Traditional economics relies heavily on the production function, a concept basic to the determination of the allocation and growth of economic output, conventionally measured as marketed output, i.e., GDP in national accounts. Technological change is assumed to be independent of production change, implying no learning by doing or by researching in the traditional treatment.
The implication of the production function in the traditional models is that because the functional form assumes that the economy is at full employment and maximal efficiency, any policy leads to costs in the form of loss of potential output. The potential for energy saving is ignored by assuming full information, maximum efficiency and full employment, now and forever, in violation of the facts. The traditional treatment of production also normally rules out of court any modelling outcome that increases the growth rate of the economy as an outcome of policy.
New evolutionary economics can provide insights into the non-economic barriers to energy efficiency and how they may be overcome (Maréchal, 2007, p.5183-5184). Complexity economists (Arthur, 1994) strongly argue for path dependency and increasing returns and economic historians have long argued that technological change and economic growth are intimately related (Maddison, 2001) and path dependent (David, 2001).