Friday, June 05, 2009

What a concept: a steady state economy

From the first time I heard of this idea that growth was essential to prosperity, it's had me shaking my head. I first heard it in terms of an individual company: a public company is always under pressure to grow, grow, grow. You can't just have one coffee shop, you have to have two. You can't just be a single company with a single focus, you have to conglomerate. Grow grow grow! It just seemed wrong for a company to be forced to grow when it could be doing perfectly well where it is. See the story of the Southern fisherman and the Northern industrialist.

Then I heard about this concept in terms of the economy in general.  I read how a steady state was considered the same as stagnation - like some horrible third circle of hell.  But you just do the math in your head, and you wonder where all this growth is going to take you.  Sure enough, it's not sustainable, and bubbles burst.  And I just sigh when I hear all these economists (who got us into this mess) trying to get us back to a trajectory of growth.  Can't we try something else for a change?

So, I thought I'd share with you this very insightful and entertaining article by Herman Daly, posted on the Oil Drum.  Herman Daly has fun skewering the growth economists (who I'm sure are ostracizing him as we speak) and then goes on to describe a vision of a healthy steady state economy.  You know, the old general store instead of Wal-Mart.

Here's one juicy skewer quote:
Some economists in fact think of nature as the set of extractive subsectors of the economy (forests, fisheries, mines, wells, pastures, and even agriculture….). The economy, not the ecosystem or biosphere, is seen as the whole; nature is a collection of parts. If the economy is the whole then it is not a part of any larger thing or system that might restrain its expansion. If some extractive natural subsector gets scarce we will just substitute other sectors for it and growth of the whole economy will continue, not into any restraining biospheric envelope, but into sidereal space presumably full of resource-bearing asteroids and friendly highly-evolved aliens eager to teach us how to grow forever into their territory. Sources and sinks are considered infinite.
Then Mr. Daly goes on to offer 10 proposals to help reach a healthy steady state economy.  I'm not sure I grok or even agree with all of them, but it's a starting point for a healthy dialog about this.  I recommend having a read...


Anonymous said...

This is a good post. It made me think about the GDP, and what we mean when we use the word "growth". I posted some thoughts on my own blog:

--lawrence krubner

Anonymous said...

I'm told that my family ran an inn for 700 years in what is now the Czech Republic (I've no idea if it was really 700 years, this is simply what I've been told). It lasted till the Communists took over in 1948. This was a family operation. The goal wasn't growth, at least not as a single entity (some children may have gone off and started inns elsewhere?). The goal was something like survival - to continue from generation to generation.

Nowadays, I am not sure that you could start an operation like that and have it last several centuries. Compared to the relative quiet of the preceding several thousands of years, the 20th century stands out as extraordinary. I have trouble imagining that the 21st century will be any less extraordinary.

I am sympathetic to the growth economists in one aspect - I don't think the GDP refers to a specific set of fixed dimensions of those human activities that could be defined as relevant. If the GDP referred to physical things, like tress, fish, houses, cars, steel, antibiotics, fuel, food, etc, then I'm sure we could agree that it must have limits. But my understanding is that it is primarily a mathematical construct. That it refers to physical things is merely an accident, a coincidence. Which physical things it refers to is something that changes constantly. To the extent that it is merely a mathematical construct, then surely it can increase forever.

-- lawrence krubner

lawrence krubner said...

Daly's essay has one serious mistake in it:

"(c) if the laws of thermodynamics did not hold. "

Invoking the laws of thermodynamics is meant to remind us of entropy and the destruction of using up our resources. But laws about entropy only apply to closed system. Any particular area, including a planet, can reduce entropy through the use of energy, and planet Earth receives energy from the Sun (which is probably why life existts on Earth, in the first place).