Testing transitions: A new model to explore how producer- and consumer-led sustainability strategies could affect macroeconomic stability

The Stockholm Environment Institute has developed a new macroeconomic model to test how different sustainability strategies affect economic stability. Unlike traditional models, this version assumes people act based on past experience rather than optimal future knowledge. Initial experiments show that 'downshifting' (reducing working hours/workforce participation) can slow GDP growth and consumption without causing instability, whereas simply reducing consumption levels while maintaining the workforce can lead to recession and economic instability.

• The model's initial experiments indicate that voluntary 'downshifting'—where individuals reduce working hours or leave the workforce—can temporarily stop GDP growth and the growth of environmentally damaging consumption in a high-income capitalist economy without causing involuntary job loss or instability.
• Reducing consumption levels without a corresponding reduction in workforce participation can trigger economic instability, resulting in a classic recession characterized by lower business returns, reduced investment, and falling wages.
• The developed model differs from common economic models by utilizing post-Keynesian theory to recreate realistic business cycles, including deep slumps and persistent underemployment, and by assuming that people anticipate the future using rules based on past experience rather than optimal choices.

APA

Stockholm Environment Institute (2019). Testing transitions: A new model to explore how producer- and consumer-led sustainability strategies could affect macroeconomic stability. https://www.sei.org/wp-content/uploads/2019/03/sei-2019-p2cs-summary-economic-model.pdf

Chicago

Stockholm Environment Institute. Testing transitions: A new model to explore how producer- and consumer-led sustainability strategies could affect macroeconomic stability. 2019. https://www.sei.org/wp-content/uploads/2019/03/sei-2019-p2cs-summary-economic-model.pdf.

Wikipedia

{{cite report |author=Stockholm Environment Institute |title=Testing transitions: A new model to explore how producer- and consumer-led sustainability strategies could affect macroeconomic stability |date=March 2019 |url=https://www.sei.org/wp-content/uploads/2019/03/sei-2019-p2cs-summary-economic-model.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{stockholmenvironmentinstitute2019testing, author = {{Stockholm Environment Institute}}, title = {{Testing transitions: A new model to explore how producer- and consumer-led sustainability strategies could affect macroeconomic stability}}, institution = {Stockholm Environment Institute}, year = {2019}, month = mar, url = {https://www.sei.org/wp-content/uploads/2019/03/sei-2019-p2cs-summary-economic-model.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }