Steady-State Economics

Second Edition With New Essays

Herman E. Daly

• Publisher: Island Press
• Year: 2012
• ISBN:
  9781597268721
• Topic: Business
• Subtopic: Business generale
• Index: Business

First published in 1977, this volume caused a sensation because of Daly's radical view that "enough is best." Today, his ideas are recognized as the key to sustainable development, and Steady-State Economics is universally acknowledged as the leading book on the economics of sustainability.

I

THE STEADY-STATE ECONOMY

1

AN OVERVIEW OF THE ISSUES

Society must cease to look upon “progress” as something desirable. “Eternal Progress” is a nonsensical myth. What must be implemented is not a “steadily expanding economy,” but a zero growth economy, a stable economy. Economic growth is not only unnecessary but ruinous.

Aleksandr I. Solzhenitsyn (1974)

The theme of this book is that a steady-state economy is a necessary and desirable future state of affairs and that its attainment requires quite major changes in values, as well as radical, but nonrevolutionary, institutional reforms. Once we have replaced the basic premise of “more is better” with the much sounder axiom that “enough is best,” the social and technical problems of moving to a steady state become solvable, perhaps even trivial. But unless the underlying growth paradigm and its supporting values are altered, all the technical prowess and manipulative cleverness in the world will not solve our problems and, in fact, will make them worse.

The recognition that there are problems of political economy that have no technical solution but do have a moral solution goes very much against the grain of modern economic theory. Yet economics began as a branch of moral philosophy, and the ethical content was at least as important as the analytic content up through the writings of Alfred Marshall.^a From then on, the structure of economic theory became more and more top-heavy with analysis. Layer upon layer of abstruse mathematical models were erected higher and higher above the shallow concrete foundation of fact. The behavior of a peasant selling a cow was analyzed in terms of the calculus of variations and Lagrangian multipliers. From the angelic perspective of hyperplanes cavorting in n-space, economists overlooked some critical biophysical and moral facts. The biophysical facts have asserted themselves in the form of increasing ecological scarcity: depletion, pollution, and ecological disruption. The moral facts are asserting themselves in the form of increasing existential scarcity: anomie, injustice, stress, alienation, apathy, and crime. The second chapter will analyze these omissions further in terms of the ends-means spectrum.

In the face of these now undeniable facts, modern economic thought cuts its losses in two ways: (1) It argues that the newly revealed dimension of ecological scarcity simply requires more clever technology and more growth, albeit growth of a slightly different kind. (2) It argues that existential scarcity (resulting from a shortage of whatever does in fact make people whole, well, and happy) is simply not real. This point has been well discussed by Walter Weisskopf (1971). Whatever the public chooses is assumed to be in the public interest, and there is no distinction between what people of the present age of advertising think will make them whole and happy and what would in fact make them so.

It is not easy (beyond the level of basic necessities) to make factual statements about what is good for people, but it is rash to assume that no such statements are possible—that all of ethics can be reduced to the level of personal tastes and that the community is nothing but an aggregate of isolated individuals.

The attraction of these simple, and I believe quite erroneous, assumptions is that by emasculating the concepts of ecological and existential scarcity, the orthodox economic growth paradigm covers up the weaknesses in its factual foundations and can thus continue building its analytical tower of babel up to a theoretical bliss point.

Only by returning to its moral and biophysical foundations and shoring them up, will economic thinking be able to avoid a permanent commitment to misplaced concreteness and crackpot rigor. Scientistic pretention and blind aping of the mechanistic methods of physics, even after physics has abandoned the mechanistic philosophy (Georgescu-Roegen, 1971), should be replaced by value-based thinking in the mode of classical political economy. Separation of “is” from “ought” is an elementary rule of clear thinking. But this separation belongs within the mind of the individual thinker. It should never have become the basis for division of labor between people and professions, much less an excuse for “running to hide in thickets of Algebra, while abandoning the really tough questions to journalists and politicians” (Robinson, 1962). Of all fields of study, economics is the last one that should seek to be “value-free,” lest it deserve Oscar Wilde’s remark that an economist is a man who knows the price of everything and the value of nothing.

Not all physical scientists have been flattered by the economists’ emulation. For example, Norbert Wiener observed:

The success of mathematical physics led the social scientists to be jealous of its power without quite understanding the intellectual attitudes that had contributed to this power. The use of mathematical formulae had accompanied the development of the natural sciences and become the mode in the social sciences. Just as primitive peoples adopt the Western modes of denationalized clothing and of parliamentarism out of a vague feeling that these magic rites and vestments will at once put them abreast of modern culture and technique, so the economists have developed the habit of dressing up their rather imprecise ideas in the language of the infinitesimal calculus. . . . To assign what purports to be precise values to such essentially vague quantities is neither useful nor honest, and any pretense of applying precise formulae to these loosely defined quantities is a sham and a waste of time [Wiener, 1964, p. 89].

