This paper addresses the question of whether a capitalist economy with interest-bearing money can... more This paper addresses the question of whether a capitalist economy with interest-bearing money can ever sustain a ‘stationary’ (or non-growing) state, or whether, as often claimed, capitalism has an inherent ‘growth imperative’ which arises from the creation of money as interest-bearing debt. We outline the development of a dedicated system dynamics model for describing Financial Assets and Liabilities in a Stock-Flow consistent Framework (FALSTAFF) and use this model to explore the potential for stationary state outcomes in an economy with balanced trade, debt-based money, and private equity. Contrary to claims in the literature, we find that neither credit creation nor the charging of interest on debt create a ‘growth imperative’ in and of themselves. We show further that it is possible to move from a growth path towards a stationary state without either crashing the economy or dismantling the system. Our model supports critiques of austerity and underlines the value of countercycl...
Understanding sustainable prosperity is an essential but complex task. It implies an ongoing mult... more Understanding sustainable prosperity is an essential but complex task. It implies an ongoing multidisciplinary and transdisciplinary research agenda. This working paper sets out the dimensions of this task. In doing so it also establishes the foundations for the research of the ESRC-funded Centre for the Understanding of Sustainable Prosperity (CUSP). Our guiding vision for sustainable prosperity is one in which people everywhere have the capability to flourish as human beings – within the ecological and resource constraints of a finite planet. CUSP’s work will explore not just the economic aspects of this challenge, but also its social, political and philosophical dimensions. It will address the implications of sustainable prosperity at the level of households and firms; and it will explore sector-level and macro-economic implications of different pathways to prosperity. It will pay particular attention to the pragmatic steps that need to be taken by enterprise, government and civi...
Modern western economies (in the Eurozone and elsewhere) face a number of challenges over the com... more Modern western economies (in the Eurozone and elsewhere) face a number of challenges over the coming decades. Achieving full employment, meeting climate change and other key environmental targets, and reducing inequality rank amongst the highest of these. The conventional route to achieving these goals has been to pursue economic growth. But this route has created two critical problems for modern economies. The first is that higher growth leads (ceteris parabis) to higher environmental impact. The second is that fragility in financial balances has accompanied relentless demand expansion. The prevailing global response to the first problem has been to encourage a decoupling of output from impacts by investing in green technologies (green growth). But this response runs the risk of exacerbating problems associated with the over-leveraging of households, firms and governments and places undue confidence in unproven and imagined technologies. An alternative approach is to reduce the pace of growth and to restructure economies around green services (post-growth). But the potential dangers of declining growth rates lie in increased inequality and in rising unemployment. Some more fundamental arguments have also been made against the feasibility of interest-bearing debt within a post-growth economy. The work described in this paper was motivated by the need to address these fundamental dilemmas and to inform the debate that has emerged in recent years about the relative merits of green growth and post-growth scenarios. In pursuit of this aim we have developed a suite of macroeconomic models based on the methodology of Post-Keynesian Stock Flow Consistent (SFC) system dynamics. Taken together these models represent the first steps in constructing a new macroeconomic synthesis capable of exploring the economic and financial dimensions of an economy confronting resource or environmental constraints. Such an ecological macroeconomics includes an account of basic macroeconomic variables such as the GDP, consumption, investment, saving, public spending, employment, and productivity. It also accounts for the performance of the economy in terms of financial balances, net lending positions, money supply, distributional equity and financial stability. This report illustrates the utility of this new approach through a number of specific analyses and scenario explorations. These include an assessment of the Piketty hypothesis (that slow growth increases inequality), an analysis of the 'growth imperative' hypothesis (that interest bearing debt requires economic growth for stability), and an analysis of the financial and monetary implications of green investment policies. The work also assesses the scope for fiscal policy to improve social and environmental outcomes.
The overall aim of PASSAGE is to explore the relationship between prosperity and sustainability a... more The overall aim of PASSAGE is to explore the relationship between prosperity and sustainability and to promote and develop research on the green economy. The research aims of the fellowship are directed towards three principal tasks: 1) Foundations for sustainable living: to synthesise findings from a decade of research on sustainable consumption and sustainable living; 2) Ecological Macroeconomics: to develop a new programme of work around the macroeconomics of the transition to a green economy. 3) Transforming Finance; to work with a variety of partners to develop a financial system fit for purpose to deliver sustainable investment. During the course of the fellowship, Prof Jackson and the team will engage closely with stakeholders across government, civil society, business, the media and academia in debates about the green economy. PASSAGE also seeks to build capacity in new economic thinking by providing a new focus of attention on ecological macroeconomics for postgraduates and young research fellows.
