A study of degrowth paths based on the von Neumann equilibrium model

Abstract

Abstract This paper revisits the von Neumann equilibrium model from a degrowth perspective. Degrowth can be either planned or autonomous based on voluntary simplicity (VS), characterized by voluntary constraints on the private consumptions. Any share of the working population is allowed to limit their private consumptions or ecological footprint. Degrowth means a lower economic growth rate as well as reductions in the usage of materials and fossil energy; however, when the economy cannot fit within the biophysical boundary despite such reductions, degrowth can also mean a deliberate transition towards lesser and cleaner production of a smaller number of goods. Taking ecological boundaries into consideration may thus switch the direction of an economy from growth to degrowth. Degrowth is consistent with economic equilibrium in the dynamic input-output model. Degrowth equilibrium results when a critical mass of the population prioritizes diminishing the ecological deficit over increasing the output levels. Green growth can take place during degrowth. While the economy gradually shrinks, the interest (profit) rate in macroeconomic equilibrium is negative due to the conservation target (excessive consumption has negative value to VS-type agents). Degrowing private consumptions implies less work, more leisure and better quality of the environment, improving social welfare. Degrowth can be advanced by adopting a more cooperative production system or by imposing high ecological taxes. The equilibrium model yields an argument for basic income as a means of supporting welfare during degrowth and of compensating for unpaid work. The open economy version of the model shows reduced scope for intra-industry trade between similar countries.