Ecological macroeconomics: An application to climate change

Abstract

Ecological Economics has not paid sufficient attention to the macroeconomic level both in terms of theory and modelling. Yet, key topics debated in the field of Ecological Economics such as sustainable consumption, reduction in working time, the degrowth debate, the energy-exergy link, and the rebound effect require a wholistic and macro perspective. While this deficiency has been identified before and Keynesian economics has been generally suggested as a potent vehicle to establish economic system's thinking, very little concrete theorizing and practical suggestions have been put forward. We give further credence to this suggestion and demonstrate the value of tackling key concerns of Ecological Economics within a Keynesian growth framework. Contextualized by an application to climate change we suggest that policy relevant recommendations need to be based on a consistent view of the macroeconomy. We end with laying out key building blocks for a Keynesian model framework for an Ecological Macroeconomics.

Downshifting in the Fast Lane: A Post-Keynesian Model of a Consumer-Led Transition

“…The result is that the capital stock continues to expand, even as GDP growth stagnates, albeit at a slower rate than previously. Higher labor costs in the downshifting scenario stimulate investment in labor-saving technology, again as anticipated by Rezai et al (2013). The effect can be seen in the graph of manufacturing labor productivity growth shown in Figure 7.…”

“…We examined consumer-led efforts to reduce working time and expenditure, independent of any government initiatives. Furthermore, by abstracting from the government and trade, we could study the potential rebound from downshifting, as identified by Rezai et al (2013). We did, indeed, observe some rebound as a smaller labor pool drove up wages, which then drove consumption expenditure and labor-saving technological innovation.…”

“…The downshifting scenario drives inflation, as seen in Figure 6. This effect, which was anticipated by Rezai et al (2013), happens because firms are unaware of the cultural phenomenon of The trajectory of GDP in the scenarios is shown in Figure 5. As seen in the figure, GDP does not grow in the downshifting scenario between years 115 and 135.…”

“…The downshifting scenario drives inflation, as seen in Figure 6. This effect, which was anticipated by Rezai et al (2013), happens because firms are unaware of the cultural phenomenon of downshifting and are making their investment and production plans based on past experience. Because less labor is available, it pushes wages up sharply.…”

Kapitel 6: Transformationspfade

“…Nationale und internationale Klimaschutzpolitik konzentriert sich auf wachstumsabhän-gige Politikmaßnahmen und eine wachsende Zahl von Studien hinterfragen kritisch die Auswirkungen von stringenten Klimaschutzzielen auf die Entwicklungspfade von Volkswirtschaften, sowie die dabei zu erwartenden Rückkopplungen (vgl. Victor, 2008;Jackson, 2009;Jackson und Victor, 2011;Victor, 2012;Rezai et al, 2013).…”