ABSTRACT
This chapter focuses on the philosophical background and the theoretical foundation of a new development model. The underlying micro-foundations and the mechanism by which it takes effect will be shown through an analysis of Engel's Law. Engel's law illustrates the relationship between levels of per capita income and per capita consumption. There is a big difference between this law of economics and general laws of physics and biology. It has only been in the last few hundred years of human history that the per capita expenditure on food has fallen to below 50 per cent of income in a few countries. During this time, the growth in rational food needs will be greater than the growth of the ability to meet this need. Some Western European countries have implemented high fuel taxation, where the taxation element is even higher than the pre-tax cost. The difference must be eliminated by means of technical and economic constraints.
