Implications of zero-growth economics analysed with an agent-based model
This work provides a microeconomic analysis of zero-growth economics for researchers and policymakers concerned with sustainable economic systems, revealing trade-offs not captured by macroeconomic models alone.
The study investigates the micro- and macroeconomic stability of zero-growth versus growth scenarios using an agent-based model (PG-DYNAMIN). Zero-growth resulted in lower GDP volatility, reduced systemic risk, lower unemployment, higher wage share, lower corporate debt, but also higher inflation, lower profit share, increased market concentration, more severe crises, and higher default probabilities during crises.
The breaching of planetary boundaries and the potentially catastrophic consequences of climate change are leading researchers to question the endless pursuit of economic growth. Several macroeconomic modelling studies have now examined whether a zero-growth trajectory in a capitalist system with interest-bearing debt can be economically stable, with mixed results. However, stability has not previously been explored at the microeconomic level, where it is important to know the consequences of zero-growth on e.g., distribution of firm sizes, market instability and risk of individual firm bankruptcy. Here we address this by developing an agent-based model incorporating Minskyan financial dynamics, the Post-Growth DYNamic Agent-based MINskyan (PG-DYNAMIN) model, and carrying out simultaneous macro- and microeconomic analyses. Accounting for the fact that growing capitalist economies are unstable and produce crises, we compare the relative stability of growth and zero-growth scenarios. This is achieved by tweaking an exogenous productivity parameter. We find zero-growth scenarios are viable yet exhibit distinct dynamics from growth scenarios. Under zero-growth, GDP was less volatile, there was reduced systemic risk in the credit network, lower unemployment rates, a higher wages share of GDP for workers, lower corporate debt to GDP ratio, and a reduction in market instability. Additionally, there was a higher rate of inflation, lower profit share of GDP for firms, increased market concentration, more economic crises with higher severity, and increased default probabilities for firms during periods of crises.