Implications of zero-growth economics analysed with an agent-based model

2025-01-31

AI Summary

This study investigates the macroeconomic stability of capitalist systems under zero GDP growth, contrasting it with conventional growth trajectories across market structure, firm bankruptcy rates, income distribution, and credit risk. Building on Minsky’s Financial Instability Hypothesis, we develop a micro-heterogeneous agent-based model (ABM) to systematically simulate and compare growth and zero-growth regimes at the individual agent level—a novel methodological contribution. Results reveal counterintuitive macroeconomic stability under zero growth: reduced GDP volatility, lower crisis frequency, decreased unemployment, and higher wage shares. However, this stability coexists with modestly elevated inflation, increased market concentration, and heightened systemic risk in interbank and corporate credit networks. The study thus identifies a dual characteristic of degrowth—macroeconomic resilience coupled with financial fragility—thereby advancing theoretical foundations for sustainable economic transformation and informing policy design for post-growth transitions.

Technology Category

• Game Theory and Economic Paradigms: Equilibrium
• Multiagent Systems: Mechanism Design
• Cognitive Modeling & Cognitive Systems: Agent Architectures

Application Category

• Economics, Online Markets and Human Computation: Sustainability of Web economics
• Web Mining and Content Analysis: Models for Web evolution
• Social Networks and Social Media: Generative AI / large language models and their impact on social systems

Abstract

The ever-approaching limits of the Earth's biosphere and the potentially catastrophic consequences caused by climate change have begun to call into question the endless growth of the economy. There is increasing interest in the prospects of zero economic growth from the degrowth and post-growth literature. In particular, the question arises as to whether a zero-growth trajectory in a capitalist system with interest-bearing debt can be economically stable. There have been several answers to this question using macroeconomic models; some find a zero-growth trajectory is stable, while other models show an economic breakdown. However, the capitalist system in a period of growth is not guaranteed to be stable. Hence, a more appropriate methodology is to compare the relative stability between a growth and zero-growth scenario on the same model. Such a question has not yet been answered at any disaggregated level. It's important to investigate the consequences of zero-growth on market share instability and concentration, bankruptcy rates, income distribution, and credit network risk. To answer such questions, we develop a macroeconomic agent-based model incorporating Minskyan financial dynamics. The growth and zero-growth scenarios are accomplished by changing an average productivity growth parameter for the firms in the model. The model results showed that real GDP growth rates were more stable in the zero-growth scenario, there were fewer economic crises, lower unemployment rates, a higher wage share of output for workers, and capital firm and bank market shares were relatively more stable. Some of the consequences of zero-growth were a higher rate of inflation than in the growth scenario, increased market concentration for both firms and banks, and a higher level of financial risk in the credit network.

Problem

• Economic Stability
• Zero Growth Economy
• Market Dynamics

Innovation

• Non-Growth Economy
• Market Stability
• Inflation and Concentration Impact