Macroeconomics of degrowth

Research & Degrowth Barcelona, Salvador Pueyo

Most people in the degrowth movement, even those rejecting institutional politics, envision large-scale economic transformations. Therefore, macroeconomic research on degrowth scenarios can have much strategic value.

A key precursor to this research was Meadows et al's (1972) Limits to Growth. With the help of computer simulations, these authors warned that growth-based policies would eventually cause global collapse, probably in the 21st century. They also simulated alternative scenarios abandoning growth. Many of their forecasts have been confirmed (Turner 2008), and there have been efforts to improve their original model, both by Meadows et al. (2004) themselves and by others (e.g., de Castro et al. 2009).

Meadows et al. used a system dynamics approach, in which the state of the simulated world at each time step followed from its state in the previous step by applying fixed rules. This differs from mainstream, neoclassical economic models. To their merit, neoclassical models feature agents taking decisions not just based on the current situation but also on future expectations. However, this trace of sophistication is more than compensated by draconian simplifications such as assuming the nonexistence of inequality, diversity, altruism, uncertainty, mistakes, crises, resource needs and environmental constraints. No wonder that mainstream economists did not predict the recent crisis, ignore sustainability and support unregulated markets.

There is now an upsurge in interest for ecological macroeconomic models to simulate degrowth, championed by P.A. Victor and T. Jackson (Victor & Rosenbluth 2007; Victor 2008; Jackson 2009; Jackson & Victor 2015). Theirs are also system dynamics models, but differ from Meadows et al.'s by incorporating economic insights of Keynesian inspiration. Unlike neoclassical models, Keynesian models allow for economic cycles and some differences among agents. Several researchers (e.g., Rezai et al. 2013; Berg et al. 2015; Fontana & Sawyer 2015; Røpke 2015; and ongoing work by Lange 2013; Rosenbaum 2014; Dafermos et al. 2014; Briens & Maïzi 2015; Naqvi 2015; Strunz et al. 2015) are developing other models along similar lines, mostly based on the post-Keynesian school (this is one of the current schools of Keynesian inspiration, which has not approached the neoclassical postulates, as opposed to the more prevalent New Keynesians). However, any such model is still an oversimplification of reality, which is especially problematic if we want to go beyond reformist scenarios. I am exploring the use of complexity science to partly overcome the limitations that this entails (Pueyo 2014).

Complementary to modelling is the elaboration of proposals of macroeconomic policy. To this end, we find a rich resource in the programmes developed by the German Greens in the 1980s and early 1990s (Riechmann 1994, Pueyo 2015), when this party held positions sharply different from the current Greens' and much closer to what we now call degrowth.

References

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Briens, F. and N. Maïzi. 2014. Prospective modeling for degrowth: Investigating macroeconomic scenarios for France. 4th International Degrowth-Conference, Sep 2014, Leipzig, Germany. https://hal.inria.fr/hal-01103616/document

Dafermos, Y., G. Galanis and M. Nikolaidi. 2014. An ecological stock-flow-fund modelling framework. Draft:http://www.boeckler.de/pdf/v_2014_10_30_dafermos_galanis_nikolaidi.pdf

de Castro, C., L. J. Miguel and M. Mediavilla. 2009. The role of non conventional oil in the attenuation of peak oil. Energy Policy 37: 1825-1833.

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Jackson, T. and P. A. Victor. 2015. Does slow growth lead to rising inequality? Some theoretical reflections and numerical simulations. Ecological Economics, doi:10.1016/j.ecolecon.2015.03.019.

Lange, S. 2013. A post-Keynesian model of sustainable (de-)growth . Draft:http://www.boeckler.de/pdf/v_2013_10_24_lange.pdf

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Pueyo, S. 2015. Recovering the early economic programmes of Die Grünen. https://grunentodegrowth.wordpress.com/

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Riechmann, J. 1994. Otra forma de trabajar, producir y consumir: Los programas económicos de Die Grünen. Ecología Política 6: 59–90. https://grunentodegrowth.files.wordpress.com/2015/05/riechmann-1994.pdf

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Strunz, S., B. Bartkowski and H. Schindler. 2015. Is there a monetary growth imperative? UFZ Discussion Papers 5/2015 . http://www.econstor.eu/handle/10419/108971

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Victor, P. A. 2008. Managing without Growth: Slower by Design, not Disaster. Edward Elgar Publishing, Cheltenham.

Victor, P. A. and G. Rosenbluth. 2007. Managing without growth. Ecological Economics 61: 492-504.