Environmental Macroeconomics: Extending the IS-LM Model to Include an `Environmental Equilibrium' Curve

Author: Lawn, Philip A.

Source: Australian Economic Papers, Volume 42, Number 1, March 2003 , pp. 118-134(17)

Buy & download fulltext article:

Price: $48.00 plus tax (Refund Policy)

Abstract:

A decade has now passed since Daly made a plea for an environmental macroeconomics. Despite an expanding literature on “green” national accounting and the efforts of ecological economists to measure the sustainable net benefits of a growing macroeconomy, it is only recently that Daly's plea has been adequately answered. This has been achieved with the incorporation by Heyes of an “environmental equilibrium” or EE curve into the familiar IS-LM model. However, the IS-LM-EE model proposed by Heyes is incomplete. By extending Heyes' model to include the role of technological progress and the need to institute policy instruments to ensure operation on the EE curve, this paper sends out a clear message that environmental concerns should be incorporated into macroeconomic models. They should not be solely confined to microeconomics.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/1467-8454.00190

Affiliations: 1: Flinders University of South Australia phil.lawn@flinders.edu.au

Publication date: 2003-03-01