Steady-State Economics, by Herman E. Daly
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Steady-State Economics: Second Edition with New Essays, by Herman E. Daly, Island Press, Washington, DC, 1991.
These comments are based on notes composed by Darrell Huwe.
The Problem
- Economic Growth
- Population Growth
- Food Supply
- Energy Supply
Stocks and Flows
- The distinction between stocks and flows is the difference between accumulated wealth and current income.
- Economic activity uses up the existing (often large, but) always finite stocks of basic raw materials (ores, good soil, etc.).
- High levels of economic activity use those resources faster.
- High levels of economic efficiency use those resources more slowly to produce the same output.
Steady-State Economy
- Constant level of stocks maintained by minimal throughput of flows.
Ends and Means
- Classical economists have moral blinders, ignoring ultimate ends and ultimate means.
Ends and means can be viewed in a quasi-continuum (re-drawn from Daly's Fig. 1, page 19):
Discipline |
Topic |
| Religion | Ultimate Ends
(good and evil) |
| Ethics | |
| | Intermediate Ends
(health, comfort, education, etc.) |
| Economics | |
| | Intermediate Means
(artifacts, labor power) |
| Technology | |
| Physics | Ultimate Means
(low-entropy matter-energy) |
Limits
- Ultimate means regulated by the laws of thermodynamics.
Most recent growth has been achieved by drawdown of geological capital.
Ecosystem and Economy
- Daly analyzes the relationship between the ecosystem and the economy in terms of stocks and flows. In particular,
- Solar energy comes into the ecosystem and heat leaves it, on the physical side.
- Depletion and production constitute a flow from the ecosystem to the economy, building up economic stocks.
- Pollution and depreciation constitute a flow from the economy to the ecosystem, reducing economic stocks.
- Both the ecosystem and the economy provide useful services.
Scarcity
Relative Scarcity
- In a free-market society, controlled by supply and demand. Invent money to implement control.
Absolute Scarcity
- Ignored by traditional economics. Assumed out of existence. Money is not the same as wealth.
Institutions of Steady-State Economics
1. Distribution
- Set limits on ownership of private property. "Tax the rich."
2. Population
- Issue licenses for babies, which can be traded in the money economy.
3. Depletion
- Set quotas for transformation of non-renewable resources. Can be auctioned off and traded.
Fallacies
- [See page 98 and following.]
- Growth helps nation more easily do environmental cleanup.
- "Trickle down" - growth needed in order to help the poor.
- There is no limit to exosomatic capital.
- Exponential growth can continue if technology can keep up.
- Reproducible capital can be freely substituted for land and resources.
- Resources small fraction of GNP [underpriced, capital and labor together exploit resources].
- Market adjusts for conservation [but not for exponential growth].
- Sociological need for excess young folks.
- Technology will always fix any problems [and never create any].
- Resource efficiency can grow indefinitely.
- Service sector no drain on resources.
- Every worker a capitalist.
- More is better.
- Misallocation will be fixed by the market.
- We are no longer dependent on environment.
- Zero growth means depression.
Energy Considerations
- In Chapter 6, Daly discusses energy and growth.
- He contends that it is better to slow down the economy than to seek energy sources.
- He contends that nuclear energy is not the answer.
Developing Countries
- In Chapter 7, Daly discusses the implications of steady-state economics for developing countries. He begins by commenting that it is, of course, "absolutely a waste of time and morally backward to preach steady-state doctrines to underdeveloped countries before the overdeveloped countries have taken any measure to reduce either their own population growth or the growth of their per-capita resource consumption."
- Much wiser to control population than to promote growth.
- Impossible to achieve United States' standard of living.
- The developed world should consume less.
Cycles of Production and Consumption
- In Chapter 9, Daly presents the steady-state economy as an alternative to "growthmania."
- Standard economics considers ever-growing cycles of production and consumption, but does not consider the role of the supporting ecosystem. Such a view can encourage an economy that can ultimately strain the surrounding environment.
- Steady-state economics considers cycles of production and consumption that take the surrounding ecosystem into account and try to achieve a state of equilibrium with it.
Integrating Economics and Ecology
- In Chapter 11, Daly claims that there are three alternate strategies for integrating economics and ecology. All three start with the notion of the economy as a subsystem of the entire planetary ecology.
Economic Imperialism
- In economic imperialism, the economy is expanded to encompass the entire ecology, so that all energy and matter flows are regulated through price mechanisms.
The ecosystem takes in solar energy and releases waste heat, while the economy generates material and releases heat into the ecosystem.
Ecological Reductionism
- In ecological reductionism, the economic subsystem is reduced to a minimum, the surrounding ecology is viewed as central.
The ecosystem takes in solar energy and releases waste heat, while the economy takes in material and energy from the ecosystem.
Steady-State Subsystem
- Viewing the two previous approaches as thesis and antithesis, this approach is the synthesis: it insists on "maintaining a boundary between the ecology and the economic subsystem and on
- drawing it in the right place, and
- putting constraints on the physical flows crossing that boundary in both directions."
The ecosystem takes in solar energy and releases waste heat, while the economy takes in material and energy from the ecosystem and generates material and releases heat into the ecosystem.
Dick Piccard revised this file (http://oak.cats.ohiou.edu/~piccard/entropy/daly.html) on January 21, 2005.
Please E-Mail comments or suggestions to "piccard@ohio.edu".