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Towards an Ecological Macroeconomics

Towards an Ecological Macroeconomics. Peter A. Victor and Tim Jackson 2012 Annual Institute for New Economic Thinking Conference Berlin 14 April 2010. Outline. Ecological economics Three major crises The dilemma of growth Beyond decoupling

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Towards an Ecological Macroeconomics

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  1. Towards an Ecological Macroeconomics Peter A. Victor and Tim Jackson 2012 Annual Institute for New Economic Thinking Conference Berlin 14 April 2010

  2. Outline • Ecological economics • Three major crises • The dilemma of growth • Beyond decoupling • GEMMA - green economy macro-model and accounts

  3. Bio-physical Cycles $$$$$$$$$$$$$$$$$$$ Goods and Services $$$$$$$$$$$$$$$$$$$ Firms Economic Cycle Households Land, Labour, Capital

  4. Billion tonnes Global Materials Extraction 1900 to 2005 Crisis 1 700% 100% F. Krausmann et al Ecological Economics 2009

  5. Excessive Burden on the Environment:Transgressing Planetary Boundaries Crisis 1 J. Rockstrom et al Nature, October 2009

  6. Crisis 2 Income per capita by Income Grouping (constant PPP2005 international $)

  7. 71% of the world’s people live in countries where income inequality has been increasing since the mid 1990s Crisis 2

  8. Crisis 3

  9. Crisis 3

  10. The dilemma of growth Innovation leading to increased labour productivity if inadequate economic growth unemployment up consumption down tax revenues down deficits up public expenditures down loan defaults up investment down lower economic growth

  11. The dilemma of growth Global Ecological Footprint 1.6 1.4 OVERSHOOT - depletion of natural capital 1.2 World biocapacity 1.0 0.8 Number of planets 0.6 0.4 0.2 0.0 1961 1971 1981 1991 2001 2007 Year Global Footprint Network

  12. The dilemma of growth World GDP (constant $) and CO2 emissions

  13. Beyond Decoupling Source: Prosperity without growth, Tim Jackson, 2009) x 130 improvement

  14. Towards an Ecological Macroeconomics K. Raworth, 2011 A safe and just space for humanity Can We Live Within The Doughnut?

  15. Managing without growth • Can we have full employment, no poverty, fiscal balance, • reduced GHG emissions without relying on economic growth? LowGrow Canada

  16. ‘Business as usual’ GDP per Capita GHG Emissions Poverty Debt to GDP Ratio Unemployment

  17. Consumption Investment Government Trade Population/labour Productivity What happens if we eliminate increases in all sources of economic growth?(starting in 2010 over 10 years)

  18. A no growth disaster Unemployment Poverty GDP per Capita Debt to GDP Ratio GHG Emissions

  19. A better low/no growth scenario • How? • Stable population and labour force • Carbon price • Reduced net investment • Balanced trade • Shorter work year • More generous anti-poverty programs GDP per Capita GHG Emissions Unemployment Poverty Debt to GDP Ratio

  20. Towards an Ecological Macroeconomics Real goods, services, labour, capital Natural energy, materials, life

  21. Towards an Ecological Macroeconomics Financial money, credit, debt Real goods, services, labour, capital Natural energy, materials, life

  22. GEMMA (Green Economic Macro Model and Accounts) • Is economic growth required in advanced economies to maintain high levels of employment, reduce poverty, and meet ambitious ecological and resource targets? • Does stability of the financial system require growth in the 'real' economy? • Will restraints on demand and supply in anticipation of or response to ecological and resource constraints, cause instability in the real economy and or financial system?

  23. Expectations/Uncertainty

  24. Progress to date • Design almost complete (in Stella and Excel) • Initial data sets for Canada and UK assembled • Model development and testing under way • First scenarios expected this summer

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