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Macroeconomic Policy in an Environmentally-Constrained Economy: A Dialectical Materialist Application of the Harrod Growth Model

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  • Alfredo R.M. Rosete
  • Hendrik Van den Berg

Abstract

After the 2007 financial crisis, most macroeconomists advocated policies to restore economic growth, disregarding the constraints imposed by nature. Because standard macroeconomic models ignore environmental constraints, we propose reviving Harrod’s dynamic model as a useful abstraction of the dialectic of an evolving macroeconomy. Harrod’s model describes how environmental constraints can push the economy into recession, and it explains why traditional macroeconomic policies are unable to put a resource-constrained economy back on a full employment growth path. By clarifying the dialectic conflicts between desired economic growth and natural growth, Harrod’s model also reveals what types of policies can achieve full employment in a resource-constrained economy. JEL Classification: O44, E61, O41, P51

Suggested Citation

  • Alfredo R.M. Rosete & Hendrik Van den Berg, 2019. "Macroeconomic Policy in an Environmentally-Constrained Economy: A Dialectical Materialist Application of the Harrod Growth Model," Review of Radical Political Economics, Union for Radical Political Economics, vol. 51(4), pages 544-552, December.
    • Handle: RePEc:sae:reorpe:v:51:y:2019:i:4:p:544-552
    DOI: 10.1177/0486613419849658
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    References listed on IDEAS

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    More about this item

    Keywords

    macroeconomic policy; environment; growth; Harrod model;
    All these keywords.

    JEL classification:

    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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