integral neoclassical economic growth journal of integral theory and practice winter 2008 issue...
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Integral Neoclassical Economic Growth
Journal of Integral Theory and Practice Winter 2008 Issue
Kevin James Bowman
Assistant Professor
Augsburg College
The Four Quadrants
Ken Wilber’s Many Levels in Four Quadrants
Consciousness BehaviorEx. Cognition (Piaget)
Culture SocietyEx. Values Ex. Techno-economic(Graves) (Lenski)
Capital Types
Accumulating CAPITAL PER WORKER over time requires INVESTMENTS.
INDIVIDUAL
Human Capital
(contributing to worker skill or dexterity)
Consciousness Capital Behavioral Capital
Per Worker (d ) Per Worker (e)
includes stages of
cognitive ability, body/brain, behaviors
self-sense, etc.
INTERIOR EXTERIOR
Cultural Capital Social Capital
Per Worker (A): Per Worker (k):
Interior intersections of Not traditionally defined.
workers within firms Rather, exterior, or economy that together
collective capital…
allow for organized
workers and machines
COLLECTIVE
The Supply SidePer Worker Aggregate Production Function
y = a1/4d1/4e1/4k1/4
y = average product and average income,
Inputs: human capital per worker (h = d + e)
d = consciousness e = behavioral capital capital per worker per worker
a = cultural capital per k = social capital worker per worker
Assumptions
1. Each input equally important
2. diminishing returns to each input setting in a equivalent rates
3. equal cost to invest in 1 unit of any capital type.
4. constant returns to scale (exponents sum to 1),
at least as a benchmark.
5. Perfect competition (pc).
OPTIMAL HIRING CONDITION => Firms hire capital until the benefit = its cost
This is only true where: d = e = a = k Investment in : d where d>e=a=k => ↓ MPd and ↑MPe, MPa, and MPk
Payments to Labor = (d+e+a) = (3/4) of y
d = consciousness e = health capital per capital per worker worker
a = cultural capital per worker
Payments to Physical Capital = k = (1/4 y
k = social capital per worker
The Demand Side Assume closed economy:
y = c + i
consumption (c) and investment (i)
includes private and public c and i.
The level of savings (sy):
sy = i = iA + iD + iK + iL
Optimal hiring condition
=> investment is divided among the four types of investment.
Assume accumulation of y is sustainable when it deepens needs satisfaction:
The Equilibrium Long Run Equilibrium Growth Path
• Each circle represents total income
per time period.
• Each input earns 1/4.
• Inputs accumulate proportionally
over time.
• Labor gets (3/4)y.
The Relation Between Needs Development and Same-Level Broad Capital (Maslow)
the satisfaction of given needs in the present brings about the desire to satisfy higher needs.
Investment in higher-order broad capital allows for greater per worker income which can satisfies
higher-order needs in the future
Informs us of:
• broad capital deepening integrally & its relation to
• same level “needs-deepening”
• satisfies Knights critique
Stylized Facts of Economic Growth:
[Valdes, 1999, Mankiw, Romer, and Weil, 1992, Bernanke and Gurkaynak, 2002]
1. The interest rate is constant.
2. The following grow at roughly equal and constant rates in countries that develop:
i) Physical capital per worker (machine per worker),
ii) income per worker, and
iii) average wages
3. Physical Capital and Labor income shares are constant.
[(1)-(3) cited in].
i) The physical capital share of total income rages from 1/4 to 1/3, and
ii) the labor share of total income ranges from 2/3 to 3/4.
4. Human capital per worker also grows at equal rates with those listed in (2) above.
Flatland Interpretation of the Economy versus
Broad and Deep Capitalism
This model provides:
1. economists with
a) a much broader/deeper understanding of human, social, and cultural capital, and
b) and understanding of needs-deepening
c) the relationship between deep capital and needs-deepening.
2. integral theorists & developmental psychologists
a. economic growth concepts
b. first dynamic, mathematical model of post-disciplinary development.
Assignment
Use Wilber’s integral model and/or the integral neoclassical economic growth model to answer the following:
1. Explain why the following are problems.
a. Economists generally assume that we only care about out own consumption of goods and services.
b. For years, only investment into physical capital was considered investment for the future.
2. Describe the transition from a stage 4 traditional economy to a stage 4 industrial economy. Describe the type of consciousness capital (such as cognition), cultural capital (like moral development) ,and social capital (like our types of machinery).