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Degrowth, Dynamic equilibrium, Externalities, Voluntary simplicity, Welfare, Sharing, Collaborative consumption, Basic income
Abstract: This paper presents a novel equilibrium framework, allowing for asymmetries in the initial wealth allocations, labour supplies as well as in the preferences of optimizing agents. The framework is applied to study a degrowth society where a subset of agents voluntarily limit their material consumption, thereby complying with voluntary simplicity (VS). At micro-level, the utility-maximization problems of asymmetric agents are formulated and solved for optimal labour supplies. New macro-level equilibrium solutions, accounting for wealth inequality, are presented based on different labour supply models. The equilibrium welfare is measured using a Bernoully-Nash aggregate. An increase in the share of the VS-type agents implies a degrowth transition to a lower level of average consumption. Analysis of the equilibrium framework shows that degrowth, whereby average market-based consumption falls, improves the equilibrium welfare, assuming the VS-type agents have sufficient resources, enabling a reduction in labour supplies. Sharing, collaborative consumption and basic income support welfare-increasing degrowth. Any growing economy can eventually reach the size at which degrowth would improve the welfare. Simulations suggest that degrowth can also yield a Pareto-improvement in welfare.