Ecological monetary economics: A post-Keynesian critique

Cahen-Fourot, Louison; Lavoie, Marc

doi:10.1016/j.ecolecon.2016.03.007

Cited by 57 publications

(32 citation statements)

References 16 publications

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“…Jackson and Victor (2015, p. 44) 'found no evidence of a growth imperative arising from the existence of a debt-based money system' in their model, because simulations converged to a stationary state. Cahen-Fourot and Lavoie (2016) came to the same conclusion, emphasizing that it is necessary to include consumption out of wealth to reach a stationary state, because saving out of profit has to be compensated. The parameter 'consumption out of wealth' c v indicates the percentage of the stock of wealth of households at the end of one period that they spend during the next period.…”

Section: Insights From Post-keynesian Modelsmentioning

confidence: 87%

“…A (weaker) 'constant incentive for growth' caused by decisions of economic agents is called 'growth impetus' (H. C. Binswanger, 2013, p. 116) or 'driver' (Jackson and Victor, 2015, p. 39). Beltrani (1999), H. C. , M. Binswanger (2009), Douthwaite (2000), Farley et al (2013), and Lietaer et al (2012) locate a growth imperative within the monetary system, while Berg et al (2015), Cahen-Fourot and Lavoie (2016), Jackson and Victor (2015), Strunz et al (2015), and Wenzlaff et al (2014) dispute this claim. The political relevance of this controversy is emphasized by some members of the Study Commission on 'Growth, Wellbeing and Quality of Life' by the German parliament: They suggest to study the different positions on the relation of growth, money, and credit to improve the basis for decision-making (Deutscher Bundestag, 2013, p. 794).…”

Section: Introductionmentioning

confidence: 91%

“…We will show in the following that this result can be generalized to other models, because they are based on similar assumptions about consumption and investment decisions (section 3.2). Sections 3.3.1-6 explain the methodology and provide five stability analyses of the papers by Berg et al (2015), Cahen-Fourot and Lavoie (2016), Jackson and Victor (2015), and, for comparison, chapters 4 and 10 of the textbook 'Monetary Economics' (Godley and Lavoie, 2012). The results are jointly discussed in section 3.4.…”

Section: Insights From Post-keynesian Modelsmentioning

confidence: 99%

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Consistency and stability analysis of models of a monetary growth imperative

Richters

Siemoneit²

2017

Ecological Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: Is fostering economic growth a question of political will or 'unavoidable' to maintain economic stability? It is disputed whether such 'growth imperatives' are located within the current monetary system, creating a conflict with sustainability. To examine the claim that compound interest causes the growth imperative, we present five post-Keynesian models and perform a stability analysis in the parameter space. A stationary state with zero net saving and investment can be reached with positive interest rates, if the parameter 'consumption out of wealth' is above a threshold that rises with the interest rate. The other claim that retained profits from the interest revenues of banks create an imperative is based on circuitist models that we consider refutable. Their accounting is not consistent, and a modeling assumption central for a growth imperative is not underpinned theoretically: Bank's equity capital has to increase even if debt does not. This is a discrepancy between the authors' intentions in their texts and their actual models. We conclude that a monetary system based on interest-bearing debt-money with private banks does not lead to an 'inherent' growth imperative. If the stationary state is unstable, it is caused by decisions of agents, not by structural inevitableness. Terms of use: Documents in

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Section: Insights From Post-keynesian Modelsmentioning

confidence: 87%

Section: Introductionmentioning

confidence: 91%

Section: Insights From Post-keynesian Modelsmentioning

confidence: 99%

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Consistency and stability analysis of models of a monetary growth imperative

Richters

Siemoneit²

2017

Ecological Economics

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“…Yet, alternative theories regard positive interest rates and non-growing economies very well reconcilable (Cahen-Fourot, 2014). In a stationary system positive and negative interest payments would have to cancel each other out.…”

Section: "Positive Interest Rates Are Incompatible With a Non-growingmentioning

confidence: 99%

“…In consequence, interest payments (=flows) are very well compatible with situations of non-changing debts (=stocks). The above reasoning by Loehr (2012) and others thus needs to be dismissed on grounds of confusing flows and stocks (Cahen-Fourot, 2014): positive interest rates do not rule out a non-growing economy. Interestingly, this Post-Keynesian perspective, while starting from a heterodox position, agrees with mainstream growth theory on one crucial issue: the growth of the economy determines the money supply, not the other way round!…”

Section: Positive Interest Rates As Growth Imperative? Some Keynes-inmentioning

confidence: 99%

Is there a monetary growth imperative?

Strunz¹,

Bartkowski²,

Schindler³

2017

Handbook on Growth and Sustainability

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: We do not know; but simplistic answers to the title's question should be mistrusted. In this paper, we first provide a literature overview, laying out the vast diversity of theories on the role of monetary aspects for economic growth both within mainstream growth theory and within heterodox perspectives. In fact, completely contradicting results have been derived from a variety of reasonable theories. Based on this literature survey, we explore the narrative background of the most prominent theories as each of them is related to and justified by a distinct narrative. For instance, mainstream growth textbooks are based on the assumption that "money is a neutral medium of exchange" while other approaches hold that "zero interest rates are a precondition for a stationary economy". We show how these narratives-though they may well contain some truth-lend themselves to serve as myths, which rather inhibit than facilitate our understanding of the complex relationship between monetary variables and economic growth. Finally, we discuss consequences for the degrowth debate in terms of practical proposals for overcoming assumed growth imperatives as well as theoretical consequences. Terms of use: Documents in

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Stock‐Flow Consistent Macroeconomic Models: A Survey

Nikiforos

Zezza

2018

Analytical Political Economy

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The stock-flow consistent (SFC) modeling approach, grounded in the pioneering work of Wynne Godley and James Tobin in the 1970s, has been adopted by a growing number of researchers in macroeconomics, especially after the publication of Godley and Lavoie (2007), which provided a general framework for the analysis of whole economic systems, and the recognition that macroeconomic models integrating real markets with flow-of-funds analysis had been particularly successful in predicting the Great Recession of 2007-9. We introduce the general features of the SFC approach for a closed economy, showing how the core model has been extended to address issues such as financialization and income distribution. We next discuss the implications of the approach for models of open economies and compare the methodologies adopted in developing SFC empirical models for whole countries. We review the contributions where the SFC approach is being adopted as the macroeconomic closure of microeconomic agent-based models, and how the SFC approach is at the core of new research in ecological macroeconomics. Finally, we discuss the appropriateness of the name "stock-flow consistent" for the class of models we survey.

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Ecological monetary economics: A post-Keynesian critique

Cited by 57 publications

References 16 publications

Consistency and stability analysis of models of a monetary growth imperative

Consistency and stability analysis of models of a monetary growth imperative

Is there a monetary growth imperative?

Stock‐Flow Consistent Macroeconomic Models: A Survey

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