Implications for Strategy and Industrial Change
Edited by Ken Green, Marcela Miozzo and Paul Dewick
Chapter 10: Making (Kondratiev) Waves: Simulating Long-Run Technical Change for an Integrated Assessment System
10. Making (Kondratiev) waves: simulating long-run technical change for an Integrated Assessment system1 Jonathan A. Köhler 1. INTRODUCTION A world macroeconomic model is being developed to investigate policies for climate change and sustainable development. To analyse climate change policy, a timescale of 100 years is necessary, because changes in CO2 concentrations, which are now strongly inﬂuencing the atmosphere, become signiﬁcant over a time period of 50–100 years or more. This raises particular diﬃculties for economic modelling. Looking back over the last 200 years, the socioeconomic system seems to be characterized by ongoing fundamental change, rather than convergence to an equilibrium state. Our opinion is that over such a long time period, a neoclassical economic model incorporating a long-term equilibrium for the world economy is inappropriate. It is necessary instead to consider the dynamic processes of socioeconomic development. These processes have been called ‘Kondratiev waves’ in the literature on long-term economic development (Freeman and Louçã, 2001). This chapter suggests a quantitative theory of long-term technical change. It will be part of a global macroeconometric model. Dewick et al. (2004) describe the process of assessing the future technologies to which this theory will be applied. In Section 2, the case is made for a disequilibrium analysis, in the spirit of the evolutionary economists. In Section 3, a (descriptive) theory of long-term economic change is discussed and an interpretation suitable for incorporation in a macroeconomic modelling framework introduced. A simple model of a growth sector is introduced in...
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