How Do We Achieve a Sustainable Economy?
 Research Project

Integrating Macroeconomics and Ecology via Energy and the Laws of Thermodynamics

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Principal Investigator: Professor Steve Keen

Steve Keen is an Australian-born, British-based economist and author. He considers himself a post-Keynesian, criticising neoclassical economics as inconsistent, unscientific and empirically unsupported. The major influences on Keen’s thinking about economics include John Maynard Keynes, Karl Marx, Hyman Minsky, Piero Sraffa, Augusto Graziani, Joseph Alois Schumpeter, Thorstein Veblen, and François Quesnay. Hyman Minsky’s financial instability hypothesis forms the main basis of his major contribution to economics which mainly concentrates on mathematical modelling and simulation of financial instability.

He is a notable critic of the Australian property bubble, as he sees it. Keen was formerly an associate professor of economics at University of Western Sydney. He is an Honorary Professor at UCL and a Distinguished Research Fellow with the Institute for Strategy Resilience & Security.

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Project Summary

Our project had two components: refining Garrett's thermodynamics-based model of human civilization, and extending the insights from Keen, Ayres & Standish 2019 on the role of energy in production.


Garrett (T.J. Garrett, 2012) treats human civilisation as a heat engine that exploits and expands a gradient between high potential energy resources, itself, and the low potential energy environment into which energy consumption by-products are dumped as waste. The GDP is a measure of the civilization expansion and a constant relationship was found between current energy consumption and historically cumulative production -- the time integral of GDP -- equivalent to 5.9 gigawatts per trillion US$2010 dollars of global wealth.


Our project refined the calculations, considered the possibility of relating energy consumption to the capital stock, evaluated simplified connections between energy consumption, efficiency, innovation, population growth and carbon dioxide emissions, and has already resulted in a paper in PLOS ONE (Timothy J. Garrett et al., 2020).

Keen et al reasoned from the insight that "capital without energy is a sculpture, labour without energy is a corpse" (Steve Keen et al., 2019) that the "factors of production" in standard Cobb-Douglas and Leontief production functions should be replaced by the product of each factor, times energy per unit, times the efficiency of conversion of energy into useful work. Our project applied this to the Goodwin cyclical growth model to develop two models, one energy-based and the other energy-and-matter-based, incorporating waste generation and resource depletion.

Our attempt to blend the two approaches resulted in a model with a highly convergent equilibrium, possibly reflecting the well-known stabilising impact of an integral block on an unstable system dynamics model. Future work includes introducing monetary dynamics and finance following (Steve Keen, 1995).

- Garrett, T.J. 2012. "No Way Out? The Double-Bind in Seeking Global Prosperity Alongside Mitigated Climate Change." Earth System Dynamics, 3, 1-17.

- Garrett, Timothy J.; Matheus Grasselli and Steve Keen. 2020. "Past World Economic Production Constrains Current Energy Demands: Persistent Scaling with Implications for Economic Growth and Climate Change Mitigation." PLoS ONE, 15(8), e0237672.

- Keen, Steve. 1995. "Finance and Economic Breakdown: Modeling Minsky's 'Financial Instability Hypothesis.'." Journal of Post Keynesian Economics, 17(4), 607-35.

- Keen, Steve; Robert U. Ayres and Russell Standish. 2019. "A Note on the Role of Energy in Production." Ecological Economics, 157, 40-46.



Working Paper

Shining the Light of Energy on Economic Models of Production

Nick Tim Garrett, Matheus Graselli, Steve Keen | February 25, 2021