crisis or opportunity economic degrowth for social equity and ecological sustainability introduction to this special issue abstract this article reviews the burgeoning emerging literature on sustainable degrowth this is defined as an equitable downscaling of production and consumption that increases human well being and enhances ecological conditions at the local and global level in the short and long term the paradigmatic propositions of degrowth are that economic growth is not sustainable and that human progress without economic growth is possible degrowth proponents come from diverse origins some are critics of market globalization new technologies or the imposition of western models of development in the rest of the world all criticize gdp accounting though they propose often different social and ecological indicators degrowth theorists and practitioners support an extension of human relations instead of market relations demand a deepening of democracy defend ecosystems and propose a more equal distribution of wealth we distinguish between depression i e unplanned degrowth within a growth regime and sustainable degrowth a voluntary smooth and equitable transition to a regime of lower production and consumption the question we ask is how positive would degrowth be if instead of being imposed by an economic crisis it would actually be a democratic collective decision a project with the ambition of getting closer to ecological sustainability and socio environmental justice worldwide most articles in this issue were originally presented at the april 2008 conference in paris on economic degrowth for ecological sustainability and social equity this conference brought the word degrowth and the concepts around it into an international academic setting articles of this special issue are summarized in this introductory article hueting d alessandro and colleagues van den bergh kerschner spangenberg and alcott discuss whether current growth patterns are un sustainable and offer different perspectives on what degrowth might mean and whether and under what conditions it might be desirable matthey and hamilton focus on social dynamics and the obstacles and opportunities for voluntary social action towards degrowth lietaert and cattaneo with gavalda offer a down to earth empirical discussion of two practical living experiments cohousing and squats highlighting the obstacles for scaling up such alternatives finally van griethuysen explains why growth is an imperative in modern market economies raising also the question whether degrowth is possible without radical institutional changes

beyond carbon pricing the role of banking and monetary policy in financing the transition to a low carbon economy it is widely acknowledged that introducing a price on carbon represents a crucial precondition for filling the current gap in low carbon investment however as this paper argues carbon pricing in itself may not be sufficient this is due to the existence of market failures in the process of creation and allocation of credit that may lead commercial banks the most important source of external finance for firms not to respond as expected to price signals under certain economic conditions banks would shy away from lending to low carbon activities even in the presence of a carbon price this possibility calls for the implementation of additional policies not based on prices in particular the paper discusses the potential role of monetary policies and macroprudential financial regulation modifying the incentives and constraints that banks face when deciding their lending strategy through for instance a differentiation of reserve requirements according to the destination of lending may fruitfully expand credit creation directed towards low carbon sectors this seems to be especially feasible in emerging economies where the central banking framework usually allows for a stronger public control on credit allocation and a wider range of monetary policy instruments than the sole interest rate

an integrated approach to climate change income distribution employment and economic growth a demand driven growth model involving capital accumulation and the dynamics of greenhouse gas ghg concentration is set up to examine macroeconomic issues raised by global warming e g effects on output and employment of rising levels of ghg offsets by mitigation relationships among energy use and labor productivity income distribution and growth the economic significance of the jevons and other paradoxes sustainable consumption and possible reductions in employment and sources of instability and cyclicality implicit in the two dimensional dynamical system the emphasis is on the combination of biophysical limits and post keynesian growth theory and the qualitative patterns of system adjustment and the dynamics that emerge

the neoclassical trojan horse of steady state economics the vision of a steady state economy elaborated by herman daly describes an economy that uses materials and energy within the regenerative and assimilative limits of the planet s ecosystems sustainable scale just distribution and efficient allocation are its constitutive theoretical goals this paper is a critique of the theoretical foundations of steady state economics it argues that steady state economics consists in an attempt to squeeze neoclassical economics into a biophysical and ethical corset as a result many fundamental flaws and criticisms of neoclassical economics remain as a consequence steady state economics does not lead to a radical departure from or improvement upon neoclassical theory but rather to fundamental internal inconsistencies between the old economics paradigm and new progressive ecological economic thinking contradictions appear at various levels ranging from ontology and methodology to theory and values as daly has pioneered the foundations of ecological economics with his thinking these ambiguities are not only problematic for steady state economics but ecological economics as a field more generally the paper concludes that ecological economics has to let go of neoclassical foundations as they contradict its core values and ambitions a new and consistent theory of political economy of the environment along heterodox lines is needed

