A Methodological Note about the Analysis of the Economic Growth and Environment

Submit Manuscript | http://medcraveonline.com The Theory of Economic Growth has its formal beginning from the seminal developments of Harrod & Domar [1]. Subsequently, in view of the well-known criticisms of these developments, particularly the intrinsic instability and the impossibility of achieving a stable equilibrium in the Harrod model, the Solow growth model emerges. In its full version, the dynamics in the Solow model take place in a balanced growth path in which consumption and output per capita grow at the rate of technical progress (exogenous). The 1980s saw the emergence of important literature, both theoretical and empirical, with sophisticated mathematical models based on Solow’s ideas. It is from the ‘90s that the interest in the environment (already present in the formulations of the classics on economic growth) is incorporated into formal neoclassical analysis, based on the concept of Sustainable Growth. In this context, Solow [2] affirmed that the conservation of the stock of physical and natural capital is sufficient condition for sustainability, and that investment in environmental improvement is the necessary condition for the deteriorated stock to maintain a level at least constant. The proposed concept of sustainability establishes that the level of life in intergenerational terms should remain at least constant [3]. In this formal context, the consideration of intertemporal decisions involves on the one hand the incorporation of natural capital to the model (as a factor of production) and its degree of complementarily between physical capital (human and not) and natural capital. On the other hand, there is a degree of uncertainty in the results obtained, due to the limits to knowledge about future environmental behavior. The purpose of this paper is to present the methodological foundations for a formal framework of economic growth analysis incorporating environmental restrictions.