Godley Table
Description
Stephen Hinton:
"One of the most powerful analytical tools in MMT is the sectoral balances framework—the Godley table—which tracks net financial flows between sectors of the economy: the domestic private sector, the government sector, and the external sector. This framework reveals that the sectors must sum to zero: one sector’s deficit is another’s surplus.
Here is where a genuinely novel synthesis becomes possible. The Godley table can be extended to include a physical sector—tracking real ecological stocks and flows of natural capital alongside financial ones. This is line four. At the end of each accounting period, one would measure whether the physical sector’s stock has gone up or down, just as one measures whether a financial sector is in surplus or deficit.
The power of this dual-register approach is profound.
Consider a government that:
- Creates money that flows to firms
- Allows those firms to deplete ecosystems for profit
- Taxes those profits
- Knows the ecosystem—the ultimate real resource base—is being permanently destroyed
A traditional Godley table would show the financial sector looking fine—government deficits creating private sector surpluses.
< The physical sector table would show the real balance sheet deteriorating, with ecosystem stocks declining year on year. The gap between those two pictures reveals the hidden subsidy that polluting industries currently enjoy: they book the financial gains in one register while the losses appear in a register nobody is officially watching . This extended accounting framework would give Raworth’s ecological ceiling the same analytical rigour that Godley tables give to financial balances. >
It would make the slow buildup of ecological overshoot visible in standard economic accounting terms before tipping points arrive."
(https://www.patreon.com/StephenHinton/posts/mmt-and-doughnut-168808367)