Endogenous Economic Growth, Climate Change and Societal Values: A Conceptual Model

In this paper, I propose an evolutionary model that is an alternative to conventional models of growth and the environment. Global economic growth, the evolution of the human population, CO2 emissions, and the state of the environment are endogenous. Societal values are the main driver of all economic variables. They determine the different types of investment, the level of aggregate consumption and employment. Societal values evolve over time in response to economic and environmental conditions. The model is applied to generate possible scenarios for the twenty-first century. A baseline calibration generates an average global GDP growth rate of 3.6% p.a. and a global population level of 11.2 billion people in 2100. Mean global temperate in 2100 will be 1.77 degrees C higher than in 1995. These results are probably too optimistic. Sensitivity analyses show how these outcomes depend on various parameters. If values respond to environmental conditions only, global warming would reach 2.5 degrees C and a lower impact of investment in carbon efficiency could lead to average temperature increase by 4.8 degrees C. The model is a novel conceptual framework that can be extended in many dimensions.