PhD Project: The ecological limits to economic growth and macroeconomic stability: a post-Keynesian perspective
Valeria Jiménez (HWR Berlin; IPE Berlin)
Supervisor: Prof. Eckhard Hein, HWR Berlin
Economic activities put severe pressure on planetary boundaries, and as these pressures increase, so do the risks of human perturbations destabilizing the earth system at a global scale. It is therefore undeniable that economic growth possibilities are limited by nature. However, most macroeconomic models do not consider ecological constraints seriously.
Green growth advocates assert that it is possible to continue economic expansion within ecological limits, through the decoupling of GDP growth from the degradation of the environment. However, de-growth proponents hold that there is an important set of arguments and evidence that point against the possibility of such decoupling. This would suggest that in order to meet ambitious ecological targets, we will need to go through a process of sustainable de-growth, which will inevitably lead to a decrease in GDP. Within this context, this doctoral project will address, among others, the following questions from a post-Keynesian perspective:
- Is it possible to maintain macroeconomic stability with low or zero economic growth, or even de-growth?
- If so, what conditions must be fulfilled in the goods market, the financial market, and the labor market in order to guarantee macroeconomic stability under zero or low economic growth?
The first paper of this doctoral project will consider a distribution and growth model driven by a non-capacity creating component of aggregate demand. It will analyze the conditions under which macroeconomic stability is guaranteed for low and zero growth. As a first step, it will consider government deficit and debt dynamics in a model with interest income and consumption out of financial and real wealth. The model will then be expanded by including, first, real wealth and income taxation, and second, capital scrapping and depreciation. Some possible next steps are the inclusion of inflation, open economy issues, and increases in labor supply.
In a subsequent paper, I am interested in expanding the analysis by developing a multi-sectoral model which allows for the discussion of structural change. The latter will provide a deeper understanding of the interactions between different sectors and the ecological constraints faced by the macroeconomy as a whole.