Among Herman Daly’s many contributions to ecological economics none is likely to have a greater a... more Among Herman Daly’s many contributions to ecological economics none is likely to have a greater and more lasting significance than his analysis of and advocacy for a steady-state economy. As is typical of so much of his work, Professor Daly has been inspired by and has built on the work of predecessors including most notably John Stuart Mill, Frederic Soddy and Nicholas Georgescu-Roegen. But he has also brought his own imagination and insights as well as his remarkable capacity for expressing complex ideas in simple terms. It is fair to say that he has virtually single-handedly ensured that the steady-state economy remains an alternative to be considered in discussions of the future of the economy and society.
International Journal of Environment, Workplace and Employment, 2004
This paper investigates how realistic it is to seek an escape from this dilemma along the lines s... more This paper investigates how realistic it is to seek an escape from this dilemma along the lines suggested by Keynes. In section II we discuss Keynes' views on how to abolish poverty and unemployment in a nogrowth environment. In section III we review some of the literature on the environmental impact of economic growth. In section IV we outline the results of a simulation exercise using a static Keynesian econometric model to calculate what the macro dimensions of a no-growth economy might look like for Canada. Are they sufficiently similar to what we have experienced to permit us to hope that they are achievable? A "no growth" economy is chosen as the extreme case of a "low growth" economy. Our model shows that a Canadian economy with macro dimensions not very different from those we have experienced can give us full employment with no growth, no poverty, and no government deficit. In section V we discuss some of the obstacles to implementation of policies sugested by ouir model, and in section VI we offer some conclusions. Details of our model and of how its parameters were estimated are in an appendix. Economy. Like all his colleagues, Keynes was not concerned about conserving the environment, even though congestion and pollution in large cities, local exhaustion of forest and mineral resources, local water shortage and desertification, were already well known phenomena in the twenties and thirties. In 1936 Keynes advanced the then novel idea (but now, it seems, forgotten) that the abolition of poverty and unemployment in a developed economy does not have to depend on growth, and that governments of such economies have both the tools and the moral obligation to eliminate
This milestone provides a broad overview of model development under Work Package 205 of the WWWfo... more This milestone provides a broad overview of model development under Work Package 205 of the WWWforEurope project. It describes briefly the challenge of modelling combined economic, ecological and financial systems and sets out a series of objectives for modelling the socio-economic transition towards sustainability. It highlights modelling needs in relation to full employment, financial stability, and social equity under conditions of constrained resource consumption and ecological limits. The paper also provides a broad overview of the literatures relevant to the task in hand. It then describes two separate modelling approaches, developed by two different teams within WWWforEurope. One of these approaches, led by WIFO, uses a Dynamic New Keynesian (DYNK) model to explore the implications of different long-run equilibrium paths for energy consumption. The other approach, led by Surrey in collaboration with York University, is motivated primarily by the desire to integrate a comprehe...
The “product” travel cost model (PTC) improves supply and substitution specification in travel co... more The “product” travel cost model (PTC) improves supply and substitution specification in travel cost models (TCM), eliminating common biases in estimating welfare effects of qualitative changes at specific sites. Angling sites and participation are modeled as a system of product supplies and demands; changes in angling quality at specific sites are evaluated as changes in the supplies of relevant products. PTC assumes that each angler chooses from a selection of angling opportunities (i.e., products) based on access cost (i.e., travel cost) and the nature of each angling product. Key factors defining angling products (e.g., success rate, fish size) are derived from angler travel patterns: Anglers are assumed indifferent between sites providing identical angling products, so choose the lowest cost site. Therefore, the benefits of any management action not only differ from average welfare-change values, but are also site-specific. Changing angling attributes at a site changes its angli...
Report to the United Nations for the 2012 Rio+ 20 Conference, 2011
Executive Summary The world has changed dramatically. We no longer live in a world relatively emp... more Executive Summary The world has changed dramatically. We no longer live in a world relatively empty of humans and their artifacts. We now live in the “Anthropocene”[3], a full world where humans are dramatically altering our ecological life-support system [4]. Our traditional economic concepts and models were developed in an empty world. If we are to create sustainable prosperity, if we seek “improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities”[5], we are going ...
