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Stability of zero-growth economics analysed with a Minskyan model
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 EconomicsISSN
0921-8009Publisher
ElsevierExternal DOI
Volume
146Page range
228-239Department affiliated with
- Informatics Publications
Research groups affiliated with
- Sackler Centre for Consciousness Science Publications
Full text available
- Yes
Peer reviewed?
- Yes
Legacy Posted Date
2017-10-16First Open Access (FOA) Date
2017-11-28First Compliant Deposit (FCD) Date
2017-10-16Usage metrics
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