Reconciling Growth and the Environment

Macroeconomic theory and policy are strongly based on the assumption that economic growth is a fundamental goal. The environmental realities of the twenty- first century compel a reassessment of macro theory in terms of the impact of current growth patterns on planetary ecosystems. This paper examines the macroeconomic impacts of growth in terms of several major areas of conflict between economic demands and ecosystem capacities: (1) energy use and fossil fuel dependence (2) greenhouse gas emissions and climate change (3) transportation systems and automobile use (4) food systems and agricultural productivity (5) water, forests, and fisheries (6) toxic chemicals and wastes. Implications for macroeconomic theory include a modification of the goal of increasing consumption, and a distinction between the consumption of necessities and luxuries. In addition, macro theory needs to address the issue of how to achieve a stable, full-employment economy in the absence of continual growth. The role of social investment and the provision of public goods needs to be recognized. The concept of a "long-term growth path" should be modified to take account of the specific impact of investment choices that affect long-term economic structure, and the concept of GDP needs to be broadened to a multidimensional measure of well-being. Macroeconomic policy implications include a shift in tax burden from income, capital, and labor to energy, materials, and waste flows, an increase in public investment, and new global institutions to regulate capital flows and transfer funds to developing nations.


Issue Date:
2003
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/15574
Total Pages:
25
Series Statement:
Working Paper No. 03-03




 Record created 2017-04-01, last modified 2017-08-23

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