Abstract

We account for physical constraints on the production process by linking the real amount (volume) of tangible output to its mass. To do that, we introduce a function that measures the mass of tangible objects (resources, output). Using the mass function, we show that the marginal product of resource inputs smaller than the ratio of the mass density of resource input to that of final goods. The boundedness of this ratio implies that the marginal resource product has an upper bound, and thus, the Inada condition for resources does not hold. This constraint on the marginal product of resource input has profound implications for long-run growth and environmental sustainability. Specifically, this constraint implies that growth of aggregate real output is possible only with greater resource input and increasing pollution.

Presenters

Ratbek Dzhumashev
Economics, Monash University, Victoria, Australia

Details

Presentation Type

Paper Presentation in a Themed Session

Theme

Economic, Social, and Cultural Context

KEYWORDS

Inada Conditions, Conservation of Mass, Production Function, Natural Resources

Digital Media

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