A new economic model

"Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist" - Kenneth Boulding

There is nothing ‘natural’ about our current economic arrangements. They have been consciously designed to achieve a simple objective: growth. But growth is not making us happier, it is creating dysfunctional and unequal societies, and if it continues will make large parts of the planet unfit for human habitation.  

We need to do things differently, and soon.

This means starting from first principles and building a new model for how the economy functions. Right now every one of us is dependent on growth. The way our economy is structured means that unless there is growth people lose their jobs, the tax base shrinks and politicians struggle to fund the public services we all rely on every day.

At nef, we want to break that vicious cycle by building a new macro-economic model that is geared not towards growth, but towards achieving the outcomes that are important to society and that can be sustained by the planet's finite carrying capacity.

This will not be easy. But we believe that if we can create an economy to achieve the goal of growth then we can also create an economy that delivers for people and the planet.

What we're doing
From 2009, we will be working with other economists on a radical new approach to economic modelling. Standard models take no account of resource use and environmental constraints, and are blind to social outcomes in terms of equity and, of course, human well being. They are open-ended by nature, with growth being the primary output of interest. Inputs feed in, interact with each other, achieve balance (or equilibrium) and outcomes result.

Our approach turns this on its head. We will start with the hard outcomes we need - environmental sustainability; equitable economic justice; and high levels of human well-being - link these to relevant economic determinants within the model (aggregate output, income distribution and working hours, respectively, for example) and to ‘reverse engineer’ what this would imply for the levels and types of differing inputs.