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Happy Degrowth vs Unhappy Growth
 

Happy Degrowth vs Unhappy Growth

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    Happy Degrowth vs Unhappy Growth Happy Degrowth vs Unhappy Growth Presentation Transcript

    • Happy Degrowth vs Unhappy Growth E. Bilancini S. D’Alessandro aHappy Degrowth vs Unhappy Growth Outline Ennio Bilancini (Universit` di Modena e Reggio Emilia, Italy) a Simone D’Alessandro (Universit` di Pisa, Italy) a still . . . work in progress Degrowth Conference Barcelona 2010 March 26-29, 2010 Barcelona
    • Happy Degrowth vs Unhappy Growth Outline E. Bilancini S. D’Alessandro Outline 1 Introduction 2 The model 3 Concluding Remarks
    • Happy Degrowth vs Unhappy Growth Outline E. Bilancini S. D’Alessandro Outline 1 Introduction 2 The model 3 Concluding Remarks
    • Happy Degrowth vs Unhappy Growth Outline E. Bilancini S. D’Alessandro Outline 1 Introduction 2 The model 3 Concluding Remarks
    • Happy Degrowth vs Unhappy Growth Outline E. Bilancini S. D’Alessandro Introduction The model Concluding Remarks 1 Introduction 2 The model 3 Concluding Remarks
    • Happy Degrowth vs Unhappy Growth Introduction E. Bilancini S. D’Alessandro The importance of economic growth to fuel well-being in Introduction rich countries is challenged by different perspectives. In this The model presentation we will consider the insights from happiness Concluding economics. Remarks Recent developments in endogenous growth theory include the effect of jealousy and keeping up with Joneses. Clearly, the outcome of the decentralized equilibrium is sub-optimal (e.g. Liu and Turnovsky, 2005). Antoci et al. (2004) present an endogenous growth model where individual utility depends on consumption of relational goods. The present paper seeks to contribute to this debate including both the aspects: de-growth towards a steady state characterized by low or zero growth rate is an option, strictly preferred to others.
    • Happy Degrowth vs Unhappy Growth Introduction E. Bilancini S. D’Alessandro The importance of economic growth to fuel well-being in Introduction rich countries is challenged by different perspectives. In this The model presentation we will consider the insights from happiness Concluding economics. Remarks Recent developments in endogenous growth theory include the effect of jealousy and keeping up with Joneses. Clearly, the outcome of the decentralized equilibrium is sub-optimal (e.g. Liu and Turnovsky, 2005). Antoci et al. (2004) present an endogenous growth model where individual utility depends on consumption of relational goods. The present paper seeks to contribute to this debate including both the aspects: de-growth towards a steady state characterized by low or zero growth rate is an option, strictly preferred to others.
    • Happy Degrowth vs Unhappy Growth Introduction E. Bilancini S. D’Alessandro The importance of economic growth to fuel well-being in Introduction rich countries is challenged by different perspectives. In this The model presentation we will consider the insights from happiness Concluding economics. Remarks Recent developments in endogenous growth theory include the effect of jealousy and keeping up with Joneses. Clearly, the outcome of the decentralized equilibrium is sub-optimal (e.g. Liu and Turnovsky, 2005). Antoci et al. (2004) present an endogenous growth model where individual utility depends on consumption of relational goods. The present paper seeks to contribute to this debate including both the aspects: de-growth towards a steady state characterized by low or zero growth rate is an option, strictly preferred to others.
    • Happy Degrowth vs Unhappy Growth Introduction E. Bilancini S. D’Alessandro The importance of economic growth to fuel well-being in Introduction rich countries is challenged by different perspectives. In this The model presentation we will consider the insights from happiness Concluding economics. Remarks Recent developments in endogenous growth theory include the effect of jealousy and keeping up with Joneses. Clearly, the outcome of the decentralized equilibrium is sub-optimal (e.g. Liu and Turnovsky, 2005). Antoci et al. (2004) present an endogenous growth model where individual utility depends on consumption of relational goods. The present paper seeks to contribute to this debate including both the aspects: de-growth towards a steady state characterized by low or zero growth rate is an option, strictly preferred to others.