a minimax portfolio selection strategy with equilibrium a new minimax model on optimal portfolio selection with uncertainty of both randomness and estimation in inputs is established and the corresponding optimal portfolio is derived analytically based on this result a sufficient condition for the existence and uniqueness of a nonnegative equilibrium price system under which the total demand and supply of each asset are equal is provided and an explicit formula for such a price system is obtained furthermore some properties of the equilibrium are discussed

ecological macroeconomic models assessing current developments our society faces a dilemma while continued economic growth is ecologically unsustainable low or negative rates of economic growth are accompanied by adverse social impacts hence there is a need for macroeconomic tools that can help identify socially sustainable post growth pathways the emerging field of ecological macroeconomics aims to address this need and features a number of new macroeconomic modelling approaches this article provides 1 a review of modelling developments in ecological macroeconomics based on the literature and interviews with researchers and 2 an analysis of how the different models incorporate policy themes from the post growth literature twenty two ecological macroeconomic models were analysed and compared to eight policy themes it was found that environmental interactions and the monetary system were treated most comprehensively themes of income inequality work patterns indicators of well being and disaggregated production were addressed with less detail while alternative business models and cross scale interactions were hardly addressed overall the combination of input output analysis with stock flow consistent modelling was identified as a promising avenue for developing macroeconomic models for a post growth economy however due to the wide interpretation of what the economy entails future research will benefit from employing a range of approaches

trends in the development of ecological economics from the late 1980s to the early 2000s abstract as the contributions to ecological economics are very diverse recent years have seen some discussion on both how to delimit the field and in which direction it should develop the intention with this paper is to contribute to the discussion by outlining important trends in the development of the field from the late 1980s to the early 2000s the study is inspired by other studies in the sociology and history of science in particular by the theoretical framework regarding scientific fields as reputational organizations which draws attention to both cognitive and social aspects of the formation of a field the basis for the paper is a combination of literature studies interviews with key researchers in the field and participant observations the paper outlines the characteristic cognitive features of ecological economics at the time of the birth of the field it is then described how the development in ecological economics was influenced by broader social factors during the following years and how the field was shaped by the inflow and outflow of different groups of researchers the emergence of different research programmes is outlined as is the organizational development finally the characteristics of ecological economics are summarized and the future prospects are briefly assessed

massaging mean variance inputs returns from alternative global investment strategies in the 1980s this paper explores the impact of adjustments to the inputs on total returns terminal wealth and portfolio turnover in an unconstrained monthly mean variance mv asset allocation over time it is well known that mv allocations are very sensitive to small forecast errors in the means and covariances this sensitivity is especially pronounced for errors in means one way to control this sensitivity to forecast errors is to use stein estimation we examined three naive applications of stein estimation for six individual country stock indexes five country bond indexes and five cash indexes this study has two major conclusions first any of the suggested adjustments to inputs dominate the results of an unadjusted input mv optimization adjusted input portfolios have higher mean return less variance and greater terminal wealth than unadjusted input portfolios second these improvements become even greater with transaction costs

globalization trade and migration undermining sustainability abstract i examine the impact of expanding international trade and migration on prospects for global sustainability from a strictly biophysical ecological behavioral perspective my starting premise is that techno industrial society is inherently unsustainable humans have a natural propensity to expand to occupy all accessible habitats and use all available resources because of continuous growth propelled by improving technology the modern human enterprise is already in a state of ecological overshoot globalization and trade exacerbate the situation by shuffling resources around and short circuiting the negative feedback that would otherwise result from local resource degradation this allows population and material growth within each individual trading region to exceed local biophysical limits this in turn accelerates the depletion of natural capital everywhere and ensures that all now trade dependent regions hit global limits simultaneously large scale migration also worsens matters by reducing negative feedback and enabling increased resource consumption moreover because resource scarcity is likely to precipitate conflict among self identifying tribal groups within multi cultural societies uncontrolled migration may create conditions that impede the implementation of policy measures required for ecological sustainability global sustainability is thus most likely to be achieved through policies that foster increased regional self reliance encourage greater investment in local natural capital and favor the development of strong diverse local economies in place such measures will raise local and therefore global bio capacities and reduce both the pull and push factors in international migration

