Capital and Knowledge: Dynamics of Economic Structures with Non-Constant Returns

441 Pages·1999·12.95 MB·English

by  Dr. Wei-Bin Zhang (auth.)

Capital and Knowledge
Dynamics of Economic Structures
with Non-Constant Returns
Springer-Verlag Berlin Heidelberg GmbH
Wei-Bin Zhang
Capital and Knowledge
Dynamics of Economic Structures
with Non-Constant Returns
With 5 Figures
i
Springer
Dr. Wei-Bin Zhang
National University of Singapore
Department of Economics
10 Kent Ridge Crescent
Singapore 119260, Singapore
ISBN 978-3-642-63516-8
Cataloging-in-Publication Data applied for
Die Deutsche Bibliothek -CIP-Einheitsaufnahme
Zhang, Wei-Bin:
Capital and knowledge : dynamics of economic structure with non
constant returns I Wei-Bin Zhang. -Berlin; Heidelberg; New York;
Barcelona; Hongkong; London; Milan; Paris; Singapore; Toyko :
Springer, 1999
ISBN 978-3-642-63516-8 ISBN 978-3-642-58254-7 (eBook)
DOI 10.1007/978-3-642-58254-7
This work is subject to copyright. AII rights are reserved, whether the whole or part
of the material is concerned, specifically the rights of translation, reprinting,
reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in
any other way, and storage in data banks. Duplication of this publication or parts
thereof is permitted only under the provisions of the German Copyright Law of
September 9, 1965, in its current version, and permission for use must always be
obtained from Springer-Verlag. Violations are liable for prosecution under the
German Copyright Law.
© Springer-Verlag Berlin· Heidelberg 1999
Originally published by Springer-Verlag Berlin Heidelberg in 1999
Softcover reprint of the hardcover lst edition 1999
The use of registered names, trademarks, etc. in this publication does not
imply, even in the absence of a specific statement, that such names are exempt
from the relevant protective laws and regulations and therefore free for general use.
Hardcover design: Erich Kirchner, Heidelberg
SPIN 10697304 42/2202-5 43 2 1 o -Printed on acid-free paper
Preface
This book constructs an economic theory which may be studied like the I Ching: it
contains multiple patterns within a grand whole; it consists of multiple parts and each
part represents itself as a consistent unity. The book is the key part of my economic
theory with endogenous popUlation, capital, knowledge, preferences, sexual division
of labor and consumption, institutions, economic structures and exchange values over
time and space (Zhang, I 996a). It has taken me a long laborious process to
systematize the ideas represented in this book: formulating the grand vision in
Schumpeter's sense, searching for or creating many ideas, of which only a few have
'survived', and now completing this book to make a tell. I remember Schumpeter's
attitude:
new ideas, unless carefully elaborated, panistakingly defended, and 'pushed', simply will
not tell (Schumpeter, 1934),
Keynes' observation:
the difficulty lies, not in the new ideas, but in escaping from the old ones, which ramifY ....
into every comer of our minds (Keynes, 1936),
as well as Confucius' recognition of the importance oftiming:
If my p'rinciples are to advance, it is so ordered. If they are to fall to the ground,it is so
ordereo. (Confucius, 1992).
Acknowledgements
I completed this book at the Swedish Institute for Futures Studies. I am grateful to the
pleasant and effective environment· produced by the staff of the Institute. I
acknowledge my deep appreciation to Professor Ake E. Andersson, my supervisor of
Ph.D. candidate for economics, and Professor Kazuhiro Yoshikawa, my supervisor of
Ph.D. candidate for systems analysis, for their continuous support and help.
I am grateful to Professor Borje Johansson who read an earlier version and offered
many valuable comments. I am grateful to Professors Toichio Asada, David Batten,
Martin Beckt:nann, Lata Charterjee, Fang Fu-Kang, Charlie Karlsson, Kiyoshi
Kobayashi, T.R. Lakshmanan, Karl-Gustaf LOfgren, Tonn Puu, Victor M. Sergeyev,
Folke Snickars, J. Barkley Rosser, Michel Sonis, and Lars Westin, for their help and
inspiration. I also wish to express my deep gratitude to many journals editors' and
their referees' comments on my paper manuscripts. I would like to thank Economics
Editor Dr. Werner A. MUller and Economics Editorial Ruth Milewski for effective
co-operation.
I am very grateful for the fmancial support received from the Swedish Institute for
Futures Studies.
