There are compelling reasons for degrowth. Our environmental footprint continues to expand, only slightly slower than GDP, and we have exceeded several planetary boundaries. If we are unable to absolutely decouple environmental impact from GDP, we must not only stabilize growth, but degrow in order to bring the global economy within sustainable bounds. Yet, even when they find this argument compelling, post-Keynesian economists are made nervous by the idea of degrowth. Historically, their interest has been full employment, not environmental constraints. The "degrowth" phase in their models resembles the Great Depression, and it is difficult to see how to introduce degrowth in a positive way. In post-Keynesian models, an expanding economy enters a potentially self-sustaining process for providing employment and desired goods and services. Unlike in supply-side mainstream models, in which the growth rate is determined by investment, demand-side post-Keynesian models can enter a prolonged and self-sustaining slump if there is a failure of demand. We consider this to be an outstanding research challenge for post-Keynesian economics: How can the models be extended to investigate degrowth?
Results/Conclusions
We present our progress in addressing this challenge through a range of growth and degrowth scenarios with a nonlinear post-Keynesian model.