It's not the `what', but the `how': Exploring the role of debt in natural resource (un) sustainability
Authored by J Gary Polhill, Julen Gonzalez-Redin, Terence P Dawson, Rosemary Hill, Iain J Gordon
Date Published: 2018
DOI: 10.1371/journal.pone.0201141
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Mathematical description
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Abstract
A debt-based economy cannot survive without economic growth. However, if
private debt consistently grows faster than GDP, the consequences are
financial crises and the current unprecedented level of global debt.
This policy dilemma is aggravated by the lack of analyses factoring the
impact of debt-growth cycles on the environment. What is really the
relationship between debt and natural resource sustainability, and what
is the role of debt in decoupling economic growth from natural resource
availability? Here we present a conceptual Agent-Based Model (ABM) that
integrates an environmental system into an ABM representation of Steve
Keen's debt-based economic models. Our model explores the extent to
which debt-driven processes, within debt-based economies, enhance the
decoupling between economic growth and the availability of natural
resources. Interestingly, environmental and economic collapse in our
model are not caused by debt growth, or the debt-based nature of the
economic system itself (i.e. the `what'), but rather, these are due to
the inappropriate use of debt by private actors (i.e. the `how'). Firms
inappropriately use bank credits for speculative goals-rather than
production-oriented ones-and for exponentially increasing rates of
technological development. This context creates temporal mismatches
between natural resource growth and firms' resource extraction rates, as
well as between economic growth and the capacity of the government to
effectively implement natural resource conservation policies. This paper
discusses the extent to which economic growth and the availability of
natural resources can be re-coupled through a more sustainable use of
debt, for instance by shifting mainstream banking forces to partially
support environmental conservation as well as economic growth.
Tags
systems
growth
Protocol
Economy
Futures