Steady-state economics

By P. Victor. His Life and Ideas, 2021

364 citations recorded by the source corpus.

Basic explanation As an economy grows, it brings benefits in terms of health, happiness and fulfilment. Infant mortality rates fall and life expectancy increases. Welfare states appear, along with health care, education and reliable infrastructure. But as an economy grows past a certain per capita size, benefits stop increasing, then start to fall, and we get more stress, congestion, crime, pollution, noise, ugliness, boring work and lack of community. But it’s the ecological damage that growth causes that presents the greatest threat to humans. It’s impossible for us to live in harmony with nature and to have a constantly growing economy. One of these aspirations has to go – we suggest it’s the latter. If you don’t find that selfevident, here’s a simple, four-point explanation: 1. Material growth can’t continue forever. This is uncontentious and nobody sane is disagreeing with it. 2. Economic growth always results in an increase in overall spending power. This is more difficult for some to understand, but it’s uncontestable. If it doesn’t increase overall spending power, then it’s not economic growth, it’s growth, or development, in something else – something intellectual, artistic, spiritual, or maybe a devaluation of the currency – but it’s not economic growth. 3. It’s not possible to ring-fence that increase in spending power so that it’s never spent on material things. If people have more money, they buy more cars, TVs, clothes, foreign holidays, second homes etc. This is obvious, surely; in an interview with footballer Andrey Shevchenko, he explained that he had nine Ferraris. I’m sure he would have had ninety if he’d had more money. 4. Therefore it’s not possible to de-link economic growth from material growth, which makes perpetual economic growth impossible without destroying ourselves. Limits to growth Meadows et al. in Limits to Growth call the combination of human resource use and waste ‘throughput’. The main barrier to the stabilisation of the global economy is that people believe that a combination of technology and innovation will increase resource efficiency – i.e. will reduce throughput for the same amount of output. This doesn’t work for two reasons. Firstly, it’s never happened before, so why should it happen in the future? Throughput (and therefore ecological damage) has been growing steadily each year for the last 200 years, because although technology improves efficiency, the reduction in throughput that could have been achieved in a stable economy is completely reversed because of economic growth. And secondly, it doesn’t work because of the Jevons paradox. Check this on Wikipedia, but basically, any technological improvement that increases efficiency in the use of a particular resource, actually increases the use of that resource, because it becomes more financially and technologically viable to use it. The classic example is James Watt’s steam engine. At the time of its invention, it was thought that it was going to reduce the use of coal, because it did the same work as the Newcomen engine with a fraction of the amount of coal. But of course, there was a massive increase in the use of coal because there was a massive increase in the number of engines and in human activity generally. There have been similar studies for other technologies and resources, but the results are the same. Khazzoom & Brookes, for example, showed that energy efficiency measures increase energy use at the macro level. This idea only works in a stable economy, not a growing one. Herman Daly developed his steadystate theories as a senior World Bank economist

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/955161e62583e7d15c19e6fe9b2e01c07d8511e1

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Citations in the corpus

Green growth or degrowth? Assessing the normative justifications for environmental sustainability and economic growth through critical social theory (2019, background): “This framework recognizes interdependencies between the natural environment, society, and the economy: the economic system is embedded in the societal system, which, in turn, is embedded in the environmental system (Daly, 1977).”
Environment, economy and society: fitting them together into sustainable development (2002, background): “In contrast, the material reality is that the economy is dependent on society and the environment (Daly, 1992; Rees, 1995; Wackernagel and Rees, 1996).”
The Shallow or the Deep Ecological Economics Movement (2013, background): “At the same time the discourse of environmental and resource economics, and its academic curricula, began to exclude radical economic critiques and earlier free thinking theories (e.g., Daly, 1977; Hirsch, 1977; Kapp, 1978; Kneese et al., 1970; Mishan, 1969; Page, 1977; Schumacher, 1973).”
Effect of economic growth on CO2 emission in developing countries: Evidence from a dynamic panel threshold model (2017, background): “The increased allocation of natural resources, accumulation of waste, and concentration of pollutants directly impacts on the degradation of environmental quality, leading to a decrease in the human living quality, despite the rising income (Daly, 1991).”
The approach of ecological economics (2005, background): “Ecological economics began with the insight that the economy must be in a materials balance between raw materials entering the process and waste leaving (Ayres and Kneese, 1969; Boulding, 1966; Daly, 1977; Faber, Manstetten and Proops, 1996; Georgescu-Roegen, 1976; Mayumi, 2001).”