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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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