In a recent paper published in the Economic Journal, Professor William D. Nordhaus of Yale University reviewed World Dynamics by Jay W. Forrester. In his criticism, Nordhaus signals three “serious problems” and several additional “questionable assumptions” of sufficient importance to undermine the usefulness of Forrester's book. However, a careful examination of his analysis shows that each point made by Nordhaus rests on a misunderstanding of World Dynamics, a misuse of empirical data, or an inability to analyze properly the dynamic behavior of the model by static equilibrium methods.
The three “serious problems” raised by Nordhaus concern the assumptions that connect industrialization to net birth rates in World Dynamics, the representation of technology and production within the world model, and the impact of prices on global resource use. The analysis presented here refutes the Nordhaus arguments and shows that World Dynamics is consistent with his references to real-world data on population, production, and capital accumulation.
KeywordsBirth Rate Static Equilibrium Dynamic Behavior Economic Policy Empirical Data
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