Dimensional Analysis in Economics: A Study of the Neoclassical Economic Growth Model

TL;DR

This paper introduces Dimensional Analysis to evaluate the consistency of the neoclassical economic growth model, revealing the need for adjustments to ensure dimensional homogeneity and improve model validity.

Contribution

It applies Dimensional Analysis principles to the neoclassical growth model, highlighting necessary modifications for dimensional consistency.

Findings

The model initially violates dimensional homogeneity.

Dimensional Analysis identifies specific inconsistencies.

Adjustments are proposed to restore dimensional consistency.

Abstract

The fundamental purpose of the present research article is to introduce the basic principles of Dimensional Analysis in the context of the neoclassical economic theory, in order to apply such principles to the fundamental relations that underlay most models of economic growth. In particular, basic instruments from Dimensional Analysis are used to evaluate the analytical consistency of the Neoclassical economic growth model. The analysis shows that an adjustment to the model is required in such a way that the principle of dimensional homogeneity is satisfied.