Working Paper GCF 1-2018, 2018. Paper abstract bibtex
Green growth rhetoric has become widespread in policy circles. It holds the promise that solving environmental problems need not harm the economy; quite the oppo- site, it is said to offer new economic opportunities. Yet, until now there is little analytically sound work on the possibility of such a dynamics. We investigate conditions under which a transition from “brown” to “green” growth can improve the economic situation both of present and future generations. We show that it is misleading to represent the situation as a prisoner's dilemma, where everybody is tempted to free ride rather than cooperate. It is more appropriate to describe it with the metaphor of a stag hunt, a situation where joint action can achieve a Pareto improvement not threatened by the so-called tragedy of the commons. This is due to the combination of three well-documented phenomena: the fact that a major aspect of technical change is learning by doing, the fact that learning by doing can develop in different directions, and the indeterminacy of labour markets resulting from the difficulty of matching the skills of people with the demand of firms. Each one of these three aspects is relevant for green growth policies, but it seems that only by combining them such policies can be successful.