Reading Notes: Ecological Macroeconomics: Consumption, Investment, and Climate Change

Jonathan M. Harris

GDP Sucks

Traditionally, the goal of macroeconomic policy has been to grow GDP as exponentially as we can. This has resulted in (go us!) exponential GDP growth, which has in turn resulted in an exponential growth in carbon emmissions. If GDP stays closely tied to carbon emmissions and degredation of the biosphere then our exponential growth will be halted- sharply- by the climate change and the collapse of our ecosystem.

Growth Without Throughput

This requires a massive reorientation in macroeconomic theory, one which takes as a condition a net decrease in material throughput. This does not necessarily mean a decrease in growth, nor does it mean economic collapse. Harris posits that it would put us somewhere between exponential growth and a “steady state” economy.

Having an economy that operates without more stuff flowing around will require drastic changes in the way that we think about consumption, capital investment and government spending.  To model this, Harris breaks down the traditional GDP equation (he’s talking about the global economy, so there’s no imports or exports):

Y=C+I+G

Into something like this

Y=energy, material and land intensive(C+I+G) + non-energy, material and land intensive(C+I+G)

We don’t have to give up on growth, just identify and encourage growth not linked to material throughup. According to Harris this kind of growth could solve urgent problems that are currently not addressed by our economy- problems like healthcare, education, community building and ecosystem conservation. All of these tasks are human labor intensive but not necessarily capital or energy intensive. Creating economic incentives to accomplish them could shift our economy to a direction of sustainable growth.

Eco-Keynsian Reforms  

In order to shift from eco-degrading growth to “good growth” we’ll need major shifts in tax and monetary policy, using traditional Keynsian methods. Essentially we make old forms of material-intensive growth more expensive and new forms of service-oriented growth less expensive. That coupled with market mechanisms for intangibles like healthy ecosystems could create an economy with significant demand for ecosystems maintenance and social equity.

While this could certainly keep people employed, I’m still not certain how this demand for ecosystem and social services is aggregated and represented in the market. 

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