Download - Macroeconomics of Degrowth
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Dr. Steffen Lange
IÖW – Institut für ökologische
Wirtschaftsforschung, Berlin
Macroeconomics of Degrowth
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Content
Part I: Different strategies: Green Growth, A-
Growth, Growth Independence, Degrowth
Part II: Macroeconomics of Zero Growth
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Part I: Different strategies: Green Growth, A-Growth,
Growth Independence, Degrowth
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Motivation
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IPCC Special Report on Global Warming of 1.5°C (2018).
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Different strategies
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Source: own illustration
A-Growth
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A-Growth and Sufficiency
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– Simple version: Cap-and-
trade system for
greenhouse gases
– More complex version:
Various policies to reduce
emissions
– Whether this leads to
positive or negative
growth does not matter
– Sufficiency measures part
of this?
Jeroen van den Bergh
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– Analysis:
– Certain institutions are growth dependent
– Strict environmental policies might lead to
economic shrinkage
– This would have strong negative social
consequence – which is why the polices
are not put into place
– Central examples:
– Employment and wage income
– Social security systems
Growth Independence
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Part II: Zero Growth
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Plural Theories
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Keynesian Theories
Income
Aggregate Demand
Investments
Production capacity
Technological change
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Marxian Theories
Market
Firm
Firm
Firm
Firm
Firm
FirmFirm
Firm
Firm
Firm
Firm
Market
Firm
FirmFirm
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– In neoclassical and Keynesian theories, zero growth is not a
problem in principle
– Central role of technological change
– Business Cycle around zero growth (for example Kalecki)
– Binswanger’s theory of growth imperative depends on few
assumptions
– In Marxian theories, zero growth more difficult. Reasons:
– Interest to accumulate by capitalists
– Coercion to invest and grow
Surprising results
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Synthesis
Supply side
Increases in productivities need to be
outbalanced by reductions in supply of
production factors. For example:
Equivalence between reductions in labour
supply (−𝑔𝐿𝑆) and growth in labour
productivity (𝑔𝑇)
−𝑔𝐿𝑆= 𝑔𝑇
Equivalence between reductions in
resource supply (−𝑔𝑅) and growth in
resource productivity (𝑔Γ)
−𝑔𝑅= 𝑔Γ
- and constant capital productivity and
capital stock
𝑔𝐾 = 0
Demand side
Changes in different components of aggregate
demand need to outbalance one another
Δ𝐼 + Δ𝐶 + Δ𝐺 = 0
Assuming constant capital depreciation and a
constant capital productivity, investments stay
constant
Δ𝐼 = 0
Therefore
Δ𝐶 + Δ𝐺 = 0
Savings equal investments
𝑆 = 𝐼
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Synthesis
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– Important question: What is the cause for less/zero growth?
– Strict environmental limits (exergy economics)
– Redirected technological change combines reduced energy and resource consumption with high
employment -> working hours reductions depend on degree of substitution between energy and
labour
– Less consumption and/or government spending
– Necessity to redistribute work and/or provide income beyond wage-labour
– Question of distribution always a central issue
Additional questions:
- What will capitalism in the economic sense do? In particular the financial system?
- What will the political economy of capitalism do?
- Relation to gender questions (wage vs. reproductive work)
- International competition
Relation to the growth and environment debate
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Thank you.
Dr. Steffen Lange
IÖW – Institute for Ecological Economy Research, Berlin