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Monetary and Fiscal Policies for a Finite Planet

Author

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  • Joshua Farley

    () (Department of Community Development and Applied Economics, University of Vermont, 617 Main Street, Burlington, VT 05405, USA
    Gund Institute for Ecological Economics, University of Vermont, 617 Main Street, Burlington, VT 05405, USA)

  • Matthew Burke

    () (Department of Community Development and Applied Economics, University of Vermont, 617 Main Street, Burlington, VT 05405, USA
    Gund Institute for Ecological Economics, University of Vermont, 617 Main Street, Burlington, VT 05405, USA)

  • Gary Flomenhoft

    () (Gund Institute for Ecological Economics, University of Vermont, 617 Main Street, Burlington, VT 05405, USA)

  • Brian Kelly

    () (Department of Community Development and Applied Economics, University of Vermont, 617 Main Street, Burlington, VT 05405, USA
    Gund Institute for Ecological Economics, University of Vermont, 617 Main Street, Burlington, VT 05405, USA)

  • D. Forrest Murray

    () (Gund Institute for Ecological Economics, University of Vermont, 617 Main Street, Burlington, VT 05405, USA)

  • Stephen Posner

    () (Gund Institute for Ecological Economics, University of Vermont, 617 Main Street, Burlington, VT 05405, USA)

  • Matthew Putnam

    () (Department of Community Development and Applied Economics, University of Vermont, 617 Main Street, Burlington, VT 05405, USA
    Gund Institute for Ecological Economics, University of Vermont, 617 Main Street, Burlington, VT 05405, USA)

  • Adam Scanlan

    () (Gund Institute for Ecological Economics, University of Vermont, 617 Main Street, Burlington, VT 05405, USA)

  • Aaron Witham

    () (Green Mountain College, One Brennan Circle, Poultney, VT 05764, USA)

Abstract

Current macroeconomic policy promotes continuous economic growth. Unemployment, poverty and debt are associated with insufficient growth. Economic activity depends upon the transformation of natural materials, ultimately returning to the environment as waste. Current levels of economic throughput exceed the planet’s carrying capacity. As a result of poorly constructed economic institutions, society faces the unacceptable choice between ecological catastrophe and human misery. A transition to a steady-state economy is required, characterized by a rate of throughput compatible with planetary boundaries. This paper contributes to the development of a steady-state economy by addressing US monetary and fiscal policies. A steady-state monetary policy would support counter-cyclical, debt-free vertical money creation through the public sector, in ways that contribute to sustainable well-being. The implication for a steady-state fiscal policy is that any lending or spending requires a careful balance of recovery of money, not as a means of revenue, but as an economic imperative to meet monetary policy goals. A steady-state fiscal policy would prioritize targeted public goods investments, taxation of ecological “bads” and economic rent and implementation of progressive tax structures. Institutional innovations are considered, including common asset trusts, to regulate throughput, and a public monetary trust, to strictly regulate money supply.

Suggested Citation

  • Joshua Farley & Matthew Burke & Gary Flomenhoft & Brian Kelly & D. Forrest Murray & Stephen Posner & Matthew Putnam & Adam Scanlan & Aaron Witham, 2013. "Monetary and Fiscal Policies for a Finite Planet," Sustainability, MDPI, Open Access Journal, vol. 5(6), pages 1-25, June.
  • Handle: RePEc:gam:jsusta:v:5:y:2013:i:6:p:2802-2826:d:26574
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    References listed on IDEAS

    as
    1. Ekins, Paul, 2003. "Identifying critical natural capital: Conclusions about critical natural capital," Ecological Economics, Elsevier, vol. 44(2-3), pages 277-292, March.
    2. Malghan, Deepak, 2011. "A dimensionally consistent aggregation framework for biophysical metrics," Ecological Economics, Elsevier, vol. 70(5), pages 900-909, March.
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    Citations

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    Cited by:

    1. Málovics, György & Dombi, Judit, 2015. "A növekedésen túl - egy új irányzat hozzájárulása a fenntarthatósági vitához
      [Beyond growth - the contribution of a new direction to the debate on sustainability]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 200-221.
    2. Cahen-Fourot, Louison & Lavoie, Marc, 2016. "Ecological monetary economics: A post-Keynesian critique," Ecological Economics, Elsevier, vol. 126(C), pages 163-168.
    3. Richters, Oliver & Siemoneit, Andreas, 2017. "Fear of stagnation? A review on growth imperatives," VÖÖ Discussion Papers 6/2017, Vereinigung für Ökologische Ökonomie e.V. (VÖÖ).
    4. Richters, Oliver, 2015. "Integrating Energy Use into Macroeconomic Stock-Flow Consistent Models," EconStor Theses, ZBW - German National Library of Economics, number 154764.
    5. Jackson, Tim & Victor, Peter A., 2015. "Does credit create a ‘growth imperative’? A quasi-stationary economy with interest-bearing debt," Ecological Economics, Elsevier, vol. 120(C), pages 32-48.
    6. Matthias Fischer, 2016. "Welfare with or without Growth? Potential Lessons from the German Healthcare System," Sustainability, MDPI, Open Access Journal, vol. 8(11), pages 1-14, October.
    7. Dittmer, Kristofer, 2015. "100 percent reserve banking: A critical review of green perspectives," Ecological Economics, Elsevier, vol. 109(C), pages 9-16.
    8. Richters, Oliver & Siemoneit, Andreas, 2016. "Consistency and stability analysis of models of a monetary growth imperative," VÖÖ Discussion Papers 1/2016, Vereinigung für Ökologische Ökonomie e.V. (VÖÖ).
    9. Patrizio Lainà, 2015. "Proposals for Full-Reserve Banking: A Historical Survey from David Ricardo to Martin Wolf," Economic Thought, World Economics Association, vol. 4(2), pages 1-1, September.
    10. Richters, Oliver & Siemoneit, Andreas, 2017. "Consistency and stability analysis of models of a monetary growth imperative," Ecological Economics, Elsevier, vol. 136(C), pages 114-125.
    11. Hardt, Lukas & O'Neill, Daniel W., 2017. "Ecological Macroeconomic Models: Assessing Current Developments," Ecological Economics, Elsevier, vol. 134(C), pages 198-211.

    More about this item

    Keywords

    monetary; fiscal; public; policy; steady-state; ecological; biophysical; macroeconomics; money; debt;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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