Abstract for: THE 2052 MODEL: General model of a modern capitalist economy in a finite environment–covering real, financial & social dynamics

We present a generic system dynamics model of a modern, capitalist economy operating a finite environment. The model covers the real, financial and social dynamics that evolve when a modern economy approaches the various constraints in the current socio-economic-bio-geophysical system. We focus on the effects of three physical constraints (resource scarcity, environmental decline, biodiversity loss), and four socio-economic constraints (accelerating unemployment, excessive debt, rising inequity, increasing isolationism). The 2052 model sees classical neoclassical macroeconomics as a special case: one where these seven constraints are relaxed by assumption, and hence do not dominate system behavior. The model includes both a description of the real economy and of the financial economy, and covers issues of demand, consumption, distribution, environment, technology, debt, government, finance, and financial instability. We show how the model is helpful in analyzing the consequences of traditional and unconventional policy proposals for improving the wellbeing of the majority vote in a rich country. We have made this model because there does not seem to exist a similar working model in the literature. The 2052 model has a broad scope (real and financial economy, physical and social constraints), a long time horizon (30+ years), and smooths over the short term dynamics that cause the 4-6 year business cycle, while maintaining the 12-18 year Kuznets cycle in excess capacity. To ensure unambiguous reference, one might alternatively refer to our model as “The green growth model” or “The Randers growth model”.