Chapter 16: Exergy flows in the economy: efficiency and dematerialization
16. Exergy ﬂows in the economy: eﬃciency and dematerialization Robert U. Ayres* BACKGROUND The possible contribution of natural resource inputs to growth (or to technical progress) was not considered seriously by mainstream economists until the 1970s (mainly in response to the Club of Rome and ‘Limits to Growth’), and then only as a constraint (Dasgupta and Heal 1974, 1979; Solow 1974a; Stiglitz 1974, 1979). It follows that, in more recent applications of the standard theory (as articulated primarily by Solow), resource consumption has been treated as a consequence of growth and not as a factor of production. This simplistic assumption is built into virtually all textbooks and most of the largescale models used for policy guidance by governments. The reality is considerably more complex. Looking at the growth process itself, it is easy to see that there are several identiﬁable ‘growth engines’ that have contributed to economic growth in the past, and still do, albeit in variable combinations. A ‘growth engine’ is a positive feedback loop or cycle. In Marshallian neoclassical economic theory, increased demand generates increased supply through savings by capitalists and investment in new capacity. More consumers and more workers led to greater aggregate income, larger savings pools and more investment. The reverse part of the feedback cycle was based on ‘Say’s law’, namely the proposition that ‘supply creates its own demand’ through declining prices (or increased quality) of products and consequent increasing demand for products (now expressed as price elasticity of demand). However, the savings...
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