CONTEMPORARY ECONOMICS AND CONTRAINDICATIONS FOR CLIMATE MALADIES: LESSONS FROM ENVIRONMENTAL MACROECONOMICS

Abstract

This paper provides an alternative basis for analyzing economic growth and the consequent perpetuation of climate malaise. The contention herein is that the effectiveness of approaches based on standard neoclassical frameworks of production and factor utilization, regardless their integration with scientific and related information is likely to be constrained. This paper considers, by recourse to the laws of thermodynamics and ecological resilience, a special production function for macroeconomics to explicitly include the stock of environmental capital (KN) as an argument alongside manufactured capital (KM) and labour (L). Being distinct from the production functions that underlie the work of Nobel Laureates – William Nordhaus and Paul Romer – the application of this function can provide different results. For example, extending the reformulated production function to the context of the Romer Model suggests clear possibilities of the need for de-growth in selected economies. Besides, the ‘Nordhausian’ claims of "optimal pollution” and "optimal climate change" could constitute a contraindication. If at all the term optimality must be used – then the optimal quantity is zero pollution and zero climate change!