Abstract
After a historical introduction of static and dynamic economic models, we will focus on the Solow model and the Cobb-Douglas production function, which are a relevant source of the current misperception of the technology concept. This misunderstanding also originates, or is the reflection of, a dimension’s ambiguity in the production functions of the Cobb-Douglas type. It will be explained, using a simple dimensional analysis, why some of the Solow model conclusions are not trustful. The same problem arises with most of total factor productivity analyses, except for the case of OECD multifactor productivity. Economic growth models of the A.C and endogenous types are also analyzed, where the above dimension’s problem is not present in the former, but the conceptual ambiguity of the term A remains on both. Then, a new linear production function is proposed and its respective economic model fully justified. It builds on the idea that the value produced may be understood and quantified as the sum of three independent value contributions: From human knowledge, from technology, and from capital. It assumes that it is possible to conceptually distinguish among these three factors and subsequently to assess their contributions to production, an issue that is the focus of the next chapter’s contents.
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Notes
- 1.
Definition (ESA 95 [17]): 8.11–8.12, 9.23, 10.27–10.30.
- 2.
Definition (ESA 95 [17]): 6.02 f.
- 3.
http://ec.europa.eu/economy_finance/db_indicators/ameco/index_en.htm (consulted March 2012).
- 4.
Definition in http://stats.oecd.org/glossary/detail.asp?ID=1698 (Accessed March 2012).
- 5.
As it was said in 1758 by Quesnay [2] in his Tableau Economique.
- 6.
This new idea of capital is somehow different from the current idea of capital, as it differentiates from technology. As such, the current idea of capital C includes the new ideas of technology (assets) TA and the capital assets CA: such that C = TA + CA. The new (capital) is written underlined.
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S. C. Fernandes, A. (2013). Technology in Growth Models. In: The Contribution of Technology to Added Value. Springer, London. https://doi.org/10.1007/978-1-4471-5001-5_2
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DOI: https://doi.org/10.1007/978-1-4471-5001-5_2
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