    • Happy Degrowth vs Unhappy Growth Ingredients and results E. Bilancini S. D’Alessandro More precisely, we present an endogenous growth model Introduction where individuals beyond private consumption and leisure, The model obtain their utility from: Concluding i. the comparison of their current material situation with their Remarks aspiration and status, and ii. the consumption of relational goods. We compare three different kinds of equilibria: i. decentralized economy; ii. myopically planned economy; iii. centrally planned economy. We show that the optimal balanced growth path is characterized by high levels of leisure and low or zero rate of growth, and this cannot be obtained with laissez-faire. The path from the actual state to the optimal trajectory can easily require a transition with negative rate of growth.
    • Happy Degrowth vs Unhappy Growth Ingredients and results E. Bilancini S. D’Alessandro More precisely, we present an endogenous growth model Introduction where individuals beyond private consumption and leisure, The model obtain their utility from: Concluding i. the comparison of their current material situation with their Remarks aspiration and status, and ii. the consumption of relational goods. We compare three different kinds of equilibria: i. decentralized economy; ii. myopically planned economy; iii. centrally planned economy. We show that the optimal balanced growth path is characterized by high levels of leisure and low or zero rate of growth, and this cannot be obtained with laissez-faire. The path from the actual state to the optimal trajectory can easily require a transition with negative rate of growth.
    • Happy Degrowth vs Unhappy Growth Ingredients and results E. Bilancini S. D’Alessandro More precisely, we present an endogenous growth model Introduction where individuals beyond private consumption and leisure, The model obtain their utility from: Concluding i. the comparison of their current material situation with their Remarks aspiration and status, and ii. the consumption of relational goods. We compare three different kinds of equilibria: i. decentralized economy; ii. myopically planned economy; iii. centrally planned economy. We show that the optimal balanced growth path is characterized by high levels of leisure and low or zero rate of growth, and this cannot be obtained with laissez-faire. The path from the actual state to the optimal trajectory can easily require a transition with negative rate of growth.
    • Happy Degrowth vs Unhappy Growth Ingredients and results E. Bilancini S. D’Alessandro More precisely, we present an endogenous growth model Introduction where individuals beyond private consumption and leisure, The model obtain their utility from: Concluding i. the comparison of their current material situation with their Remarks aspiration and status, and ii. the consumption of relational goods. We compare three different kinds of equilibria: i. decentralized economy; ii. myopically planned economy; iii. centrally planned economy. We show that the optimal balanced growth path is characterized by high levels of leisure and low or zero rate of growth, and this cannot be obtained with laissez-faire. The path from the actual state to the optimal trajectory can easily require a transition with negative rate of growth.
    • Happy Degrowth vs Unhappy Growth Outline E. Bilancini S. D’Alessandro Introduction The model Concluding Remarks 1 Introduction 2 The model 3 Concluding Remarks
    • Happy Degrowth vs Unhappy Growth The utility function E. Bilancini S. D’Alessandro We add to the basic leisure consumption trade-off, the fact Introduction that individuals can obtain utility from the consumption of The model relational goods: Concluding φ η Remarks (ci ¯−γ li xi )1−σ c ui = f (ci , ¯, li , xi ) = c , (1) 1−σ where, c is private consumption, ¯ is average consumption, l c is leisure, x is consumption of relational goods, φ, η > 0 and σ = 1. Jealousy =⇒ γ > 0, Keeping up with Joneses (KUJ) =⇒ σ > 1. Relational goods x are given by: xi = g(li , V) = li V, (2) where, V is defined as the stock of social capital.
    • Happy Degrowth vs Unhappy Growth The utility function E. Bilancini S. D’Alessandro We add to the basic leisure consumption trade-off, the fact Introduction that individuals can obtain utility from the consumption of The model relational goods: Concluding φ η Remarks (ci ¯−γ li xi )1−σ c ui = f (ci , ¯, li , xi ) = c , (1) 1−σ where, c is private consumption, ¯ is average consumption, l c is leisure, x is consumption of relational goods, φ, η > 0 and σ = 1. Jealousy =⇒ γ > 0, Keeping up with Joneses (KUJ) =⇒ σ > 1. Relational goods x are given by: xi = g(li , V) = li V, (2) where, V is defined as the stock of social capital.
    • Happy Degrowth vs Unhappy Growth The utility function E. Bilancini S. D’Alessandro We add to the basic leisure consumption trade-off, the fact Introduction that individuals can obtain utility from the consumption of The model relational goods: Concluding φ η Remarks (ci ¯−γ li xi )1−σ c ui = f (ci , ¯, li , xi ) = c , (1) 1−σ where, c is private consumption, ¯ is average consumption, l c is leisure, x is consumption of relational goods, φ, η > 0 and σ = 1. Jealousy =⇒ γ > 0, Keeping up with Joneses (KUJ) =⇒ σ > 1. Relational goods x are given by: xi = g(li , V) = li V, (2) where, V is defined as the stock of social capital.
