Economic literature frequently treats zombie firms merely as systemic “noise” – that is, as disruptive, stochastic, and distorting factors that degrade the efficiency of market mechanisms and obstruct the optimal allocation of resources. According to this approach, these economically unviable, artificially sustained enterprises should be phased out or liquidated as swiftly as possible to allow capital and labor to flow toward novel, genuinely productive sectors. There is only one fundamental flaw with this paradigm: it serves the primacy of economic growth, which directly conflicts with Earth’s ecological and planetary boundaries. The conceptualization of zombies as mere noise warrants nuanced reexamination through the necessary transformation toward the paradigm of degrowth, or qualitative growth.
Zombies and Noise
The 2021 collaborative volume Noise: A Flaw in Human Judgment – authored by Nobel laureate in economics Daniel Kahneman, French behavioral strategy researcher Olivier Sibony, and Cass R. Sunstein, director of the Program on Behavioral Economics and Public Policy at Harvard – inspires us to view the zombie phenomenon, traditionally deemed strictly detrimental in mainstream economic terms, through a new lens.
A careful reading of the volume reveals that errors within complex systems – including socio-economic structures – rarely cancel each other out; rather, they accumulate. One of the book’s foundational tenets, grounded in the logic of least squares and error analysis, is that systemic errors and misjudgments do not fortuitously average out. The presence of zombies – namely, underperforming companies in the economy that lock up capital and labor – is not neutralized by the performance of healthy market segments; instead, these misallocations accumulate as structural losses within the macroeconomy.
As the book demonstrates, organizations often fail to perceive massive systemic anomalies (such as hundreds of millions missing from insurance companies) because routine operations and conformity conceal them. Within economic policy and the banking sector, zombie firms persist for decades (facilitated by practices such as rolling over bad loans) because decision-makers and lenders evade painful confrontations and liquidations, thereby maintaining the illusion of systemic stability. This is apart from the phenomenon wherein the financial sector has expanded exponentially at the direct expense of the real economy, with remedies remaining absent to this day.
When interpreting noise, it is vital to acknowledge the role of stochasticity and the “lottery effect.” A critical question in research on zombification is whether a firm’s survival is anchored in genuine competitiveness or merely sustained by a succession of external circumstances (such as a low-interest-rate environment, an allocation lottery of state subsidies, or discretionary individual banking decisions). Following the logic of noise research, if survival becomes decoupled from performance – analogous to punishment depending on a judge’s mood or ambient temperature – the market’s signaling system collapses.
Kahneman and his co-authors also advocate for pursuing “decision hygiene” and structured protocols when managing noise. This is necessitated by the fact that the totality of tasks cannot be entrusted to the individual, subjective discretion of administrative staff. Processes must be structured: the application of structured checklists, algorithms, or the Mediating Assessments Protocol (MAP) can mitigate subjective noise within the system. The majority of these mechanisms remain conspicuously absent from the banking and monetary spheres to this day, where lenders decide on a discretionary, biased basis which zombie-status enterprises are rewarded with new loans as a “lifeline” and which are permitted to fail.
More Than Noise: The Channelling of Zombies Toward the Degrowth Paradigm
From the perspective of classical economics, therefore, zombies introduce noise into the economy and must be eliminated to achieve healthier and higher economic growth dynamics. The paradigm of degrowth critiques the imperative of unlimited economic growth, productivism, and the artificial maintenance of low-efficiency, resource-wasteful structures. If zombie corporations are to be transformed or phased out in alignment with the objectives of degrowth, wholesale liquidation may not be the optimal path; instead, a more differentiated and complex approach is required:
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Rigorous “decision hygiene” and automated restructuring (filtering out noise): Discretionary, protectionist rescue packages and banking “zombie rollover” practices must be terminated. There is an urgent need for objective, rule-based audits – utilizing cost-benefit and ecological-footprint filters – to prevent subjective political or financial decision-makers from arbitrarily sustaining unviable entities that are ecologically and socially detrimental.
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Liberation of capital and labor (de-carcassation): Zombie firms tie up human capital and energy in low-value-added and frequently ecologically damaging activities. Public policies should incentivize the orderly wind-down (or restructuring and liquidation) of these enterprises, redirecting labor and resources toward sectors prioritized by degrowth, such as local economies, the social economy, ecological restoration, and public services.
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Introduction of ecological and social utility quotas: The support or market authorization of corporations should be measured against social and ecological resilience rather than net financial growth. Rather than counting the sheer number of zombie firms, policies should determine which of these entities engage in socio-ecologically beneficial activities capable of reinforcing a system of sustainable, local alternatives.
