Is green growth possible and even desirable in a spaceship economy?

Abstract

There seems to be a consensus among many growth and resource economists that perpetual growth can be ensured if it gets increasingly resource-efficient and if growth focuses on creating values, a result derived by models using production functions that allow asymptotically complete decoupling of the economy from its resource base by substituting natural resources through physical and knowledge capital. This growth process can be called green growth. The following paper attempts to show, within the framework of an semi-endogenous growth model using a linear-exponential production function (Linex function) with bounded resource efficiency, that the accumulation of physical and knowledge capital to substitute natural resources cannot guarantee green growth. As the population grows, per capita income decreases, and the economy’s capital base decays. In addition, an ecological displacement effect resulting from the biophysical embeddedness of the economy further exacerbates the result. Physical capital pushes back the natural spaces necessary to regenerate natural services and resources and can, therefore, not be accumulated endlessly. A comparison with standard resource models shows that this displacement effect also limits growth for models with production functions with low elasticities of substitution. Finally, the analysis of transitory dynamics addresses aspects of intergenerational equality in a limited biosphere.