Towards an Ecological Macroeconomics

Peter A. Victor and Tim Jackson2012 Annual Institute for New Economic Thinking Conference

Berlin 14 April 2010

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

accounts

Firms Households

Bio-physical Cycles

Economic Cycle

Billiontonnes Global Materials Extraction 1900 to 2005

100%

700%

F. Krausmann et al Ecological Economics 2009

Crisis 1

Excessive Burden on the Environment:Transgressing Planetary Boundaries

J. Rockstrom et alNature, October 2009

Crisis 1

Income per capita by Income Grouping(constant PPP2005 international $)

Crisis 2

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

Crisis 3

Crisis 3

Innovation leading to increased labour

productivity

if inadequate economic growth

unemployment upconsumption down

tax revenues downdeficits up

public expenditures downloan defaults up

investment down

lower economic growth

The dilemma of growth

Global Footprint Network

Global Ecological Footprint

World biocapacity

Num

ber o

f pla

nets

1961 1971 1981 1991 2001 2007

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Year

OVERSHOOT - depletion of natural capital

The dilemma of growth

The dilemma of growth

19701972

19741976

19781980

19821984

19861988

19901992

19941996

19982000

20022004

20060

50

100

150

200

250

World GDP World CO2

World GDP (constant $) and CO2 emissions

Beyond DecouplingSource: Prosperity without growth, Tim Jackson, 2009)

x 130 improvement

Towards an Ecological Macroeconomics

K. Raworth, 2011 A safe and just space for humanityCan We Live Within The Doughnut?

LowGrow Canada

Can we have full employment, no poverty, fiscal balance, reduced GHG emissions without relying on economic growth?

Managing without growth

‘Business as usual’

GDP per Capita

GHG Emissions

Poverty

UnemploymentDebt to GDP Ratio

What happens if we eliminate increases in all sources of economic growth?(starting in 2010 over 10 years)

• Consumption• Investment• Government

• Trade• Population/labour

• Productivity

A no growth disaster

GDP per Capita

GHG Emissions

Poverty

Unemployment

Debt to GDP Ratio

A better low/no growth scenarioHow? • Stable population and labour force• Carbon price• Reduced net investment• Balanced trade• Shorter work year• More generous anti-poverty programs

GDP per Capita

GHG EmissionsUnemployment

Poverty Debt to GDP Ratio

Real

Natural

Towards an Ecological Macroeconomics

Financial

Real

Natural

Towards an Ecological Macroeconomics

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?

Expectations/Uncertainty

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