, No. 4 (December, 1972), pp. 477481. With regard to more than onetrend projection model being used together for forecasting, according to Jantsch, "themerely extrapolative approach taken by the earlier multivariate models was based onstatistical correlation eflecting he constellation of forces in the recent past and ... wastacitly assumed to hold also for the forecasted period. Such approaches are thus in-herently restricted n most cases to very short time periods, perhaps up to five years" (p.478).

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6 "Econometric echniques are basically geared to optimization, or a single criterion, ofsystems of linear equations and are in this form restricted o mechanistic ystem modelswhich do not account for the possibility of internal structural hange in the process"(Jantsch, bid, p. 478).

7 The general equilibrium heory in economics follows the generalized principle of LeChatelier n chemistry. "This principle stated that a system change could be analyzed

by looking at the beginning and terminal tates. It inquires only into the ultimate effect,upon equilibrium, of a given total change in a parameter, eaving aside all questionsrelating to the path by which the displacement of equilibrium akes place" (Edgar S.Dunn, Jr., Economic and Social Development, Baltimore, 1971, p. 31).

8 Albert 0. Hirschman, The Strategy of Economic Development (New Haven, Yale Univer-sity Press, 1958).

9 For (a), (b), and (c), see Allyn Young, "Increasing Returns and Economic Progress,"Economic Journal, Vol. 38 (December, 1928),pp. 527-542; N. Kaldor, "The Irrelevanceof Equilibrium Economics," Economic Journal, Vol. 82 (December, 1972), pp. 1237-1255. Regarding (d), it may be noted that the general equilibrium heory (in fact allclassical and neoclassical theories) of economics is based on the assumption that the

market s served by numerous irms, each supplying a small share of the total productand each being subject o a market price, which no single unit is big enough to alter orcontrol. In a situation of increasing returns, however, organizations often grow to solarge a size that they influence r control market prices and thus upset the working of thesystem of perfect competition, a basic assumption of the general equilibrium chool.In the real world, the economy of the developed countries s an economy of monopoly,oligopoly, and monopolistic ompetition, an economic systemdominated by big organiza-tions (including giant corporations). n the developing countries, big organizations dooccupy a crucial role in economic development especially n fields such as industries,transport and communications, banking and finance). See John Kenneth Galbraith,Economics and the Public Purpose (Boston, 1973) and The New Industrial State (Boston,

1967, second revised ed. 1971).10 Roy F. Harrod, "An Essay in Dynamic Theory," Economic Journal, 1939, Vol. 49, pp.14-33; E. D. Domar, "Capital Expansion, Rate of Growth, and Employment," Econo-metrica, 1946, Vol. 14, pp. 137-147, reprinted n his Essays in the Theory of EconomicGrowth (New York, 1957), pp. 70 ff.

11 Simon Kuznets, Modern Economic Growth: Rate, Structure, and Spread (New Haven,Yale University Press, 1966), p. 491.

12 Jay W. Forrester, World Dynamics (Cambridge, Mass., Wright-Allen, 1971) and theMeadows Report mentioned n note 2 above.

13 By "feedback oop" (positive or negative) s meant a chain of cumulative ause-and-effectrelationships eading to a spiral of changes (either ncreases or decreases) or a "vicious

circle."14 Report on the Limits to Growth: A Study by a Special Task Force of the World Bank(Washington, D.C., September 1972).The Special Task Force was under the Chairman-ship of Mahub ul-Haq, Director, Policy Planning and Programme Review Departmentof the World Bank (International Bank for Reconstruction and Development). Thisreport will be referred o hereafter n this paper as the Haq Report.

15 A brief summary of this unpublished eport s found in the Development orum issuedby the U.N. Centre or Economic and Social Information), Vol. 1, No. 3 (April, 1973),p. 3.

16 John L. Meno, The Mineral Resources of the Sea, Amsterdam, 1965,pp. 4-5. This impor-tant source of mineral resources has, however, been little exploited relative o its poten-

tial.17 Ibid, p. 278. "Assuming hat only 10 percent of the nodule deposits prove economic tomine, it can be seen that there are, in general, sufficient upplies of man) metals n thesesea-floor deposits to last for thousands of years at our present rates of consumption.

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Even assuming a world population of 20 billion people consuming metals at a rate equalto that in the United States at the present ime, the reserves of most of the industriallyimportant metals would still be measured n terms of thousands of years" (Ibid, p.277 f.).

18 Ibid, p. 280.19 This statement s based on the impression obtained rom a discussion between some of

the authors of the Meadows Report and some staff members of an international rganiza-tion.20 We do not analyse in this paper the mechanisms of adaptation and adjustments. One

such mechanism may be mentioned, .e. money (and credit). For theoretical studies, itmay be permissible o assume, as a first step, the neutrality f money. For policymaking,the role of money must be taken fully into account. Reference may be made to a reviewof the place of money in the theory of development by Lord Robbins (in his The Theoryof Economic Development in the History of Economic Thought, London, 1968, pp. 120-149).Due to differences n monetary olicies and other causes, he economic growth of somecountries is accompanied by business cycles, while that of some other countries bycontinuous nflation. n either of these two cases, money's role is not neutral and it does

influence he results of economic growth.21 In a statistical study of the growth of science and scientific manpower over the century(in terms of quantities f scientific iterature nd number of scientists as given n manpowerreports and with regard o the world picture without reference o field and to country),Derek De Solla Price found that in first approximation he growth of science activityhas been constant, at an exponential rate of roughly 7% per annum (doubling n sizeevery 10 to 15 years), which is a much faster rate than either the population explosionor the world rate of industrialization. ee the first Science of Science Foundation Lecturein England delivered by him, which was published n Nature (1965) and summarized nRobert A. Charpie, "Technological nnovation and the International Economy," inTechnological Innovation and the Economy, ed. by Maurice Goldsmith (London, 1970).

22 Conservation of natural resources and preservation of a healthy human environmentshould be givenadequate attention. The former s particularly mportant or the developedcountries. The developed ountries are now using far more non-renewable esources hancountries n the Third World. The latter now consume only a very small percenta e of theworld's minerals and fuels. When Third World economies grow, the developed countrieswill increasingly eel the shortage of minerals and fuels, unless steps are taken toincrease production ignificantly hrough echnological and other innovations.

23 Both the demand and supply of capital are influenced by technological and institutionalfactors. Modern echnology, basically capital-intensive, ncreases he demand or capital.It also leads to higher productivity, which has always been a main factor for increasingthe supply of capital. Institutional actors (including he corporation orm of organiza-

tion, over-all egal framework, nd many others) are important n facilitating he accumu-lation of capital. The capitalistic form of production cannot exist without modemtechnology, and the size of capital varies directly with technological progress.

24 Up to the last paragraph, we have treated he problem of economic growth as a purely"economic" problem. t is important o note that economic growth s very much affectedby political, social, and cultural actors. Economic development which s a much broaderconcept than economic growth) is closely related to social, political, and administrativedevelopment, nd they are all parts of the process of modernization.

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Wu Limits to Growth Models for Public Policy