on the sensitivity of mean variance efficient portfolios to changes in asset means some analytical and computational results tbis paper investigates the sensitivity of meanvariance mv efficientportfolios to changes in the means of individual assets when only a budget constraint is imposed on the investment problem the analytical results indicate that an mv efficient portfolio s weights mean and variance can be extremely sensitive to cbanges in asset means when nonnegativity constraints are also imposed on the problem the computational results confirm that a positively weigbted mv efficient portfolio s weigbts are extremely sensitive to cbanges in asset means but the portfolio s returns are not a surprisingly small increase in the mean of just one asset drives balf the securities from the portfolio yet the portfolio s expected return and standard deviation are virtually uncbanged this paper supersedes should investors hold well diversified portfolios financial support from the natural science and engineering research council of canada is gratefully acknowledged we also acknowledge the most capable assistance of ruth cornale simon ng jean marc potier and frederick shen the paper was presented at simon fraser university and the western finance association meetings in san diego we thank the participants especially stephen brown john herzog john heaney ray koopman and bruce lehmann and the editors jon ingersoll and chester spatt for

ecological macroeconomics in the open economy sustainability unequal exchange and policy coordination in a center periphery model abstract this article introduces a novel environmental interpretation of a keynesian coordination game and develops four potential scenarios to remaining within a global carbon emissions constraint with inspiration from research on ecologically unequal exchange eue we demonstrate the drawbacks of present green growth strategies by considering how pollution and resource intensive industries are distributed unevenly in the world economy with large and increasing negative impacts on the periphery the situation may only be exacerbated if the reduction of emissions in the center is based on shifting heavy industries and extractive enterprises to low cost producers in the periphery in this way existing research likely overemphasizes the capacity of green investment policy to achieve sustainable outcomes our scenarios show that achieving global sustainability and improving global equity will require an impressive level of coordination between the center and periphery as well as a significant reduction in the rate of growth degrowth in the center

trade development and sustainability a critical assessment of the free trade dogma abstract mainstream economic theory argues that trade and especially free trade isbeneficial to everyone involved this fundamental idea which has the character of a dogma still plays an important role in international discussions on trade issues notably in relation to development and environment the purpose of this article is to critically assess the free trade dogma and to investigate the validity of widely used arguments concerning the relations between trade and development and between trade and environment it is argued that the trading system is not something inherently good and especially the developing countries benefits from trade have been very dubious furthermore the trading system has contributed to environmental problems in several ways e g generating undervaluation of natural resources stimulating economic growth with environmental deterioration as a consequence and magnifying and creating externalities the critical approach makes a case for reducing trade

towards post keynesian ecological macroeconomics the paper starts with a brief criticism of macroeconomic analyses of different schools of thought for their focus on economic growth and maximisation of output this applies to the traditional keynesian approach which has focused on the achievement of sufficient aggregate demand to underpin full employment and full capacity utilisation down playing aggregate supply constraints this also applies to the neoclassical approach including the current new consensus macroeconomics approach which asserts the dominant role of aggregate supply in the long run and where growth is set by the so called natural rate of growth with no concerns over environmental and ecological issues the paper then proposes a different approach to macroeconomic analysis it explicitly acknowledges that economic growth is a double edged sword growth can help to alleviate persistent levels of high unemployment but it can also lead to potentially catastrophic environmental problems building on the monetary circuit theory and the demand led growth theory the paper offers an analysis of the interconnections and interdependence of the economic biophysical and social worlds and by doing it hopes to provide the building blocks for the establishment of post keynesian ecological macroeconomics

portfolio optimization under a minimax rule this paper provides a new portfolio selection rule the objective is to minimize the maximum individual risk and we use an l function as the risk measure we provide an explicit analytical solution for the model and are thus able to plot the entire efficient frontier our selection rule is very conservative one of the features of the solution is that it does not explicitly involve the covariance of the asset returns

from ecological macroeconomics to a theory of endogenous money for a finite planet abstract this paper takes stock of the achievements and gaps of the emerging field of ecological macroeconomics which has brought insights from specific schools of macroeconomics most notably post keynesian to ecological economics with a strong emphasis on the endogeneity of money ecological macroeconomics has proposed fiscal monetary and prudential reforms to boost green investments and developed new modeling frameworks to explore the interactions between the financial macroeconomic and biophysical spheres while these proposals open a broader range of possibilities to engage in a socio ecological transition than those offered by the current paradigm of a financialized global economy they paradoxically suffer from similar limitations by placing much faith in green investments they impose a vision of the transition that presents strong technical and institutional limitations the field also fails to revisit its own understanding of macroeconomics and of specific phenomena e g financial instability through a biophysical lens in spite of increasing transdisciplinary evidence supporting this approach we suggest overcoming these limitations through institutionalist perspectives that understand money as a language through which value is created and legitimized those perspectives seem essential to re embed the governance of money within a worldview that acknowledges the finiteness and incommensurable values of earth s life support systems