The challenge is to develop a political economics that recognizes both ecological and existential scarcity and develops its propositions at a low to intermediate level of abstraction, understandable by the layman or average citizen, rather than dictated by a priesthood of “technically competent” obscurantists. If economic reality is actually so complex that it can only be described by complicated mathematical models that add epicycles to epicycles and externalities to externalities, then the reality should be simplified. Human institutions should not be allowed to grow beyond the human scale in size and complexity (Schumacher, 1973). Otherwise, the economic machine becomes too heavy a burden on the shoulders of the citizen, who must continually grind and regrind himself to fit the imperatives of the overall system, and who becomes ever more vulnerable to the failure of other interdependent pieces that are beyond his control and even beyond awareness (Vacca, 1974). Lack of control by the individual over institutions and technologies that not only affect his life but determine his livelihood is hardly democratic and is, in fact, an excellent training in the acceptance of totalitarianism.

That man is fully expected to make whatever adaptations are technologically required is part of the Faustian covenant that we have made with Big Science and High Technology. The guidebook to the 1933 Chicago World’s Fair on science and industry proclaimed or reaffirmed the covenant: “Science discovers, industry applies, and man adapts himself to or is molded by new things. . . . Individuals, groups, entire races of men, fall into step with Science and Industry” (quoted in Dubos, 1974–1975, p. 8). Man receives wealth but accepts the obligation to adapt to, be molded by, and fall into step with Big Science and High Technology.

But have we not outgrown the naive 1933 faith in Science as the benevolent master? Some have, but in others the faith has taken on a more sophisticated and dangerous form. A famous social scientist ends an article on “sociological aspects of genetic control” with the following words:

Deliberate control, once begun, would soon benefit science and technology, which in turn would facilitate further hereditary improvement, which again would extend science, and so on in a self-reinforcing spiral without limit. In other words, when man has conquered his own biological evolution he will have laid the basis for conquering everything else. The universe will be his, at last. [Davis, 1972, p. 379].

We might ask precisely who, finally, will be master of the universe, since when man has conquered his own biological evolution then victor and vanquished are one and the same, and the statement is self-contradictory (Lewis, 1947). What is probably meant is that some men will have conquered the biological evolution of other men. But I mention that problem only in passing. The point of Davis’ statement is that we will not only conform ourselves socially to the dictates of High Technology, but we will reprogram our very genetic inheritance in its service! In return for this total subservience we are offered progress in the form of a “self-reinforcing spiral without limit.” The principle ideological manifestation of this “progress” is the doctrine of unlimited economic growth, which requires, among other things, a lot of energy, though not so much as the energy companies think. Dr. Alvin Weinberg tells us that to get the energy:

We nuclear people have made a Faustian bargain with society. On the one hand, we offer—in the catalytic burner—an inexhaustible source of energy. . . . But the price that we demand of society for this magical energy source is both a vigilance and a longevity of our social institutions that we are quite unaccustomed to [Weinberg, 1972, p. 33].

If we believe in “self-reinforcing spirals without limit” and “magical energy sources,” consider enforced human adaptation an honor rather than a cost, and believe that the whole universe could be “ours” at last, then we surely will dismiss as a “failure of nerve” any talk about the necessity and desirability of a steady-state economy. The no-limits attitude is not often as explicit as in the expressions I have quoted, but a little scratching often reveals it to be just below the surface, as will be seen in Chapter 5, when we consider the specific views of several representative economists.

In paradoxical conflict with this Faustian view of the power of technology stands the fact that the most basic laws of science are statements of impossibility: it is impossible to create or destroy matter-energy; it is impossible to travel faster than the speed of light; it is impossible to have perpetual motion; it is impossible for an organism to live in a medium consisting only of its own waste products; it is impossible to measure anything without altering the thing measured; and so on. Mathematicians, before they invest much time in trying to solve a problem, first attempt to prove the existence or nonexistence of a solution. If it can be shown that a solution does not exist, then they save an infinite amount of futile effort by not looking for it. Perhaps the success of science is due to its refusal to attempt the impossible; this success has paradoxically fostered the popular belief that nothing is impossible. It is economically very valuable to know what is impossible, and economic theory also contains some impossibility theorems: the impossibility of deriving social preferences from individual preferences, for example, or the impossibility of having more than one equilibrium price for a given commodity in a purely competitive market.

