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Modelling the Great Transition. Emanuele Campiglio James Meadway. Istanbul – ESEE Conference - 2011. nef Great Transition Initiative. Towards a new economic system: Widespread wellbeing Environmental sustainability (energy, climate) Fair distribution of wealth But: How to get there?

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Modelling the great transition

Modelling the Great Transition

Emanuele Campiglio

James Meadway

Istanbul – ESEE Conference - 2011


Nef great transition initiative
nef Great Transition Initiative

  • Towards a new economic system:

    • Widespread wellbeing

    • Environmental sustainability (energy, climate)

    • Fair distribution of wealth

  • But: How to get there?

  • We need:

    • Policy analysis tools

    • Appropriate economic theory

      We need a model!


Starting reference
Starting reference

  • Peter Victor’s LOWGROW Model (2008)

  • Macroeconomic model of the Canadian Economy

  • System dynamics methodology

  • Main result: using the right policies, it could be possible to have a high employment sustainable economy without growth.

  • Main policies:

    • Carbon taxation

    • Work time reduction



What next
What next?

  • Other countries’ application (UK, US, Italy, Austria, New Zealand..)

  • Economic theory refinement and expansion:

    • Money

    • Banking system

    • Endogenous technical change

    • Energy sector

    • Climate change economics

    • Rest of the world (trade, migration..)

  • Methodology refinement (system dynamics literature)


The great transition model
The Great Transition model

  • Research question: How to manage the UK economy within environmental limits whilst delivering increasing wellbeing?

  • Research process:

    • Build a macroeconomic model of the UK economy

      • System dynamics methodology

      • Core economic model

      • Environmental limits; Finance; Wellbeing; Technical change; …

      • Data collection; functions estimation; calibration

    • Policy testing

    • Introduce microeconomic behaviour (endogenous consumption / work / investment choices)


Main references
Main references

  • Peter Victor’s LOWGROW

  • Yamaguchi’s Macroeconomic dynamics

  • David Wheat’s Macrolab

  • Tom Fiddaman’s FREE

  • Millennium Institute’s T21

  • Neoclassical models: Dice/Rice, Witch

  • Growth theory







Consumption sector
Consumption sector

 Banking sector



Next steps
Next steps

  • Complete the core model:

    • Prices, interest rate, wages

    • Banking system, finance, money creation

    • Government revenues and expenditures

  • Insert environmental limits:

    • Energy sector

    • Climate change



Next steps1
Next steps

  • Complete the core model:

    • Prices, interest rate, wages

    • Banking system, finance, money creation

    • Government revenues and expenditures

  • Insert environmental limits:

    • Energy sector

    • Climate change (damage function?)

  • Calibrate the model  Numerical simulations:

    • What mix of policies is needed?

    • How to finance the transition?



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