Integrating Circularity and Qualitative Growth: the Novel Strategy and Macroeconomic Theory for Sustainable Development

  • Thursday 12 October 2023
  • 18:30 - 19:30
  • Virtual Event
  • Eligible for 1 credit

Though there is agreement that the green transition needs some form of circular economy, in order to achieve decoupling, it is necessary to integrate circularity and qualitative growth. Sustainable development needs a novel macroeconomics: the theory of qualitative growth and a new descriptive framework for economies.

This webinar develops the new macroeconomics of the green transition, outlines its applications, and discusses the current controversy that risks paralyzing the green transition.

18:30 Welcome Remarks by CFA Society Italy Valentina Valdameri, CFA - Board Member - CFA Society Italy

Valentina Valdameri

CFA - Board Member - CFA Society Italy

Valentina Valdameri is Senior Business Development Manager for the wholesale and institutional Italian market at Legal&General Investment Management (LGIM) since September 2022, having held the same role between 2019 and 2021 yet. Valentina joins LGIM after being one year at Fidelity International as Senior Sales Manager for the wholesale and institutional Italian market. Prior to that she has been Business Development Manager at Legg Mason Global Asset Management and Client Service Officer at State Street Global Advisors, where she started her career in 2012. She graduated with a MSc in Business and Enterprise Law at Bocconi University in 2013. She is a CFA Charterholder since 2019.

18:35 Integrating Circularity and Qualitative Growth: the Novel Strategy and Macroeconomic Theory for Sustainable Development Sergio Focardi, PhD - Founder - Economics and Complexity

Sergio Focardi

PhD - Founder - Economics and Complexity

Sergio Focardi, PhD – is the Founder of Economics and Complexity, a consulting firm on the new economic thinking. Sergio Focardi holds a degree in Electronic Engineering from the University of Genoa, Italy, and PhD in Financial Mathematics from the University of Karlsruhe, Germany. Dr Focardi has taught at major Universities: EDHEC in Nice, University of New York at Stony Brook, Princeton, Pole De Vinci in Paris, Franklin University in Lugano. Sergio is the author/coauthor of 24 books and more than 100 papers on quantitative finance. Sergio and coauthors have developed the theory of qualitative growth and have written extensively on this topic. The book The Theory of Qualitative Growth, coauthored by Focardi and Fabozzi is forthcoming with Nova Science Publishers. Follow a selection of recent papers on qualitative growth: Sergio Focardi and Frank J. Fabozzi, “Why Should Asset Management Be Interested in New Economic Thinking”, The Journal of Portfolio Management Novel Risk, 2022, 276-295 Frank J. Fabozzi, Focardi, Linda Ponta, Manon Rivoire, Davide Mazza, “The Economic Theory of Qualitative Green Growth”, Structural Change and Economic Dynamics, March 2022 Frank J. Fabozzi, Sergio Focardi, and Zenu Sharma, “Investment Management Post Pandemic, Post Global Warming, Post Resource Depletion”, Journal of Portfolio Management, September 2021 Special Issue “Novel Risk”. “The paper Reconciling Circularity and Growth: The Model of Qualitative Economic Growth”, 2023, can downloaded from SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4440479 . The paper The green transition, a great opportunity for Quantum Economics is forthcoming in the new journal Quantum Economics and Finance

19:25 Q&A Session

The webinar in detail

Part Iwhy we need to integrate some form of circular economy with qualitative growth.

We first present data on global warming and the exhaustion of natural resources, citing the relevant literature. Next, we discuss the circular economy. We show how implementing a full-fledged circular economy has a huge social impact and economic cost. The circular economy requires to redesign production processes. The circular economy, per se, does not guarantee growth. We argue that, in order to achieve decoupling, it is necessary to integrate some form of circular economy with qualitative growth.

We also discuss what we might call the “green transition controversy”. As the European and American governments began to push for the green transition, opponents started pointing out political and ethical concerns as well as potential technological issues and the possibility of a devastating recession.

Part II: the theory of qualitative growth.

We begin by observing that modern, advanced economies are evolutionary complex systems that output a large number of heterogeneous products and services that change qualitatively and innovate. Therefore, it is impossible to aggregate the quantities of output. The quantity of output is not an observable.

Since the Bretton Woods conference, the magnitude of an economy is measured by the nominal GDP, that is, the sum of all final transactions. But in order to compute growth, we need to compare GDP in different moments. Computing GDP in different moments requires evaluating inflation. But given the evolving nature of products and services, inflation is not a well-defined concept. In practice, a large fraction of price changes due to qualitative changes, are computed as inflation.

Simply put, real economies have become evolutionary complex systems, but mainstream economics have not followed this evolution. We propose a new macroeconomic framework based on the methodological principles of modern physical sciences. Modern physical sciences are based on theories that include abstract terms that acquire meaning through the entire theory. Observations are determined by the entire theory.

We apply these principles to economics. We create economic models where the growth of the observable nominal GDP depends on several abstract terms, in particular Quantity, Quality, and Generalized Inflation. We link these abstract terms to empirical data through measurement processes. Measurement processes include the observation of measure of complexity. We use the measures of complexity based on export data introduced by Hidalgo and Hausmann. However, we observe that the circular economy might greatly affect export and therefore new complexity measures might be needed. We also briefly cite the possibility of using techniques of quantum probability to represent decision making processes that are subject to superposition of states.

We conclude by showing applications of the new economic thinking we propose analysing current inflation and the stagflation of the 1970s. We discuss how the new economic thinking, that requires a profound change of the descriptive framework of an economy might be useful for asset management and for risk management.

The paper "Reconciling Circularity and Growth: The Model of Qualitative Economic Growth" can be downloaded here

Important information

  • Registrations will close on 10 October, 6 PM CET.
  • A kind reminder with instructions to connect to Zoom platform will be sent to all registered participants on 11 October.
  • This event will be recorded. 
  • This event will be held in English.
  • CFA Institute Regular and Affiliate members can self report 1 PL credit accessing their account page on the CFA Institute website.