At the heart of Prosperity without Growth is the call for a new ‘ecological macro-economics’: an understanding of the dynamics of the modern economy that can also incorporate the reality of ecological and resource constraints. A critical challenge for the new approach is the need to ensure economic stability even as relentless growth in consumer demand may be attenuated. Central to Tim Jackson’s PASSAGE work programme is the goal of forging new understandings of the macro-economy.
The work draws on a wide range of theoretical and conceptual approaches – including ecological economics, post-Keynesian economics, modern money theory, and investment allocation. Tim has been working closely with other economists – in particular the Canadian economist Peter Victor – to develop a suite of system dynamics models capable of describing a sustainable national economy operating within ecological limits.
The overall Green Economy Macro-Model and Accounts (GEMMA) framework is being calibrated first for the UK and the Canadian economies, using data from the System of National Accounts. Additional case studies will be developed as the framework progresses.
GEMMA is designed to include not just the structure of the real economy, but also to make a proper account of the ecological constraints under which the economy must operate. It is built around a 12-sector input output framework which can describe the structure of the economy, its employment needs, its environmental impacts and its resource requirements. GEMMA also aims to include a comprehensive model of the financial (money) economy, using principles of stock-flow consistency. Early results from GEMMA were presented at the Rio Conference in June 2012.
The financial side of GEMMA is being developed initially through a single-sector model of Financial Assets and Liabilities in a Stock and Flow consistent Framework (FALSTAFF). Again calibrated against UK and Canadian data, FALSTAFF aims to describe not only the evolution of the ‘real’ economy but also the financial behaviour of households, firms and government at the aggregate level. Early results from FALSTAFF were presented at the Canadian Society for Ecological Economics conference in November 2013.
One of the most important dimensions of the green economy is the question of social justice. Recent years have witnessed a rising attention to the vast and increasing levels of inequality both within and between nations – most notably through the work of French economist Thomas Piketty. Tim is currently exploring this dimension of the green economy through a simple model of Savings Inequality and Growth in a Macroeconomic (SIGMA) framework. The SIGMA model has been used to address the critical question: what happens to inequality as the growth rate declines?
Investment plays a critical role in any economy. Tim’s work places the idea of investment at the heart of the green economy. He argues that investment should be seen as one of the most important relationships in economics – the relationship between the present and the future. To achieve a sustainable economy, investment must help build and protect the assets on which future prosperity depends. As well as modelling the conceptual basis for this kind of investment, Tim works closely with a number of investors and asset managers to turn theory into practice.