the economics of degrowth economic degrowth is ecologically desirable and possibly inevitable but under what conditions can it become socially sustainable how can we have full employment and economic stability without growth what will happen to public spending and to public debt how would production be organised in a degrowing economy and under what plausible socio political conditions could such grand changes happen standard economic theories and models ignore these questions for them economic growth is an axiomatic necessity this article reviews recent contributions in the economics of degrowth and identifies research avenues for ecological economists

growth in global materials use gdp and population during the 20th century the growing industrial metabolism is a major driver of global environmental change we present an assessment of the global use of materials since the beginning of the 20th century based on the conceptual and methodological principles of material flow accounting mfa on the grounds of published statistical data data compilations and estimation procedures for material flows not covered by international statistical sources we compiled a quantitative estimate of annual global extraction of biomass fossil energy carriers metal ores industrial minerals and construction minerals for the period 1900 to 2005 this period covers important phases of global industrialisation and economic growth the paper analyses the observed changes in the overall size and composition of global material flows in relation to the global economy population growth and primary energy consumption we show that during the last century global materials use increased 8 fold humanity currently uses almost 60 billion tons gt of materials per year in particular the period after wwii was characterized by rapid physical growth driven by both population and economic growth within this period there was a shift from the dominance of renewable biomass towards mineral materials materials use increased at a slower pace than the global economy but faster than world population as a consequence material intensity i e the amount of materials required per unit of gdp declined while materials use per capita doubled from 4 6 to 10 3 t cap yr the main material groups show different trajectories while biomass use hardly keeps up with population growth the mineral fractions grow at a rapid pace we show that increases in material productivity are mostly due to the slow growth of biomass use while they are much less pronounced for the mineral fractions so far there is no evidence that growth of global materials use is slowing down or might eventually decline and our results indicate that an increase in material productivity is a general feature of economic development

internationalization and the social democratic model crisis and future prospects this article examines the crisis of the social democratic model in the four countries austria norway finland and sweden in which social democracy was most successful in maintaining and even extending its two central achievements full employment and the institutional welfare state through the end of the 1980s four major conclusions emerge from the analysis first supply side measures more so than demand management were central to the employment and growth models pursued by social democracy prior to the early 1970s second the increasing trade openness contributed little to the recent problems of social democracy by contrast financial internationalization and deregulation and the multinationalization of capital undermined important features of the supply and demand sides of the models third changes in the international and domestic economies have weakened centralized bargaining fourth governments in the three nordic countries made serious mistakes in economic policy which greatly aggravated

sensitivity analysis for mean variance portfolio problems this paper shows how to perform sensitivity analysis for mean variance mv portfolio problems using a general form of parametric quadratic programming the analysis allows an investor to examine how parametric changes in either the means or the right hand side of the constraints affect the composition mean and variance of the optimal portfolio the optimal portfolio and associated multipliers are piecewise linear functions of the changes in either the means or the right hand side of the constraints the parametric parts of the solution show the rates of substitution of securities in the optimal portfolio while the parametric parts of the multipliers show the rates at which constraints are either tightening or loosening furthermore the parametric parts of the solution and multipliers change in different intervals when constraints become active or inactive the optimal mv paths for sensitivity analyses are piecewise parabolic as in traditional mv analysis however the optimal paths may contain negatively sloping segments and are characterized by types of kinks i e points of nondifferentiability not found in mv analysis

complementary system perspectives in ecological macroeconomics the example of transition investments during the crisis globally societies are facing a number of interrelated environmental economic and social crises this paper is intended to contribute to the development of an ecological macroeconomics that addresses these multiple crises in combination insights from different research communities will be included in this effort taking an ecological economic understanding of sustainability as the point of departure and inspired by systems thinking it is discussed which economic sub systems should be in focus for sustainability transitions and whether relevant guides for sustainability can be formulated for these systems in particular the focus is on systems that are decisive for resource consumption and pollution although their influence on these is indirect a simple typology of sub systems is suggested and applied in relation to an example that highlights the importance of the interplay between macroeconomic provision and distribution systems the example concerns investments in sustainability transitions of provision systems and demonstrates the complexities of implementing such transformations during the economic crisis it also addresses the need for ecological macroeconomics to develop a third position beyond austerity policies and keynesian approaches

a maxmin policy for bond management a simple immunization problem is formulated as a maxmin optimal control problem and analytically solved by means of dynamic programming the optimal control law namely the immunization policy turns out to be quite different from any duration based immunization policy moreover it is seemingly able to discriminate between favourable and unfavourable changes in the yield curve