This paper addresses the question of whether a capitalist economy with interest-bearing money can... more This paper addresses the question of whether a capitalist economy with interest-bearing money can ever sustain a ‘stationary’ (or non-growing) state, or whether, as often claimed, capitalism has an inherent ‘growth imperative’ which arises from the creation of money as interest-bearing debt. We outline the development of a dedicated system dynamics model for describing Financial Assets and Liabilities in a Stock-Flow consistent Framework (FALSTAFF) and use this model to explore the potential for stationary state outcomes in an economy with balanced trade, debt-based money, and private equity. Contrary to claims in the literature, we find that neither credit creation nor the charging of interest on debt create a ‘growth imperative’ in and of themselves. We show further that it is possible to move from a growth path towards a stationary state without either crashing the economy or dismantling the system. Our model supports critiques of austerity and underlines the value of countercycl...
Understanding sustainable prosperity is an essential but complex task. It implies an ongoing mult... more Understanding sustainable prosperity is an essential but complex task. It implies an ongoing multidisciplinary and transdisciplinary research agenda. This working paper sets out the dimensions of this task. In doing so it also establishes the foundations for the research of the ESRC-funded Centre for the Understanding of Sustainable Prosperity (CUSP). Our guiding vision for sustainable prosperity is one in which people everywhere have the capability to flourish as human beings – within the ecological and resource constraints of a finite planet. CUSP’s work will explore not just the economic aspects of this challenge, but also its social, political and philosophical dimensions. It will address the implications of sustainable prosperity at the level of households and firms; and it will explore sector-level and macro-economic implications of different pathways to prosperity. It will pay particular attention to the pragmatic steps that need to be taken by enterprise, government and civi...
Modern western economies (in the Eurozone and elsewhere) face a number of challenges over the com... more Modern western economies (in the Eurozone and elsewhere) face a number of challenges over the coming decades. Achieving full employment, meeting climate change and other key environmental targets, and reducing inequality rank amongst the highest of these. The conventional route to achieving these goals has been to pursue economic growth. But this route has created two critical problems for modern economies. The first is that higher growth leads (ceteris parabis) to higher environmental impact. The second is that fragility in financial balances has accompanied relentless demand expansion. The prevailing global response to the first problem has been to encourage a decoupling of output from impacts by investing in green technologies (green growth). But this response runs the risk of exacerbating problems associated with the over-leveraging of households, firms and governments and places undue confidence in unproven and imagined technologies. An alternative approach is to reduce the pace of growth and to restructure economies around green services (post-growth). But the potential dangers of declining growth rates lie in increased inequality and in rising unemployment. Some more fundamental arguments have also been made against the feasibility of interest-bearing debt within a post-growth economy. The work described in this paper was motivated by the need to address these fundamental dilemmas and to inform the debate that has emerged in recent years about the relative merits of green growth and post-growth scenarios. In pursuit of this aim we have developed a suite of macroeconomic models based on the methodology of Post-Keynesian Stock Flow Consistent (SFC) system dynamics. Taken together these models represent the first steps in constructing a new macroeconomic synthesis capable of exploring the economic and financial dimensions of an economy confronting resource or environmental constraints. Such an ecological macroeconomics includes an account of basic macroeconomic variables such as the GDP, consumption, investment, saving, public spending, employment, and productivity. It also accounts for the performance of the economy in terms of financial balances, net lending positions, money supply, distributional equity and financial stability. This report illustrates the utility of this new approach through a number of specific analyses and scenario explorations. These include an assessment of the Piketty hypothesis (that slow growth increases inequality), an analysis of the 'growth imperative' hypothesis (that interest bearing debt requires economic growth for stability), and an analysis of the financial and monetary implications of green investment policies. The work also assesses the scope for fiscal policy to improve social and environmental outcomes.
The overall aim of PASSAGE is to explore the relationship between prosperity and sustainability a... more The overall aim of PASSAGE is to explore the relationship between prosperity and sustainability and to promote and develop research on the green economy. The research aims of the fellowship are directed towards three principal tasks: 1) Foundations for sustainable living: to synthesise findings from a decade of research on sustainable consumption and sustainable living; 2) Ecological Macroeconomics: to develop a new programme of work around the macroeconomics of the transition to a green economy. 3) Transforming Finance; to work with a variety of partners to develop a financial system fit for purpose to deliver sustainable investment. During the course of the fellowship, Prof Jackson and the team will engage closely with stakeholders across government, civil society, business, the media and academia in debates about the green economy. PASSAGE also seeks to build capacity in new economic thinking by providing a new focus of attention on ecological macroeconomics for postgraduates and young research fellows.
