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Can the market economy deal with sustainability?

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  • Schoenmaker, Dirk
  • Stegeman, Hans

Abstract

The central question in this paper is whether a market economy can theoretically and empirically deal with sustainability. A system analysis of the current neoclassical theory shows that the system components (goal function, interaction mechanisms, actors and outcomes) are predominantly defined in terms of economic growth and facilitated by market exchange. This fosters (over)production and consumption of private goods, crowding out public goods and preservation of the commons. The one size fits all ‘economic mechanism design’ cannot deliver societal outcomes regarding sustainability. The explicit recognition that an economy has different domains (ecological, social, economic) broadens the options for incorporating sustainability within the economic system. This richer framework allows us to analyse the economic problem at hand: an efficient economic system in an inclusive society within biophysical boundaries. We show that the alternative for market economics does not only have to be government intervention but can also include private forms of collective decision-making

Suggested Citation

  • Schoenmaker, Dirk & Stegeman, Hans, 2022. "Can the market economy deal with sustainability?," CEPR Discussion Papers 17712, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17712
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    2. Filipe Duarte Santos & Tim O’Riordan & Miguel Rocha de Sousa & Jiesper Strandsbjerg Tristan Pedersen, 2023. "The Six Critical Determinants That May Act as Human Sustainability Boundaries on Climate Change Action," Sustainability, MDPI, vol. 16(1), pages 1-20, December.

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    Keywords

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    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth

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