TOWARDS A DISEQUILIBRIUM THEORY OF ENDOGENOUS ECONOMIC-GROWTH

This paper discusses the need for a new approach to economic growth th eory. The standard theory of growth-in-equilibrium driven by exogenous , uncaused, productivity gains has an implication that is both unjusti fied and perverse from a policy perspective: that government intervent ion of any kind can only introduce constraints and reduce option space , thus decreasing potential growth. It is argued that growth theory sh ould (1) acknowledge the importance of natural resources, especially f ossil fuels, as a driver of past and present economic growth, (2) inco rporate an explicit recognition that growth is a consequence of techno logical innovation, especially radical innovation, that often responds to natural resource scarcities or other societal needs and (3) explic itly reflect the fact that the important (i.e. scarce) factors of prod uction in economics can and do change over time, i.e. from a rural 'co wboy' economy of the past to an urbanized 'spaceship' economy of the f uture. In short, it should reflect the fact that 'necessity is the mot her of invention'. The first and third of these modifications have bee n proposed before, but not in combination. The third seems to be new.