An ecological stock-flow-fund modelling framework
Authors: Yannis Dafermos, Giorgos Galanis, Maria Nikolaidi
Abstract: This paper develops an ecological stock-flow-fund (ESFF) modelling framework that integrates the flow-fund model of Georgescu-Roegen (1971, 1979) with the stock-flow consistent modelling approach of Godley and Lavoie (2007). This framework combines various fundamental features of post-Keynesian and ecological economics, most notably the consideration of the macroeconomy as an open subsystem of the closed ecosystem, the impact of aggregate demand on economic growth and employment, the biophysical limits to economic activity, the effects of finance on growth and the importance of the laws of thermodynamics. The ESFF modelling framework relies on four matrices: 1) the ecosystem flow-fund matrix; 2) the ecosystem stock matrix; 3) the transactions flow matrix; 4) the balance sheet matrix. It is argued that the framework developed in the paper provides a quite rich platform for the analysis of the complex interactions between the macroeconomy and the ecosystem.
Macroeconomics of Growth, Distribution, and Climate Change
Authors: Armon Rezai
Abstract: Ecological Economics has not paid sufficient attention to the macroeconomic level both in terms of theory and modeling. Yet, key topics debated in the field of Ecological Economics such as sustainable consumption, reduction in working time, the degrowth debate, the energy-exergy link, and the rebound effect require a holistic and macro perspective. While this deficiency has been identified before and Keynesian economics has been generally suggested as a potent vehicle to establish economic system’s thinking, very little concrete theorizing and practical suggestions have been put forward. We give further credence to this suggestion and demonstrate the value of tackling key concerns of Ecological Economics within a Keynesian growth framework.
View Full Topic Here
A Stock-Flow Consistent Input-Output Model with Applications to Energy Price Shocks, Interest Rates, and Heat Emissions
Authors: Matthew Berg, Brian Hartley, Oliver Richters
Abstract: By synthesizing Stock-Flow Consistent models, Input-Output models, and aspects of Ecological macroeconomics, we are able to simultaneously model monetary flows through the financial system, flows of produced goods and services through the real economy, and flows of physical materials through the natural environment. A simple baseline model is used to analyze the role of energy price shocks in contributing to recessions and the rebound effects of increased energy efficiency. In the stability analysis, we demonstrate that contrary to some claims, 0% interest rates are not a necessary condition for a stationary economy in stock-flow equilibrium, and we show how the Sraffian maximum rate of profit can be generalized to multiple sectors, and how inventory oscillations can destabilize the model. Third, implied heat emissions from energy conversion and the effect of anthropogenic heat flux on climate change are considered in light of a minimal single-layer atmosphere climate model.
Decoupling, Interest Rates, and the Environmental Impact of Intermediate Production in an Ecological Stock-Flow Consistent Input-Output Model
Authors: Matthew Berg, Brian Hartley, Christian Kimmich, Oliver Richters
Abstract: A Stock-Flow Consistent Input-Output model is extended to explicitly incorporate stocks of natural resources. The model is used to demonstrate that different compositions of gross output can have different environmental impacts, even if final GDP is the same for both compositions of gross output. The model is used to analyze the issue of decoupling economic growth from environmental impacts, to determine whether or not conditions of environmental sustainability and economic growth are compatible, and the different environmental and economic impacts of using renewable vs. non-renewable energy sources. Assets other than money, including bonds and equities, are added to the model, and the conditions under which positive interest rates are compatible with a non-growing economy are considered. Additional economic features are added to the model, including an ex-ante/ex-post treatment of time and capacity utilization targeting by productive industries.