    • Happy Degrowth vs Unhappy Growth Social Capital E. Bilancini S. D’Alessandro Social capital changes in time. Its dynamics depends on the average level of leisure in the Introduction society ¯ The simplest way to include this complementarity l. The model Concluding in leisure is: Remarks V = B ¯ − δV, ˙ l (3) where B, δ > 0. We started with this simple form, but we include non-linearity in the “productivity” of average leisure which depends on the current level of social capital (networks): V = ¯ f (V) − δV, ˙ l (4) where f (V) takes a logistic form: θ f (V) = β + . (5) 1 + eψ−ξV
    • Happy Degrowth vs Unhappy Growth Social Capital E. Bilancini S. D’Alessandro Social capital changes in time. Its dynamics depends on the average level of leisure in the Introduction society ¯ The simplest way to include this complementarity l. The model Concluding in leisure is: Remarks V = B ¯ − δV, ˙ l (3) where B, δ > 0. We started with this simple form, but we include non-linearity in the “productivity” of average leisure which depends on the current level of social capital (networks): V = ¯ f (V) − δV, ˙ l (4) where f (V) takes a logistic form: θ f (V) = β + . (5) 1 + eψ−ξV
    • Happy Degrowth vs Unhappy Growth Social Capital E. Bilancini S. D’Alessandro Social capital changes in time. Its dynamics depends on the average level of leisure in the Introduction society ¯ The simplest way to include this complementarity l. The model Concluding in leisure is: Remarks V = B ¯ − δV, ˙ l (3) where B, δ > 0. We started with this simple form, but we include non-linearity in the “productivity” of average leisure which depends on the current level of social capital (networks): V = ¯ f (V) − δV, ˙ l (4) where f (V) takes a logistic form: θ f (V) = β + . (5) 1 + eψ−ξV
    • Happy Degrowth vs Unhappy Growth Social Capital E. Bilancini S. D’Alessandro Social capital changes in time. Its dynamics depends on the average level of leisure in the Introduction society ¯ The simplest way to include this complementarity l. The model Concluding in leisure is: Remarks V = B ¯ − δV, ˙ l (3) where B, δ > 0. We started with this simple form, but we include non-linearity in the “productivity” of average leisure which depends on the current level of social capital (networks): V = ¯ f (V) − δV, ˙ l (4) where f (V) takes a logistic form: θ f (V) = β + . (5) 1 + eψ−ξV
    • Happy Degrowth vs Unhappy Growth Decentralized economy E. Bilancini S. D’Alessandro The problem Introduction ∞ φ η The model (ci ¯−γ li xi )1−σ −ρt c Concluding max e dt (6) Remarks 0 1−σ ˙ s.t. ki = rki + w(1 − li ) − ci , (7) ki (0) > 0 and V(0) > 0, (8) where r and w are the “price” of capital and labour. Production follow a simple Romer (1986) production function: yi = A(¯ iα (1 − li )β , k)k (9) with A(¯ = A¯1−α k) k
    • Happy Degrowth vs Unhappy Growth Decentralized economy E. Bilancini S. D’Alessandro Introduction The model Main outcome Concluding Remarks The level of social capital does not affect the equilibrium allocation of time between labour and leisure. If we allow for the non-linear dynamics in the accumulation of social capital, two locally stable levels of V can be sustained on the balanced growth path. Jealousy deeply affects the rate of growth and the allocation of time: γ ↑ =⇒ g ↑ =⇒ li ↓
    • Happy Degrowth vs Unhappy Growth Decentralized economy E. Bilancini S. D’Alessandro Introduction The model Main outcome Concluding Remarks The level of social capital does not affect the equilibrium allocation of time between labour and leisure. If we allow for the non-linear dynamics in the accumulation of social capital, two locally stable levels of V can be sustained on the balanced growth path. Jealousy deeply affects the rate of growth and the allocation of time: γ ↑ =⇒ g ↑ =⇒ li ↓
    • Happy Degrowth vs Unhappy Growth Myopically Planned Economy E. Bilancini S. D’Alessandro (MPE) Introduction The model Concluding Remarks The problem φ η ∞ (c1−γ li xi )1−σ −ρt i max e dt (10) 0 1−σ ˙ s.t. ki = Aki (1 − li )β − ci , (11) ki (0) > 0 and V(0) > 0, (12)
    • Happy Degrowth vs Unhappy Growth MPE vs Decentralized E. Bilancini S. D’Alessandro Introduction The model Concluding Remarks
    • Happy Degrowth vs Unhappy Growth Centrally Planned Economy (CPE) E. Bilancini S. D’Alessandro The problem Introduction φ η (c1−γ li xi )1−σ −ρt The model ∞ i Concluding max e dt (13) Remarks 0 1−σ ˙ s.t. ki = Aki (1 − li )β − ci , (14) V = ¯ f (V) − δV, ˙ l (15) ki (0) > 0 and V(0) > 0, (16) θ f (V) = β + . (17) 1 + eψ−ξV
