A proposal for the greening of textbook macro: 'IS-LM-EE'

The celebrated ecological economist Herman Daly asked: 'Is there not a neglected connection between the environment and the macroeconomics we teach? If there is no such thing as environmental macroeconomics in our textbooks, should there be? If so, what would it look like?' [Daly, H., 1991. Towards an environmental macroeconomics. Land Econ. 67(2), 255-259]. Emphasising the need to breach widely-used undergraduate texts - such as Abel and Bernanke [Abel, A., Bernanke, B.S., 1998. Macroeconomics, 3rd edition. Addison-Wesley, New York], Begg et al. [Begg, D., Fischer, S., Dornbusch, R., 1998. Economics 5th edition. McGraw-Hill, London] and Sloman [Sloman, J., 1997. Economics, 3rd edition, Prentice-Hall, London] - we show that an 'environmental equilibrium' (EE) line can be added to the standard IS-LM diagram which remains the workhorse of undergraduate macro teaching and is widely used for applied policy analysis. The familiar comparative static analysis of fiscal and monetary policy are reworked. It is argued that chapter sections detailing the environmental extension should be incorporated into all IS-LM-using texts.