Each of the key sections from Chapters 2 to 9 is based on one of my published or
unpublished manuscripts. Grateful acknowledgment is made to the following sources
for the use of my published materials:
Section 2.2 for Zhang (1996h) Umea Economic Studies No. 403, Umea University;
Section 2.3 for Zhang (I 995c) Economic Modelling 12,425-434;
Section 3.2 for Zhang (1996c) Chaos, Solitons and Fractals, 2019-29;
Section 3.3 for Zhang (l995a) Umea Economic Studies No. 368, University of
Umea;
Section 3.4 for Zhang (1992a) Journal of Economics 55, 43-63;
Section 4.1 for Zhang (l995e) Umea Economic Studies No. 369, University of
Umea;
Section 4.2 for Zhang (I 996e) Working Paper 96-2, Dept. of Social Systems Eng.,
Tottori University, Japan;
Section 4.3 for Zhang (I 993a) Structure and Change in the Space-Economy, edited
by T.R. Lakshmanan and P. Nijkamp;
Section 4.4 for Zhang (l996g) Structural Change and Economic Dynamics 7, 207-
221;
Vl11 Acknowledgements
Section 5.1 for Zhang (1995) Ume~ Economic Studies No. 369, University ofUme~;
Section 5.4 for Zhang (1994d) Ume~ Economic Studies No. 348, University of
Umea;
Section 6.2 for Zhang (1 996b) The Interdisciplinary Information Sciences 2, 1-10;
Section 7.1 for Zhang (l993f) Seoul Journal of Economics 6, 361-377;
Section 7.2 for Zhang (l994b) Umea Economic Studies No. 350, University of
Umea;
Section 8.1 for Zhang (1994f) Working Paper of CERUM, University of Umea,
CWP-1994:3;
Section 8.2 for Zhang (1993b) Economics Letters 42, 105-110;
Section 8.3 for Zhang (1 994c ) Umea Economic Studies No. 348, University of
Ume~;
Section 9~1 for Zhang (1 996f) Working Paper 96-3, Dept. of Social Systems Eng.,
Tottori University, Japan;
Section 9.3 for Zhang (1 996i) Ume~ Economic Studies No. 404, Ume~ University;
Section 9.4 for Zhang (1995b) Seoul J. of Economics 8, 395-411;
Appendices 2.1,3.1,4.1,5.1 for Sections 2.7,3.3,2.4,2.6 in Zhang (1990a);
Appendix 3.2 for Section 6.2 in Zhang (1991).
Grateful acknowledgment is made to Elsevier Science for permission to use Zhang
(1993b, 1995c, 1996c, 1996g), to Springer-Verlag for Zhang (1990a, 1991,
1993a), to Springer-Verlag Wien for Zhang (1 992a), to the Seoul Journal of
Economics for Zhang (1993f), and to Tohoku University for Zhang (1996b). Every
effort has been made to locate the copyright holders for material used here.
Omissions brought to our attention will be corrected in future editions.
Contents
1 Introduction .................. ....................................................................... 1
1.1 Classical Economics .................................................................... ... 2
1.2 General Equilibrium Theory .... ................... ... ................................. 5
1.3 Neoclassical Growth Theory .......................... ................................ 6
1.4 Disequilibrium Economics .. .................................................. ......... 8
1.5 Economic Structure ........................................ ......................... ....... 9
1.6 Economics with Returns to Scale .... .............................. .............. ... 10
1.7 Modem Vision of Economic Processes by Complex Theory ......... 12
1.8 Structure of the Study ..................................................................... 14
2 One-Sector Growth Models under Constant Returns
toScale ..................................................................................................... 19
2.1 The One-Sector Growth Model ..................................................... 20
2.2 Growth with Home Capital ............................... ....................... ...... 31
2.3 Time Distribution in the One-Sector Growth Model..................... 38
2.4 Conclusions ...................................................... ............................. 44
Appendix ..................................... ............... ................................................ 45
A. 2.1 Production Functions in Growth Theory ....................................... 45
A. 2.2 Preference and Utility Functions ................................................... 47
A. 2.3 The Solow-Swan Model ................................................... ............. 50
A. 2.4 The Ramsey Growth Model ...................... .................................... 50
3 One-Sector Economies under Non-Constant Returns
to Scale .................................................................................................... 55
3.1 The Growth Model with Public Goods ......................................... 57
3.2 Knowledge, Population, Environment and Economic Growth ...... 64
3.3 An Economic Dynamics with Livestock ....................................... 79
3.4 Economic Development with Human Capital and Opening .......... 87
3.5 On Returns to Scale .................................................. .................... 102
Appendix ................................. .................................................................. 104
A. 3.1 Economic Growth with Money................ ...................................... 104
A. 3.2 Economic Chaos with Endogenous Population ............................ 113
4 Knowledge, Growth and Economic Structures ........................ 118
4.1 An Agricultural Economy with Land Ownership Distribution ...... 121
x Contents
4.2 A Two-Sector Ricardian Economy ................................................ 130
4.3 The Ricardian System with Knowledge and Infrastructures ............ 140
