Report on the capacity of  existing models to incorporate  wellbeing and sustainability  indicators
Creators: name: Van den Eynde, Rob
name: Horen Greenford, Daniel
name: O'Neill, Daniel
name: Demaria, Federico
Publisher: name: Zenodo
Year: 2023

description: One of the most pressing questions of this century is how countries can meet the basic needs of their citizens without overburdening the planet’s ecosystems. The mainstream economic paradigm is unfit to address this challenge, as it lacks a satisfactory description of how the economy is embedded within broader societal and environmental systems. To understand how societies can become sustainable and fair, economic models need to be expanded to include a more holistic depiction of the economy within its broader context. Several initiatives such as the Doughnut of social and planetary boundaries and the Sustainable Development Goals have paved the way by proposing a broader set of indicators that capture the social and environmental performance of society. This report analyses how capable current macroeconomic models are of simulating the transition to a more just and sustainable society. First, we assess how well-represented social and environmental indicators are in a sample of 50 models. Second, we investigate the methods that are used to model these indicators in a smaller targeted sample of 15 models. Last, we analyse which variables are commonly used to determine social and environmental outcomes. We find that most existing models lack a broad coverage of social and environmental indicators. The indicators with the best representation are those that can be easily linked to economic variables such as GDP, government spending, and household income. The best represented environmental indicators include climate change, energy use, land conversion, and water use. The best represented social indicators include jobs, income, economic development, and income equality. A key challenge is to include indicators that go beyond traditional macroeconomic thinking. These include less tangible social goals like life satisfaction and social support, and broad measures of environmental pressure like the ecological footprint. It is essential to represent a diversity of social and environmental indicators, as not including them runs the risk that they are not taken into account by policymakers.  Models also need to better include environmental limits, such as those associated with the planetary boundaries framework, and social thresholds, such as those associated with meeting basic human needs. Of some concern, we find that most models lack a representation of feedback mechanisms from the environment and society back to the economy. Information in existing models tends to flow in one direction: from the economy to society and the environment, but not back the other way. We argue that modelers should rely less on monetary variables to model social outcomes and environmental pressures. Furthermore, modelers and policymakers should acknowledge the intrinsic value of different social goals, instead of treating them as means in the service of economic growth.  Macroeconomic models are an essential decision-making tool for policymakers, but we find that existing models are inadequate to help societies navigate their way towards a sustainable future. To address this shortcoming, models should represent a wider variety of social and environmental indicators, and incorporate important thresholds and limits linked to these. Moreover, they should include a more holistic depiction of the interactions between environmental, societal, and economic systems. By adopting this broader perspective, policymakers will be better able to prioritize human and planetary wellbeing instead of economic growth.