ABSTRACT

THE ANALYSIS O F E C O N O M I C growth is dominated by neoclassical aggre-gate models of exogenous and endogenous growth in equilibrium, as is the application of growth theory to environmental problems and resource scarcity Although formal models of economic growth have generated many clear insights, they suffer from two problems. First, they fail to address some relevant issues related to growth, because they omit certain elements in their description of reality: processes out of equilibrium; "choice" between multiple equilibria; and structural changes in the economy. The latter is the more surprising because economic growth hardly ever occurs without structural change. Growth theory makes many convenient but erroneous assumptions, so its results are questionable at best. Representative agents, rational behavior, perfect information, an aggregate production function, growth in equilibrium, and reversible growth are all debatable to say the least. Moreover, under these assumptions certain aspects of policy disappear from the analysis.