Fig. 4.2 Simplified Macroeconomic Model of the Interaction between Energy and the Economy Probably the long-term model that is most sophisticated in its treatment of interindustry relationships and capital accumulation is the Resources for the Future (RFF) model, developed by Ridker and Watson,30 based on a 185-sector dynamic interindustry model.$$ The RFF model was selected for this assessment on the basis of several selection criteria — sectoral detail, endogenous treatment of both capital investment and final demand, and transferable experience in the form of existing model runs covering the desired time frame — 2000-2030. Table 4.1 provides our assumptions about population, labor force, labor productivity, and GNP in constant (Jan. 1978) dollars. The population figures incorporate a replacement fertility rate of 2.1 children per woman. Although the total fertility rate is currently around 1.9, there is no basis on which to assume it will remain at this unprecedented level. Moreover, immigration — illegal as well as legal — will probably remain above the 400,000 per year that is incorporated into these projections. The labor numbers, which take into account increased female participation in the labor force, somewhat earlier retirement age, and other trends, are consistent with the population figures. The GNP, derived from projections about the labor force, participation rates, employment rates, changes in working hours per year, and productivity growth rates, increases at an annual rate of 2.8% between 1980 and 2000 and 2.5% thereafter. This compares with a rate of 3.1% per year between 1970 and 1979 and 3.4% between 1950 and 1970. The decrease in GNP growth is due in part to declining productivity, attributable to the need to divert capital into the energy sector and energy conservation. Clearly, this economic scenario is only one of several self-consistent possibilities. It probably represents an upper limit to GNP growth.
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