Economic Growth and Energy

capital There are two meanings in economics. One is the monetary value of assets owned by an individual firm, etc. or the amount that is available to invest. The second meaning, used herein, refers to a human-made input into the production process, including things such as buildings and machinery, and infrastructure (telecommunications systems and the like). Capital in these forms is also described as reproducible capital, manufactured capital, or human-made capital. Some writers use the term ‘‘capital’’ more widely, to include human capital and/or environmental or natural capital. Human capital refers to expertise or know-how embodied in people through processes of education and training. The term ‘‘natural capital’’ has been used to refer to the stock of environmental resources. demand elasticity The percentage response in the quantity of a good demanded for a 1% increase in its price. diminishing returns If use of an input to production is increased, holding the amounts of the other inputs constant, the law of diminishing returns states that eventually the marginal product of an input will decline, though not necessarily becoming negative. ecological economics A transdisciplinary field including ideas from economics, natural sciences, and other social sciences, in which scholars and practitioners are interested in the broad question of the use of resources by society and in understanding the nature, behavior, and dynamics of the economy–environment system. Many, but not all, ecological economists are highly critical of the mainstream (neoclassical) school of economics. econometrics The specialized branch of mathematical statistics applied to the analysis of economic data. economic growth An increase in economy-wide economic production, usually measured by an increase in gross domestic product (GDP); also, the process of the economy growing over time. elasticity of substitution A measure of the responsiveness of the ratio of the quantities of two productive inputs to a change in the relative prices of the quantities. For example, if the price of energy increases 1% relative to the price of capital and the amount of energy used per dollar of capital decreases by 1%, then the elasticity of substitution is 1. If the decrease in energy use is less, then the elasticity of substitution is less than 1, and vice versa. embodied energy Used directly in the production of goods and services, energy is also used indirectly through its involvement in producing the other inputs to production. The sum of the two uses is called the embodied energy of the good or service. externality A negative externality, or external effect, occurs when a production or consumption activity has unintended damaging effects, such as pollution, on other firms or individuals, and no compensation is paid by the producer or consumer to the affected parties. A positive externality occurs when activities have beneficial effects for others who do not pay the generator of the effect, such as freely available research results. institutions Commonly accepted rules, practices, etc. that govern human social and economic behavior, such as laws, customs, markets, etc. marginal product If use of an input to production is increased, holding the amounts of the other inputs constant, the increase in output produced is called the marginal product of that input. neoclassical economics The mainstream school or paradigm of economics characterized by mathematical models based on optimization by individual consumers and producers. A paradigm that arose in the late 19th century and emerged to its dominant position after the World War II; other paradigms include Keynesian, Marxist, Institutional, and neo-Ricardian, and postKeynesian models. nonrenewable resource A natural resource such as petroleum, which has zero natural growth over ordinary human timescales; though it may be replenished over geological time. Renewable resources such as forests