Abstract
By synthesizing stock-flow consistent models, input–output models, and aspects of ecological macroeconomics, a method is developed 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. This paper highlights the linkages between the physical environment and the economic system by emphasizing the role of the energy industry. A conceptual model is developed in general form with an arbitrary number of sectors, while emphasizing connections with the agent-based, econophysics, and complexity economics literature. First, we use the model to challenge claims that 0% interest rates are a necessary condition for a stationary economy and conduct a stability analysis within the parameter space of interest rates and consumption parameters of an economy in stock-flow equilibrium. Second, we analyze the role of energy price shocks in contributing to recessions, incorporating several propagation and amplification mechanisms. 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, although the model is only implicitly, not explicitly, linked to the economic model.
Highlights
One of the key issues faced by modern society is navigating the transformation towards a sustainable economy that respects ‘planetary boundaries’ [1]
Contrary to some of the literature in ecological economics, we demonstrated that a stationary economy can in principle be associated with positive interest rates
As the energy sector is one of the key linkages connecting the natural environment with the economy, we studied the environmental impact of energy conversion
Summary
By synthesizing stock-flow consistent models, input–output models, and aspects of ecological macro-. Economics, a method is developed 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. This paper highlights the linkages between the physical environment and the economic system by emphasizing the role of the energy industry. A conceptual model is developed in general form with an arbitrary number of sectors, while emphasizing connections with the agent-based, econophysics, and complexity economics literature. We use the model to challenge claims that 0% interest rates are a necessary condition for a stationary economy and conduct a stability analysis within the parameter space of interest rates and consumption parameters of an economy in stock-flow equilibrium. 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, the model is only implicitly, not explicitly, linked to the economic model
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.