Editing Macroeconomics (section)

==== Environmental and climate issues ====
[[File:Diagram of natural resource flows-en.svg|thumb|Natural resources flow through the economy and end up as waste and pollution.]]

Since the 1970s, various environmental problems have been integrated into growth and other macroeconomic models to study their implications more thoroughly. During the oil crises of the 1970s when scarcity problems of natural resources were high on the public agenda, economists like [[Joseph Stiglitz]] and [[Robert Solow]] introduced [[non-renewable resource]]s into neoclassical growth models to study the possibilities of maintaining growth in living standards under these conditions.<ref name=Sørensen/>{{rp|201–39}} More recently, the issue of [[climate change]] and the possibilities of a [[sustainable development]] are examined in so-called [[Integrated assessment modelling|integrated assessment models]], pioneered by [[William Nordhaus]].<ref>{{cite book |last1=Hassler |first1=J. |last2=Krusell |first2=P. |last3=Smith |first3=A. A. |chapter=Chapter 24 - Environmental Macroeconomics |chapter-url=https://www.sciencedirect.com/science/article/abs/pii/S1574004816300076 |title=Handbook of Macroeconomics |publisher=Elsevier |access-date=9 September 2023 |pages=1893–2008 |date=1 January 2016|volume=2 |doi=10.1016/bs.hesmac.2016.04.007 |isbn=9780444594877 }}</ref> In macroeconomic models in [[environmental economics]], the economic system is dependant upon the environment. In this case, the [[circular flow of income]] diagram may be replaced by a more complex flow diagram reflecting the input of solar energy, which sustains natural inputs and [[ecosystem services|environmental services]] which are then used as units of [[Production (economics)|production]]. Once consumed, natural inputs pass out of the economy as pollution and waste. The potential of an environment to provide services and materials is referred to as an "environment's source function", and this function is depleted as resources are consumed or pollution contaminates the resources. The "sink function" describes an environment's ability to absorb and render harmless waste and pollution: when waste output exceeds the limit of the sink function, long-term damage occurs.<ref name=Harris2006>Harris J. (2006). ''Environmental and Natural Resource Economics: A Contemporary Approach''. Houghton Mifflin Company.</ref>{{rp|8}}  In 2024 a new approach was proposed which would institutionalize Inclusion, Sustainability and Resilience in Domestic Economic Governance.<ref>{{cite book |last= Samans|first= Richard |date=2024 |title= Human-Centred Economics: The Living Standards of Nations (open access) |url=https://richardsamans.net/book-human-centred-economics/ |location= |publisher= Palgrave Macmillan in association with the ILO|access-date=22 April 2025}}</ref>