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Stability of zero-growth economics analysed with a Minskyan model

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posted on 2023-06-09, 08:18 authored by Adam BarrettAdam Barrett
As humanity is becoming increasingly confronted by Earth's finite biophysical limits, there is increasing interest in questions about the stability and equitability of a zero-growth capitalist economy, most notably: if one maintains a positive interest rate for loans, can a zero-growth economy be stable? This question has been explored on a few different macroeconomic models, and both ‘yes' and ‘no’ answers have been obtained. However, economies can become unstable whether or not there is ongoing underlying growth in productivity with which to sustain growth in output. Here we attempt, for the first time, to assess via a model the relative stability of growth versus no-growth scenarios. The model employed draws from Keen's model of the Minsky financial instability hypothesis. The analysis focuses on dynamics as opposed to equilibrium, and scenarios of growth and no-growth of output (GDP) are obtained by tweaking a productivity growth input parameter. We confirm that, with or without growth, there can be both stable and unstable scenarios. To maintain stability, firms must not change their debt levels or target debt levels too quickly. Further, according to the model, the wages share is higher for zero-growth scenarios, although there are more frequent substantial drops in employment.

History

Publication status

  • Published

File Version

  • Published version

Journal

Ecological Economics

ISSN

0921-8009

Publisher

Elsevier

Volume

146

Page range

228-239

Department affiliated with

  • Informatics Publications

Research groups affiliated with

  • Sackler Centre for Consciousness Science Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2017-10-16

First Open Access (FOA) Date

2017-11-28

First Compliant Deposit (FCD) Date

2017-10-16

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