Among Herman Daly’s many contributions to ecological economics none is likely to have a greater a... more Among Herman Daly’s many contributions to ecological economics none is likely to have a greater and more lasting significance than his analysis of and advocacy for a steady-state economy. As is typical of so much of his work, Professor Daly has been inspired by and has built on the work of predecessors including most notably John Stuart Mill, Frederic Soddy and Nicholas Georgescu-Roegen. But he has also brought his own imagination and insights as well as his remarkable capacity for expressing complex ideas in simple terms. It is fair to say that he has virtually single-handedly ensured that the steady-state economy remains an alternative to be considered in discussions of the future of the economy and society.
International Journal of Environment, Workplace and Employment, 2004
This paper investigates how realistic it is to seek an escape from this dilemma along the lines s... more This paper investigates how realistic it is to seek an escape from this dilemma along the lines suggested by Keynes. In section II we discuss Keynes' views on how to abolish poverty and unemployment in a nogrowth environment. In section III we review some of the literature on the environmental impact of economic growth. In section IV we outline the results of a simulation exercise using a static Keynesian econometric model to calculate what the macro dimensions of a no-growth economy might look like for Canada. Are they sufficiently similar to what we have experienced to permit us to hope that they are achievable? A "no growth" economy is chosen as the extreme case of a "low growth" economy. Our model shows that a Canadian economy with macro dimensions not very different from those we have experienced can give us full employment with no growth, no poverty, and no government deficit. In section V we discuss some of the obstacles to implementation of policies sugested by ouir model, and in section VI we offer some conclusions. Details of our model and of how its parameters were estimated are in an appendix. Economy. Like all his colleagues, Keynes was not concerned about conserving the environment, even though congestion and pollution in large cities, local exhaustion of forest and mineral resources, local water shortage and desertification, were already well known phenomena in the twenties and thirties. In 1936 Keynes advanced the then novel idea (but now, it seems, forgotten) that the abolition of poverty and unemployment in a developed economy does not have to depend on growth, and that governments of such economies have both the tools and the moral obligation to eliminate
This milestone provides a broad overview of model development under Work Package 205 of the WWWfo... more This milestone provides a broad overview of model development under Work Package 205 of the WWWforEurope project. It describes briefly the challenge of modelling combined economic, ecological and financial systems and sets out a series of objectives for modelling the socio-economic transition towards sustainability. It highlights modelling needs in relation to full employment, financial stability, and social equity under conditions of constrained resource consumption and ecological limits. The paper also provides a broad overview of the literatures relevant to the task in hand. It then describes two separate modelling approaches, developed by two different teams within WWWforEurope. One of these approaches, led by WIFO, uses a Dynamic New Keynesian (DYNK) model to explore the implications of different long-run equilibrium paths for energy consumption. The other approach, led by Surrey in collaboration with York University, is motivated primarily by the desire to integrate a comprehe...
The “product” travel cost model (PTC) improves supply and substitution specification in travel co... more The “product” travel cost model (PTC) improves supply and substitution specification in travel cost models (TCM), eliminating common biases in estimating welfare effects of qualitative changes at specific sites. Angling sites and participation are modeled as a system of product supplies and demands; changes in angling quality at specific sites are evaluated as changes in the supplies of relevant products. PTC assumes that each angler chooses from a selection of angling opportunities (i.e., products) based on access cost (i.e., travel cost) and the nature of each angling product. Key factors defining angling products (e.g., success rate, fish size) are derived from angler travel patterns: Anglers are assumed indifferent between sites providing identical angling products, so choose the lowest cost site. Therefore, the benefits of any management action not only differ from average welfare-change values, but are also site-specific. Changing angling attributes at a site changes its angli...
Report to the United Nations for the 2012 Rio+ 20 Conference, 2011
Executive Summary The world has changed dramatically. We no longer live in a world relatively emp... more Executive Summary The world has changed dramatically. We no longer live in a world relatively empty of humans and their artifacts. We now live in the “Anthropocene”[3], a full world where humans are dramatically altering our ecological life-support system [4]. Our traditional economic concepts and models were developed in an empty world. If we are to create sustainable prosperity, if we seek “improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities”[5], we are going ...
This working paper presents a stock-flow consistent (SFC) simulation model of a national economy,... more This working paper presents a stock-flow consistent (SFC) simulation model of a national economy, calibrated on the basis of Canadian data. LowGrow SFC describes the evolution of the Canadian economy in terms of six financial sectors whose behaviour is based on ‘stylised facts’ in the Post-Keynesian tradition. Contrary to the accepted wisdom, the results indicate the feasibility of improved environmental and social outcomes, even as the growth rate declines to zero.
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Papers by Peter Victor