2. Growth model considerations
The Solow model of economic growth, in the Cobb-Douglas form, can only be used for long-term forecasting of economic growth potential if gross extrapolations and assumptions are made about K, L and TFP and hence does not explicitly define growthpotential in terms of deterministic economic input quantities e.g. capital is both a factor of production and a dependent variable of economic output. For this reason, the Solow model is not suitable for explicit forecasting1 and does not satisfy Leontief’s [2] call to
raise the structural understanding of production and economic growth. An explicit economic growth formulation must fulfill the following basic criteria:
1. Autonomous physical phenomena must exist on which economicgrowth is explicitly dependent and that can be formulated as independent variables.
2.The autonomous physical phenomena must be essential factors of production of economic output. The factors described above are termed autonomous factors of production or AFP for the purpose of this discussion. We consider the importance of consolidating the reformulation of an economic growth model with traditional factors of production (K, L and components of TFP) in terms of their relation to AFP. Under the assumption that an as-yet-unidentified AFP exists, traditional factors of production are handled as follows.