Economic Growth Theory and Natural Resource Constraints: A Stocktake and Critical Assessment

• Published date: 01 June 2023
• Author: Robbie Maris,Mark Holmes
• Date: 01 June 2023
• DOI: http://doi.org/10.1111/1467-8462.12505

The Australian Economic Review, vol. 56, no. 2, pp. 255–268 DOI: 10.1111/1467-8462.12505

Perspective

Economic Growth Theory and Natural Resource Constraints:

A Stocktake and Critical Assessment

Robbie Maris and Mark Holmes*

Abstract

Society is facing signif‌icant environmental

challenges. The effects of climate change,

biodiversity loss and environmental degrada-

tion are being increasingly felt worldwide. In

recent years, researchers have attempted to

adapt neoclassical and endogenous growth

theory to account for constraints imposed by

scarce natural resources. In this article, we

review where, and how, researchers tend to

incorporate natural resources and natural

capital into growth theory. We then outline

areas and questions that remain unanswered,

including how novel impact investing and the

eroding trade‐off between GDP and the

environment affect growth theory.

JEL CLASSIFICATION

E13; O44

1. Introduction

Society is facing environmental challenges on

several fronts and at unprecedented scale. The

effects of climate change, biodiversity loss,

environmental degradation and pollution are

being increasingly felt worldwide. Scientists

warn that we are rapidly approaching several

planetary boundaries (points of no return, where

damages to the environment become irrever-

sible). Historically, economic growth and

production (predominantly in developed coun-

tries) have substantially raised living standards

and human prosperity but placed immense

stress on natural resources and the environment.

It is widely acknowledged that predictions of

limitless economic growth without concern for

environmental degradation are erroneous. In

recent years, researchers have attempted to

adapt neoclassical and endogenous growth

theory to account for constraints imposed by

scarce natural resources.

In this article, we consider how current

growth models adequately address these

constraints. We consider scarce natural re-

sources to include all natural capital (stocks of

the world's natural assets, including geology,

soil, air, water and so on) and the ecosystem

services this natural capital provides. Natural

capital and the f‌lows of ecosystem services are

limited by natural boundaries governed by

nature and have been diminished over time.

Hence, we consider them to be scarce

resources that should be incorporated into

economic growth theory (as do many others—

see Costanza et al. 2017). We argue that,

* School of Accounting, Finance and Economics,

University of Waikato, Private Bag 3105, Hamilton

3240, New Zealand. Corresponding author: Maris, email

<robbiem8910@gmail.com>.

© 2023 The Authors. The Australian Economic Review publishedby John Wiley & Sons Australia, Ltd on behalf of The University of

Melbourne, MelbourneInstitute: Applied Economic & Social Research, Faculty of Businessand Economics.

This is an open access article underthe terms of the Creative Commons Attribution License, which permits use, distributionand

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