Abstract
This paper explains how the Human and Resources with MONEY (HARMONEY) economic growth model exhibits realistic dynamic interdependencies relating resources consumption, growth, and structural change. We explore dynamics of three major structural metrics of an economy. First, we show that an economic transition to relative decoupling of gross domestic product (GDP) from resource consumption is an expected pattern that occurs because of physical limits to growth, not a response to avoid physical limits. While increasing operational resource efficiency does increase the level of relative decoupling, so does a change in pricing from one based on full costs to one based only on marginal costs that neglect depreciation and interest payments. Marginal cost pricing leads to higher debt ratios and a perception of higher levels of relative resource decoupling. Second, if assuming full labor bargaining power for wages, when a previously-growing economy reaches peak resource extraction and GDP, wages remain high but profits and debt decline to zero. By removing bargaining power, profits can remain positive at the expense of declining wages. Third, the internal structure of HARMONEY evolves in the same way the post-World War II U.S. economy. This is measured as the distribution of intermediate transactions within the input-output tables of both the model and U.S. economy.
Highlights
Scientists and economists often seek to understand the linkages among natural resources consumption and the cost of resources in tandem with the growth rate, size, and structure of complex systems
The first is the assumption whether prices are based on full cost (FC) or marginal cost (MC) pricing
We linearly decrease the wage function parameters w1 and w2 from 1 to 0, during the time span indicated in Table 3, to Population via death rates ( N) Prices ( Pe, Pg) Wages (w) Debt of firms ( De, Dg) Capacity utilization (C Ue, CUg) Inventories ( g, wH) Economic output (Y e, Yg) Physical output ( Xe, Xg) Investment ( Ie, Ig) Capital ( Ke, Kg) Labor ( Le, Lg) Household consumption (C e, Cg) Power return ratios (e.g., net external power ratio (NEPR), net power ratio (NPR))
Summary
Scientists and economists often seek to understand the linkages among natural resources consumption and the cost of resources in tandem with the growth rate, size, and structure of complex systems. These systems can be biological organisms, ecosystems, and national or global economies. The size of organisms and ecosystems is measured by their mass, volume, and population Their structure is measured by the flow of nutrients and energy in food webs and internal distributions systems (i.e., circulatory systems) as well as social networks, such as within eusocial insect colonies. The structure of an economy can be measured by functions and metrics that summarize the distribution of stocks (e.g., capital) and flows (e.g., income, power) among people and jobs, companies, economic sectors (Hidalgo et al 2007; Hidalgo and Hausmann 2009; King 2016), or other categories through which money and natural resources flow
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