/ THEMES / SYSTEM DYNAMICS

S2 :: SYSTEMS ANALYSIS TO EXPLORE NARRATIVES OF SUSTAINABLE PROSPERITY

This theme will collate and synthesize narratives of sustainable prosperity, and, through systems analysis techniques, explore their macro-economic implications.

CC BY-NC 2.0 :: inspired by David Wicks' "3d L-system in processing" / Flickr

This theme uses empirically-calibrated, economic system models to explore visions of sustainable prosperity. It is thus composed of two parallel main strands: the first is collation and synthesis of narratives of sustainable prosperity arising from across the CUSP programme; the second is development of models for the analysis and testing of the economic, financial, environmental and social dimensions of these narratives. We will work with our partners within CUSP and also with our partner organisations (including KTH Sweden, the Finance Innovation Lab and the Institute and Faculty of Actuaries) to draw up plausible and contrasting visions of sustainable prosperity. Modelling is based on the platforms developed in the Prosperity and Sustainability in the Green Economy (PASSAGE) project (including the Green Economy Macro-Model and Accounts (GEMMA) framework being developed by Prof Tim Jackson, University of Surrey and Prof Peter Victor, York University, Canada), and the expanded World 3 model being developed by the Global Resources Observatory, Anglia Ruskin University.

S2.1 :: Model Development

Some of the key questions to address when attempting to understand the macro-economic implications of sustainable prosperity are: What does an economy look like when it remains within ecological and resource limits? And, how does a post-growth economy maintain full employment, distributional equity and financial stability? These questions are addressed by the Green Economy Macro-Model and Accounts (GEMMA) framework, which analyses resource-constrained and ecologically-bounded economies, modelling them as stock-flow consistent dynamic systems. GEMMA, which takes a long term view, is a national level model calibrated against National Accounts data (currently for three economies: the UK, Canada and Ireland).

Complementary to GEMMA, the expanded World 3 model being developed by the Global Resources Observatory (GRO) at Anglia Ruskin University takes a global, shorter term approach. Similar to GEMMA, it is a system dynamics model. Its aim is to evaluate the systemic risk generated by food and energy supply trends and shocks, and their interactions with the material, financial and knowledge economies, under the constraints of a finite planet. It thus addresses the question: What are the systemic and cascading risks in the near term in financial and economic systems as a result of resource scarcity?

S2.2 :: Narratives for Sustainable Prosperity

There are, of course, many diverse visions of sustainable prosperity, and this strand of work will collate, synthesise and develop a select number of core, alternative narratives as they arise from the other CUSP themes. These narratives could include, but are not limited to, the following emerging ideas:

  • Technology investment and innovation: According to this narrative, investment in technological innovations will achieve low-carbon, inclusive, climate resilient growth. It is widely explored in the literature (see for example the New Climate Economy report).
  • Structural economic change: This narrative is based on a core vision inherent in the focus of CUSP themes >>A and >>S1: the potential for a structural economic shift towards sectors that deliver high social, psychological and cultural satisfaction but require lower throughput of material resources.
  • Sufficiency: In this narrative, everyone, including the poorest, is envisioned to have the means to achieve a ‘decent’ life. This is a key narrative arising from themes >>M and >>S1, relating to social justice and equitable access to goods and services.
  • New models of enterprise: This narrative explores the potential for alternative business models to contribute to sustainable prosperity. Such a narrative would envisage enhanced contribution to economic activity from, for example, social enterprise, the collaborative economy, the sharing economy, and green investment. This narrative is strongly linked to CUSP theme >>P.

S2.3 :: Scenario Testing: outcomes and indicators

The narratives developed in Project S2.2 will be tested using the modelling framework(s) developed in Project S2.1. In particular, we will explore the macroeconomic and financial stability of the narratives under different assumptions about investment, public spending, consumer behaviour and the money supply. A core aspect of the analysis (see Project S2.4 below) will focus on questions concerning work, employment, labour productivity and the substitution between labour and capital. An additional element will focus on the finance sector, including the creation of money, and the potential for innovative investment models. Further analysis will explore the resilience of the economy (and in particular the finance sector) to assess whether these narratives and frameworks lower the risks from wild card or shock events (such as acts of war disrupting energy supply chains or climate change events impacting on food availability).

While the analysis will report on a variety of indicators such as economic output, resource use, emissions, employment, inequality and wellbeing, the most appropriate indicator set to describe sustainable prosperity is not an easy or obvious choice. We will therefore explore and test a variety of new alternative indicators such as adjusted GDP, wellbeing life-years, and inequality between wellbeing groups, in order to develop a multivariate indicator set that adequately describes sustainable prosperity, without being overly numerous.

S2.4 :: Calibrating Good Work

Building on the employment focus in Project S2.3, we will also explore the relationship between work, environmental impact and wellbeing. Drawing on insights from Project >>A.2 and >>S1.2, we want to test the hypothesis that there exists a ‘sweet spot’ of ‘good work’ in which certain sectors of the economy offer a triple dividend: low environmental impact, high labour intensity, and high levels of worker satisfaction. Project S2.4 will carry out a statistical exploration of the relationship between the material or carbon footprint of different sectors and the quantity and quality of employment in those sectors. In collaboration with Happiness Works, we will test the wellbeing implications of a structural shift towards low-carbon, high employment sectors.