4.4 A Structural Dynamics of Agriculture, Industry and Service .......... 151
4.5 Economic Structure with Multiple Capital Goods ......................... 161
4.6 On Economic Structures ... .................. ....... ........................ ....... ..... 165
Appendix ........ .......................... ... ............. .......................... ......... ........... ... 166
A.4.1 The Neoclassical Two-Sector Growth Model................................. 166
A.4.2 The Neoclassical Multiple Sector Models ...................................... 169
A4.3 Proving Proposition 4.2.1 ..... ... ... .................. ..... ..... ........................ ... 171
A4.4 Proving Proposition 4.4.1 ................................................................... 174
A4.5 Proving Proposition 4.5.1 .................................................................. 178
5 Knowledge, Growth and Wealth Distribution ............................ 182
5.1 Income Distribution with Human Capital, Diligence and
Frugality ......................................................................................... 184
5.2 Growth with Government's Redistribution Policy......................... 194
5.3 Economic Structure with Multiple Groups and Job
Amenities ........... .............. ........ .......... ......... ...... ...................... ....... 205
5.4 A Two-Group Growth Model with Capital and
Knowledge ............ .................. .............. ...... ...... ................ .......... ... 218
5.5 ' On Economic Evolution with Multiple Groups ............................. 224
Appendix .. ...... ........... ........... ............. ..... ................. ..... ...... ...... ................. 226
A5.1 Distribution of Income and Wealth in Sato' s Model .......................... 226
A5.2 Proving Propositions 5.1.1 and 5.1.2 ................................................. 228
A5.3 Proving Proposition 5.3.1 ................................................................. 232
A.5.4 Proving Proposition 5.4.1 ............................................................. 237
6 Education, Research and Growth .................................................... 239
6.1 Education and Saving in the Growth Model..... ........ ....... .............. 241
6.2 The Research Model with Job Amenities ...................................... 250
6.3 The Two-Group Model with Research and Job Amenities ............ 264
6.4 Growth with Capital, Human Capital and Knowledge ................... 272
Appendix ........................... ............ .... ........................... ............................. 273
A.6.l Proving Proposition 6.1.1 ................. .............. .............. .................. 273
7 Unemployment in Disequilibrium Dynamics .................................. 275
7.1 Growth and Unemployment in a Two-Group Economy......................... 276
7.2 Unemployment with Endogenous Knowledge ........................................ 288
7.3 Unemployment in a 'Welfare Economy' ................................................. 299
7.4 Conclusions ...................................................................................... 307
Appendix ....... ...... ................. .................. .............................. ...... ............... 308
A 7.1 Proving Lemmas 7.1.3 and 7.1.4 and Examining the Case of
'Different Preferences ......... .... .......... ........................................... ...... 308
A 7.2 Proving Proposition 7.2.1 ................................................................. 312
Contents xi
8 Economic Development with Sexual Division of Labor .............. 315
8.1 Sexual Division of Labor with Home Capital and Time
Distribution ................. .......................... ........................................ 316
8.2 The Impact of Female Labor Participation on Knowledge
Economies ............................................ ........................................ 324
8.3 Sexual Division of Labor with Capital and Knowledge ................ 332
8.4 Economic Growth with Sexual Discrimination ....... ...................... 345
8.5 On Complex of Sexual Division of Labor and Consumption ........ 354
Appendix . .................................. ................................................................ 356
A.8.1 Proving Lemmas 8.1.3 and 8.1.4 ................................................... 356
A.8.2 Proving Lemma 8.2.1 ..................................................................... 357
A.8.3 Proving Propositions 8.3.1 and 8.3.2 ............................................. 357
9 Preference Change with Capital and Knowledge ...................... 364
9.1 Preference Change in the One-Sector Growth Model.......................... 366
9.2 Dynamics of Capital, Knowledge and Preference ............................... 372
9.3 Dynamic Economic Structure with Preference Change ........................ 377
9.4 Growth and Preference Change with Sexual Division of Labor ............. 391
9.5 Concluding Remarlc; ............... ...................... ..................................... 400
10 Summary ..................................................................... ;......................... 402
Bibliography....................... ................... ..................................... ............. 407
Name Index ............................................................................................... 419
Subject Index 422