Integral Neoclassical Economic Growth

Journal of Integral Theory and Practice Winter 2008 Issue

Kevin James Bowman

Assistant Professor

Augsburg College

bowmank@augsburg.edu

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).