Geoscience Reference
In-Depth Information
Product
Improvement
R&D Substitution of
Knowledge for Labour;
Capital; and Exergy
Process
Improvement
Substitution of
Exergy for Labour
and Capital
Lower Limits to
Costs of
Production
INCREASED REVENUES
Increased Demand for
Final Goods and Services
Lower Prices of
Materials &
Energy
Economies of
Scale
Fig. 2.2 The substitution of exergy for labour and capital seen as the key factor of lowering costs
and increasing revenues in the virtuous cycle driving historical economic growth. Source Ayres
and Warr ( 2005 )
US GDP (1900=1)
GDP Japan (1900=1)
25
50
GDP estimate LINEX
GDP estimate Cobb-Douglas
Empirical GDP
GDP estimate LINEX
GDP estimate Cobb-Douglas
Empirical GDP
20
40
15
30
10
20
PRE-WAR COBB DOUGLAS
alpha=0.33
beta=0.31
gamma=0.35
POST-WAR COBB DOUGLAS
alpha=0.78
beta=0.03
gamma=0.25
PRE-WAR COBB DOUGLAS
alpha=0.37
beta=0.44
gamma=0.19
POST-WAR COBB DOUGLAS
alpha=0.51
beta=0.34
gamma=0.15
5
10
0
1900
0
1920
1940
1960
1980
2000
1900
1920
1940
1960
1980
2000
year
year
Fig. 2.3 The explanatory capacity of a LINEX or Cobb-Douglass production function which
includes useful work together with labour and capital, confronted with the historical GDP series of
the United States and Japan (1900
-
2000). Source Ayres ( 2008 ). Besides the standard Cobb-
Douglass function,
the following LINEX production function has also been used: Y t ¼
which includes capital (K), labour (L) and useful work (U).
Considering that there is an apparent inconsistency between very small factor payments directly
attributable to physical resources
þ ab
1
U exp
a 2
L þ U
K
L
U
and the obvious importance of nal
useful energy (or exergy) as a factor of production, this approach abandons the neoclassical
assumption that the productivity of a factor of production must be proportional to the share of that
factor in the national income. Alternatively, it considers that available useful work, either
mechanical, chemical or thermal, multiplies the joint productivity of any combination of capital
and labour throughout all value-added stages of the whole set of production chains (Ayres 2001 ,
pp. 817
especially fossil fuels
-
838; Ayres and Warr 2005 , pp. 181
-
209 and Ayres et al. 2009 ). Therefore,
the
neoclassical identi cation of marginal productivities with factor shares is here replaced by a
Search WWH ::




Custom Search