Beyond Green Scarcity
A taxonomy
I presented a paper at the Bucknell Institute for Public Policy conference, Policy Challenges in a Complex World, held on October 2–3, 2025, on the relation between inequality and the environment. A working paper version should be available soon. The paper, tentatively titled “Beyond Green Scarcity: Ecological Economics, Demand-Led Growth, and the External Constraint,” tries to make sense of the relation between ecological economics, Post Keynesian economics, Institutionalism, Green Marxism, and the degrowth literature. The link to the paper will be posted when the final version is ready. I decided to put it here rather than the blog, since this is not directly of immediate interest, and is a more substantive topic that I have been using in my classes (a previous discussion here). It is shorter than normal, but I hope the taxonomy might be useful (in similar vein see my discussion of welfare here).
The central point is relatively simple. Environmental problems are not merely market failures, in the sense used by mainstream economics. They are not just deviations from an otherwise efficient allocation of resources, to be corrected by the proper price, tax, discount rate, or property right. Pollution, climate change, the depletion of resources, and the destruction of ecosystems are social costs generated by the normal functioning of capitalist economies. This is compatible with a Post Keynesian, broadly interpreted, view in which capitalism is not a self-adjusting system. Unemployment, inequality, financial instability, uneven development, and environmental degradation are not accidental imperfections. They are part of the way the system reproduces itself.
At the same time, the paper is also critical of the more radical versions of the degrowth argument. That does not mean that all growth is good, or that technology will automatically solve the ecological crisis. Far from it. The issue is the composition, direction, and social control of growth. In particular, for peripheral economies, and certainly for Latin America, generalized degrowth is not a plausible development strategy. These economies need employment creation, structural transformation, public investment, redistribution, and, to do that, they must avoid of the balance-of-payments constraint. A reduction in exports of commodities, without an alternative source of foreign exchange, would normally produce, eventually, an external crisis, recession, inflation, falling wages, and worsening inequality. Hardly a recipe for ecological or social improvement.
The main contribution of the paper is the simple taxonomy of the several theories that deal with environmental issues. The basis for organizing the different positions is to separate two questions that are usually conflated. The first concerns the view of modern industrial society, or, perhaps, more accurately capitalism. The taxonomy separates those that think that market solutions are the best alternative to deal with both social and ecological problems from those that capitalism, or a market economic is structurally problematic, producing social and ecological costs as part of its normal operation. The second question concerns technology, and whether innovations are basically seen as a solution to the ecological crisis, even if not a panacea, or is it seen as the source of new problems, through rebound effects, new forms of extraction, new consumption patterns, and the reproduction of existing social relations.
A tentative taxonomy would look like this:
The upper-left quadrant corresponds to the conventional mainstream view, including much of neoclassical resource and environmental economics. In this view, scarcity is the key problem, and markets, if properly regulated to deal with imperfections, will deliver the required solutions through changes associated to substitution on the basis of price signals. William Nordhaus-style climate economics would fit here, as would the broader popular belief that innovation and better prices will eventually take care of the problem.
The upper-right quadrant includes more conservative or steady-state views. These are more pessimistic about unlimited growth and more serious about ecological limits. Herman Daly’s steady-state economics is the obvious reference. But these views often stop short of a full critique of capitalism, or of marginalist economics, I might add. The system can be preserved, but must be restrained.
The lower-left quadrant is where I would place the argument of my paper. It includes Post Keynesian ecological macroeconomics, Institutionalism, structuralist development economics, Green New Deal proposals, and some Green Marxist positions. The economy is not self-adjusting, and ecological destruction cannot be reduced to externalities. But the answer is not simply less aggregate output. The answer is a transformation of the structure of production and demand: green public investment, industrial policy, redistribution, regulation of resource extraction, public control or taxation of natural resource rents, and policies that reduce the dependence of peripheral economies on commodity exports.
The lower-right quadrant requires a caveat. I am calling degrowers Luddites, but only in a limited and somewhat polemical sense. Most degrowth authors are not against technology as such. Most support renewable energy and other forms of technological development. Their skepticism is about the idea that efficiency gains, decoupling, and green innovation can sustain endless aggregate growth. In that sense, they are technologically skeptical, not necessarily anti-technology. Techno-pessimists as I labeled it. Still, the problem remains that the politics of generalized degrowth tends to underestimate the macroeconomic and developmental consequences of reducing output, particularly in the periphery.
This is also where Branko Milanovic’s objection is relevant (see my old discussion of degrowth here). He notes that only a relatively small share of the population in rich countries lives below the global mean income. Hence, any serious global equalization through degrowth would require convincing the overwhelming majority of people in rich countries that their incomes are too high and must be reduced, not temporarily, but permanently. In practice, that would mean a prolonged depression followed by a permanently lower standard of living. The political feasibility of that is, to put it mildly, doubtful. And in middle-income and poor countries, where inequality remains very high and large parts of the population still require higher material consumption, the problem is even more severe.
The point, then, is not to defend growth in the abstract. Some growth is socially useless and ecologically destructive. But growth is necessary, especially when it involves public transportation, renewable energy, sanitation, health, education, housing, and the restructuring of production away from ecologically destructive activities, and the raising of the living standards of the vast majority of the global population.
The real issue is not growth versus degrowth, but what kind of growth, for whom, under what institutional arrangements, and with what external constraints. That is why a Post Keynesian and structuralist approach remains indispensable for thinking about the environment.