We need to recognize another impossibility theorem in political economy: specifically, that a U.S.-style high-mass consumption, growth-dominated economy for a world of 4 billion people is impossible. Even more impossible is the prospect of an ever growing standard of per-capita consumption for an ever growing world population. The minerals in concentrated deposits in the earth’s crust, and the capacity of ecosystems to absorb large quantities or exotic qualities of waste materials and heat set a limit on the number of person-years that can be lived in the “developed” state, as that term is understood today in the United States. How the limited number of person-years of “developed” living will be apportioned among nations, among social classes, and over generations will be the dominant economic and political issue for the future (Keyfitz, 1972).

The steady-state economy respects impossibilities and does not foolishly squander resources in vain efforts to overcome them. Our present institutions allow technology to be autonomous and force man to play the accommodating role. The steady-state economy seeks to change institutions in such a way that people become autonomous and technology is not abandoned, but is demoted to its proper accommodating role. Growth economics gave technology free rein. Steady-state economics channels technical progress in the socially benign directions of small scale, decentralization, increased durability of products, and increased long-run efficiency in the use of scarce resources. Institutions for redirecting technical evolution are discussed in Chapter 3.

Probably the major disservice that experts provide in confronting the problems of mankind is dividing the problems in little pieces and parceling them out to specialists. Food problems belong to agriculture and energy problems to engineering or physics; employment and inflation belong to economics; adaptation belongs to psychologists and genetic engineers; and the “environment” is currently up for grabs by disciplinary imperialists. Although it is undeniable that each specialty has much of importance to say, it is very doubtful that the sum of all these specialized utterances will ever add up to a coherent solution, because the problems are not independent and sequential but highly interrelated and simultaneous. Someone has to look at the whole, even if it means foregoing full knowledge of all of the parts. Since “economics” as well as “ecology” come from the same Greek root (oikos), meaning “management of the household,” and since man’s household has extended to include not only nations but also the planet as a whole, economics is probably the discipline that has least justification for taking a narrow view. Let us take a minute to consider the economy, environmental quality, food, energy, and adaptation as interrelated subtopics within the framework of economics viewed as management of the household of man.

The economy, or household of mankind, consists of two things: the members of the family and their furniture and possessions, or, in purely physical terms, human bodies and physical commodities or artifacts. For the last century or more, the most salient characteristic of the human household has been its enormous quantitative growth. Population has grown at rates vastly in excess of any that have ever prevailed in the entire history of the species. This unprecedented population growth has been accompanied by, and in part made possible by, an even greater rate of increase in the production of artifacts. World population has grown at around 2 percent annually, doubling every thirty-five years, and world consumption has grown at about 4 percent annually, doubling every seventeen or eighteen years. But production and consumption are not the precise words, since man can neither produce nor destroy matter and energy but only transform them from one state to another. Man transforms raw materials into commodities and commodities into garbage. In the process of maintaining ever larger populations of both people and artifacts, the volume of raw materials transformed into commodities and ultimately into garbage has increased greatly. In the United States in 1972, about 43,000 pounds of basic nonfood raw materials were used per person to produce commodities and will eventually end up as waste (National Commission on Materials Policy, 1973, p. 2:6).

Furthermore, man cannot convert waste back into raw materials except by expending energy that inevitably degrades into waste heat, which cannot be recycled. Man can let nature recycle some wastes if he is not too impatient and refrains from overloading natural cycles. Recycling is a good idea, but it has limits provided by the second law of thermodynamics, which, in effect, says that energy cannot be recycled and that matter can only be recycled at something less than 100 percent.

Why has the human household grown so rapidly? Basically, because we made it grow. Since procreating is a more popular activity than dying, and is likely to remain so, we eagerly reduce death rates and only half-heartedly talk about reducing birth rates. Even though we have reached replacement fertility in the United States (each new family has on the average only 2.1 children), our population will continue to grow because such a large proportion of the population (the baby boom of the 1940s) is now moving into the high fertility age brackets, and it will be 50 years before these people enter the high mortality age brackets. In fact, our population would grow by about 70 million before it levels off at about 280 million around the year 2050, assuming replacement fertility is maintained (Frejka, 1973, p. 165). In a young population, the net popularity of procreating over dying is even greater than it is in an older population. At the world level, even on the optimistic assumption that the net reproductive rate (NRR) falls to unity by the year 2000, the present 4 billion will have reached 6 billion by the end of the century (Frejka, 1973, p. 55). Of course, famine may well prevent this figure from being reached. Even though many, but not all, governments have decided that further population growth is not desirable, it is likely to occur whether th...