macroeconomic narratives in a world of crises an analysis of stories about solving the system crisis since the financial crisis in 2008 a series of publications on macroeconomic responses to the compound crises of the economy and the environment have emerged under labels such as green new deal green growth and the great transition attempts at offering coherent responses to the crises have been made these responses have in common that they all present a large number of policy proposals for ways in which to solve the current crises and achieve a sustainable economy this article provides a mapping of a selection of such responses and an analysis of their content the analysis combines discourse theory and narrative analysis and investigates discourses by studying the narratives they produce the study thus contributes to the long line of analyses on discourses on sustainable economy empirically by investigating and analysing a number of macroeconomic proposals for solving the system crisis and theoretically by elaborating on the concept of narrative dynamics in relation to persuasive strength in political decision making

the hygienic transition from cesspools to sewer systems 1840 1930 the dynamics of regime transformation this article addresses the topic of transition and system change and proposes endogenous regime transformation as alternative transition path to technological substitution using sociological and institutional insights the dynamics of regime transformation are conceptualised two characteristics are pressure from outsider groups and adjustments in cognitions norms and formal rules enacted by regime insiders the transformation perspective is illustrated with a historical case study the hygienic transition from cesspools to integrated sewer systems in the netherlands the case study is used to make additions to the transformation perspective particularly with regard to tactical and strategic games

ecological macroeconomics an application to climate change ecological economics has not paid sufficient attention to the macroeconomic level both in terms of theory and modeling yet key topics debated in the field of ecological economics such as sustainable consumption reduction in working time the degrowth debate the energy exergy link and the rebound effect require a holistic and macro perspective while this deficiency has been identified before and keynesian economics has been generally suggested as a potent vehicle to establish economic system s thinking very little concrete theorizing and practical suggestions have been put forward we give further credence to this suggestion and demonstrate the value of tackling key concerns of ecological economics within a keynesian growth framework contextualized by an application to climate change we suggest that policy relevant recommendations need to be based on a consistent view of the macroeconomy we end with laying out key building blocks for a keynesian model framework for an ecological macroeconomics authors abstract

does slow growth lead to rising inequality some theoretical reflections and numerical simulations this paper explores the hypothesis most notably made by french economist thomas piketty that slow growth rates lead to rising inequality if true this hypothesis would pose serious challenges to achieving prosperity without growth or meeting the ambitions of those who call for an intentional slowing down of growth on ecological grounds it would also create problems of social justice in the context of a secular stagnation the paper describes a closed demand driven stock flow consistent model of savings inequality and growth in a macroeconomic framework sigma with exogenous growth and savings rates sigma is used to examine the evolution of inequality in the context of declining economic growth contrary to the general hypothesis we find that inequality does not necessarily increase as growth slows down in fact there are certain conditions under which inequality can be reduced significantly or even eliminated entirely as growth declines the paper discusses the implications of this finding for questions of employment government fiscal policy and the politics of de growth

portfolio selection and skewness evidence from international stock markets abstract this paper finds that the returns of the world s 14 major stock markets are not normally distributed and that the correlation matrix of these stock markets was stable during the january 1988 december 1993 time period polynomial goal programming in which investor preferences for skewness can be incorporated is utilized to determine the optimal portfolio consisting of the choices of 14 international stock indexes the empirical findings suggest that the incorporation of skewness into an investor s portfolio decision causes a major change in the construction of the optimal portfolio the evidence also indicate that investors trade expected return of the portfolio for skewness

estimation risk in portfolio selection the mean variance model versus the mean absolute deviation model konno and yamazaki konno h k yamazaki 1992 mean absolute deviation portfolio optimization model and its applications to tokyo stock market management sci 39 519 531 propose the mean absolute deviation mad model as an alternative to the mean variance mv model they claim it retains all the positive features of the mv model saves the investor computing time and does not require the covariance matrix this paper shows that ignoring the covariance matrix results in greater estimation risk that outweighs the benefits in both models estimation error is more severe in small samples small observations relative to the number of assets and for investors with high risk tolerance the mv model s lower estimation risk is most striking in small samples and for investors with a low risk tolerance

existence of equilibrium in capm abstract in the mean variance capital asset pricing model capm non monotonicity of preferences may lead to satiation and short selling as well as satiation may lead to non existence of equilibrium this paper identifies several sets of sufficient conditions for equilibrium to exist the nature of the central conditions is to impose bounds on the investors degree of risk aversion as measured by the marginal rate of substitution between mean and standard deviation of return these bounds do not need to hold globally but only in a relevant range of portfolios or combinations of mean and standard deviation