    • Happy Degrowth vs Unhappy Growth CPE vs Decentralized E. Bilancini S. D’Alessandro Introduction The model Concluding Remarks
    • Happy Degrowth vs Unhappy Growth Outline E. Bilancini S. D’Alessandro Introduction The model Concluding Remarks 1 Introduction 2 The model 3 Concluding Remarks
    • Happy Degrowth vs Unhappy Growth Comments E. Bilancini S. D’Alessandro Introduction The model If social planner considers the effect of average leisure on the Concluding dynamics of social capital accumulation the results change. Remarks In order to maximize the individual utility function a higher share of leisure is needed. Growth looses importance. Social planner should shift from a regime based on work for growth to that based on work for social capital accumulation. Social planner who implements public policy for growth does not include aspects of human life which are crucial for well-being.
    • Happy Degrowth vs Unhappy Growth Transition E. Bilancini S. D’Alessandro Introduction The model Concluding Remarks How to change from a work for growth regime to a work for social capital one? preliminary results highlight that: • High-income countries =⇒ the level of physical capital must decline, since it cannot be sustained in the other regime. • Low-income countries =⇒ the level of physical capital still increases, while the working time should start decreasing.
    • Happy Degrowth vs Unhappy Growth Transition E. Bilancini S. D’Alessandro Introduction The model Concluding Remarks How to change from a work for growth regime to a work for social capital one? preliminary results highlight that: • High-income countries =⇒ the level of physical capital must decline, since it cannot be sustained in the other regime. • Low-income countries =⇒ the level of physical capital still increases, while the working time should start decreasing.
    • Happy Degrowth vs Unhappy Growth Final Remarks E. Bilancini S. D’Alessandro Introduction The model We obtain this result without negative externalities of growth Concluding Remarks on social capital. We do not include an effect of social capital on Jealousy and KUJ. We do not take into account the natural environment. All these elements and many others should be included and would work in our direction: growth cannot be happy. Only myopically social planners (i.e. economists) can believe it!
    • Happy Degrowth vs Unhappy Growth Final Remarks E. Bilancini S. D’Alessandro Introduction The model We obtain this result without negative externalities of growth Concluding Remarks on social capital. We do not include an effect of social capital on Jealousy and KUJ. We do not take into account the natural environment. All these elements and many others should be included and would work in our direction: growth cannot be happy. Only myopically social planners (i.e. economists) can believe it!
    • Happy Degrowth vs Unhappy Growth Final Remarks E. Bilancini S. D’Alessandro Introduction The model We obtain this result without negative externalities of growth Concluding Remarks on social capital. We do not include an effect of social capital on Jealousy and KUJ. We do not take into account the natural environment. All these elements and many others should be included and would work in our direction: growth cannot be happy. Only myopically social planners (i.e. economists) can believe it!
    • Happy Degrowth vs Unhappy Growth Final Remarks E. Bilancini S. D’Alessandro Introduction The model We obtain this result without negative externalities of growth Concluding Remarks on social capital. We do not include an effect of social capital on Jealousy and KUJ. We do not take into account the natural environment. All these elements and many others should be included and would work in our direction: growth cannot be happy. Only myopically social planners (i.e. economists) can believe it!
    • Happy Degrowth vs Unhappy Growth Final Remarks E. Bilancini S. D’Alessandro Introduction The model We obtain this result without negative externalities of growth Concluding Remarks on social capital. We do not include an effect of social capital on Jealousy and KUJ. We do not take into account the natural environment. All these elements and many others should be included and would work in our direction: growth cannot be happy. Only myopically social planners (i.e. economists) can believe it!