Timescales and Investment Dynamics in the Economy (TIDE)

Chester, Daniel and Jarvis, Andrew and Szerszynski, Bronislaw (2025) Timescales and Investment Dynamics in the Economy (TIDE). PhD thesis, UNSPECIFIED.

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Abstract

Global warming at a level greater than 1.5 °C above pre-industrial levels is widely understood to risk irreversible damage and is unlikely to be averted without a radical departure from current policy and patterns of investment within the coming decades. Moreover, such a transition is also likely to require large quantities of the economy’s existing productive structures – both physical infrastructure and the workers who operate it – to be retired or repurposed before their expected end of life. If poorly managed, this threatens significant losses to investors (including pension funds) and widespread impacts on livelihoods. This thesis seeks to understand how as a society we make investments in our future, and how the timescales over which these investments are made constrain the ability for the economy to move in novel directions. Investment lifetimes, despite their relevance to rates of both economic growth and transition, are poorly understood and have therefore been under-represented in models of economic transition. Using a systems dynamics approach which treats capital assets as flows and stocks rather than fixed artifacts – and is therefore able to replicate the description of other flowing systems in the natural sciences – new methods are introduced for estimating turnover timescales from available capital stocks data. This allows the timescale distribution of the whole economy to be derived, providing new insights into macroeconomic investment behaviour and the inertial dynamics of the economy. The global risk of stranded assets is then estimated by a new model which simulates the turnover dynamics of capital. This uniquely includes human as well as produced capital, bringing to the forefront the risks to workers rather than just to financial investors. Several pathways to zero carbon emissions in 2050 are explored, finding that delaying a ban on new carbon-dependent investment from 2020 to 2030 increases the global capital value at risk from 117 T$ to 557 T$, over a third of the present-day economy, highlighting the perils of delaying emissions reduction policy. Finally, the same ecology-inspired turnover model is applied to human working lifetimes, exploiting the widespread adoption of human capital (defined by expected lifetime earnings) to further understanding of working patterns and the importance of consumption to developing human productive potential. This leads to a final conclusion: that the common distinction in economics between consumption and investment is not so clear cut, and in fact almost all expenditure is some form of investment, with varying degrees of productivity and over varying timescales. This reinforces the value of the timescale-focused, systems dynamics view of the economy that this thesis introduces.