An Introduction to REXS a simple system dynamics model of long-run endogenous technological progress, resource consumption and economic growth
This paper describes the development of a forecasting model called REXS (Resource EXergy Services) capable of accurately simulating the observed economic growth of the US for the 20th century. The REXS model differs from previous energy-economy models such as DICE and NICE (Nordhaus 1991) by replacing the requirement for exogenous assumptions of continuous exponential growth for a simple model representing the dynamics of endogenous technological change, the result of learning from production experience. In this introductory paper the authors present new formulations of the most important components of most economy-energy models the capital accumulation, resource use (energy) and technology-innovation mechanisms. Robust empirical trends of capital and resource intensity and the technical efficiency of exergy conversion were used to parameterise a very parsimonious model of economic output, resource consumption and capital accumulation. Exogenous technological progress assumptions were replaced by two learning processes: a) cumulative output and b) cumulative energy service production experience. The initial results of simulation for the period 1900-2000 shed light on the historical causes of economic growth and downturn. They also have considerable implications when simulating future output for scenario analysis. Over the past century, the dominant long-term productivity improvements can be associated with efficiency improvements of primary exergy use. Economic downturns were the result of strong and sudden depreciation during the 1930s due to overcapacity and a similar rapid drop in the level of investment end energy consumption in the early 1970s. The REX modules are the focus of ongoing research. The authors discuss briefly the many possibilities for elaboration of each module that will enrich the feedback dynamics, policy levers and post-scenario analyses.
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