Testing Alternative Models in Sustainability Economics: Baumol versus Georgescu-Roegen

Abstract

Given the ubiquitous nature of the laws of thermodynamics, it would be reasonable to expect that the divergence between strong and weak sustainability could be subjected to critical tests. That is, it should be possible to use the neoclassical production theory and the laws of thermodynamics to generate predictions able to question the empirical adequacy of the neoclassical research program in terms of sustainability. However, the current state of the debate normally suggests the opposite, that is, the currently available evidence is not sufficient to build refutations. Contrary to this prognosis, we argue that it is possible to build critical tests to evaluate the models in dispute using evidence already available. However, such a construction requires that the analysis of the sustainability be not restricted to the type of evidence traditionally used by such models. We argue that alternative theories must be explicitly used to give meaning to new types of evidence. Without the explicit mobilization of alternative theories to evaluate new types of evidence, critics of the orthodox theory dwell on an epistemological trap, in which the questioned research program determines what is or what is not scientifically meaningful. To illustrate the prospects of the methodological proposal presented here, we apply this approach to a particular neoclassical model – the Baumol’s model –, which explicitly supports the ability to indefinitely continue the trajectory of economic growth triggered by the Industrial Revolution. The results refute the tested neoclassical model, demonstrate the need to distinguish between intensive and extensive substitution of natural resources, and corroborate the Geogescu-Roegen fund-flow model.