An integrated biophysical and economic modeling framework for long-term sustainability analysis: the HARMONEY model

Abstract

This paper derives a long-term dynamic growth model that endogenously links biophysical and economic variables in a stock-flow consistent manner. The two industrial sector HARMONEY (Human And Resources with MONEY) model enables exploration of interdependencies among resource extraction rate and depletion; the accumulation of population, capital, and debt; and the distribution of money flows within the economy. Using a post-Keynesian economic framework, we find that wage share declines after the model reaches a constant per capita resource extraction rate, with the level of investment and markup on costs determining the rate of decline. This pattern is consistent with data for the United States. Thus, the model framework enables realistic investigation of trade-offs between economic distribution, size, and resources consumption between sectors as well as between labor and capital. These trade-offs are core to the debates regarding environmental and socioeconomic sustainability. This model serves as a platform upon which to add features to explore long-term sustainability questions such as a transition to low-carbon energy.