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New ecological macroeconomics

Recently, courageous, influential and practical attempts to bring together the analysis of ecology, economy and social behaviour in rich economies have begun to emerge. Particularly noteworthy is Tim Jackson’s book Prosperity without Growth: Economics for a Finite Planet (2011).

The book started its life when the author was asked in 2003 to write an early report for the Sustainable Development Commission under the Labour government in the United Kingdom. The key questions posed by Jackson are whether an economy based on the perpetual expansion of ‘debt-fuelled’ consumption of materials and energy can be ecologically sustainable and socially viable, let alone economically stable.

These questions have been asked since the late 1960s and 1970s by Nicholas Georgescu-Roegen, Kenneth Boulding, Herman Daly, Robert Ayres and the school of ecological economists to which Jackson has long belonged with his early work on the social psychology of consumption. Peter Victor (2008) too has recently elaborated an ecological macroeconomic model for the economy of Canada. These well-written contributions represent important contributions as formative texts in the emergence of a new ecological macroeconomics.

Ecological economists see the economy as composed of three levels. There is on top the financial economy (that got out of hand, and whose representatives now want to impose ‘debtocracy’ everywhere), there is then the real, productive economy of manufacturing, services and wage employment; but there is also the bottom layer or engine room of the real-real economy involving flows of energy and materials and accumulation of waste such as excessive amounts of carbon dioxide. This view of the economy goes back to Frederick Soddy in the 1920s, an often-cited Nobel Prize winner in Chemistry and a monetary reformer.

Ecological economists have also long recognised that economic growth is not well measured. Jackson, for instance, recalls well-known critiques of economic growth since the 1960s, and research on the lack of correspondence between GDP growth and increased happiness beyond a certain income per capita threshold (about USD 15,000).

It has been noted that consumer debt increased very much before the economic crisis of 2008 and that public debt has since increased enormously in many countries. Ecological economists are against increasing this debt, because they are sceptical about economic growth. Debt cannot ‘fuel’ growth, because economic growth is literally fuelled by fossil fuels. Increased debts can furthermore only be settled by inflation (money loses value), by impoverishing debtors, or by even more economic growth. Jackson calls repeatedly for ‘financial prudence’, not simply because of the risk of default, but more because debt repayment implies increased economic growth, which in rich countries is to be avoided for ecological and social reasons. The ecological reasons are clear. If world economic and population growth trends of 2007 would continue, then in order to keep carbon dioxide concentration below 450 ppm, the carbon intensity of the rich economies would have to decrease over 100 times by 2050, a goal that would be impossible to achieve. There are also other compelling ecological arguments against increased economic growth stemming from ‘peak oil’, other resource limits and biodiversity loss.

No less forceful is Jackson’s discussion on well-being, happiness, prosperity and the capabilities for ‘flourishing’ – used by Jackson to refer to the development of human potential, self- and social realisation, or ‘épanouissement’. It is not to be achieved by compulsory consumption of positional goods. Stopping economic growth is not only sound and feasible from the ecological–economic viewpoint but is also a good idea in terms of the social revaluation of the commons. Indeed, Jackson insists that biological evolution, including the evolution of humans, has gained more by co-operation (as Kropotkin argued) than by competition, complementing critiques of development by Arturo Escobar, Wolfgang Sachs and similar authors, as well as doctrines of economic degrowth (‘décroissance’) in France and Italy by Serge Latouche and other authors.

The thesis that the economy can be managed without growth while avoiding the consequent collapsing of investment and increase of unemployment is radical enough. Jackson and Victor both outline detailed recommendations for policy-makers based on a new ecological macroeconomic theory. If there is no economic growth, then unemployment will increase, given the trend to increased labour productivity (because of technical change and the drive for profits). To address ‘the stigma of unemployment’, Jackson calls for support for the so-called Cinderella sector (which, remembering William Morris, one could call the ‘News from Nowhere’ sector of happy horticulturalists and artisans). This sounds naïve, but it is well thought out, as a key virtue of this sector is its low labour productivity and the capacity to provide massive gainful employment. Jackson mentions other policies like a basic universal citizen’s income and work sharing, as well as investments in renewable energy and in ecosystem restoration and enhancement. However, since such investments are unlikely to give a high rate of return in money terms, the share of savings (or taxes) and the role of the public sector of the economy will have to grow. Does this means a retrenchment of capitalism? This final question remains unanswered.


Jackson, T. (2011) Prosperity without Growth: Economics for a Finite Planet, London: Earthscan.

Victor, P. (2008) Managing Without Growth: Slower by Design, Not Disaster, Cheltenham: Edward Elgar.

Further reading:

Ayres , R.U. , van den Bergh , J. and Gowdy , J. (1998) ‘Viewpoint: weak versus strong sustainability’ , Tinbergen Institute Discussion Papers 98–103/3 .

Boulding , K. (1966) ‘The economics of the coming spaceship earth’ , in H. Jarrett (ed) Environmental Quality in a Growing Economy , Baltimore : Johns Hopkins Press .

Daly , H. (1973) Toward a Steady-state Economy ,  San Francisco : WH Freeman & Co .

Escobar, A. (2011) Encountering Development: The Making and Unmaking of the Third World (New in Paper). Princeton University Press.

Georgescu-Roegen , N. (1971) The Entropy Law and the Economic Process , Cambridge, MA : Harvard University Press .

Kneese , A. and Ayres , R.U. (1969) Production, consumption and externalities, American Economic Review , 59 : 282 – 297 .

Latouche, S. (2010) Farewell to growth. Polity.

Sachs, W. (1993) Global ecology and the shadow of development. Global ecology: A new arena of political conflict, 3, 22.

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