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Achieving a steady state: an interview with ecological economics pioneer Herman Daly

02/09/2013

Europe is presently in the midst of an economic growth crisis. Economists are working hard to put forward recommendations that politicians can turn into policies that will restore growth, bringing with it the promise of more jobs and greater prosperity. But growth in much of the world has been based on exploitation of resources, an unsustainable practice in a world with an expanding population and resource limitations. Eco-innovation is one response to this – eco-innovation is defined as “any form of innovation aiming at significant and demonstrable progress towards the goal of sustainable development. This can be achieved either by reducing the environmental impact or achieving a more efficient and responsible use of resources.”

One group of economists goes beyond this, however, and is calling for the establishment of a steady-state economy. According to the concept of the steady-state economy, there is a conflict between traditional economic growth and environmental protection, economic sustainability and international stability. Resources are already over-exploited, and the current growth pattern will eventually result in conflict over resources. The Arlington, Virginia (USA)-based Center for the Advancement of the Steady-State Economy (CASSE) argues that “we find ourselves in a global state of overshoot, accumulating ecological debt by depleting natural capital to keep the economy growing.”

CASSE defines the steady-state economy as: “an economy with constant stocks of people and artifacts, maintained at some desired, sufficient levels by low rates of maintenance ‘throughput’, that is, by the lowest feasible flows of matter and energy from the first stage of production to the last stage of consumption.” This definition is contained in Steady-State Economics (1991) by Herman Daly, a leading figure in the field of ecological economics. He is credited with getting the World Bank to think about sustainable development in the early 1990s (he was formerly the bank's senior environmental economist), and he co-founded the International Society of Ecological Economics.

Professor Daly, who is now emeritus professor at the University of Maryland’s School of Public Affairs and an executive board member of CASSE, gave his view on the steady-state economy as an eco-innovation:

Is the idea of the steady-state economy itself an eco-innovation?

Herman Daly: Yes, or more accurately it is the economic policy context within which eco-innovations will be profitable. Eco-innovations economise on throughput – the entropic flow from nature, beginning with depletion and ending with pollution. This fundamental cost is either underestimated or not counted at all by the market, which consequently selects against innovations that save what is not treated as scarce. Limiting throughput to ecologically safe levels, either by cap-auction-trade systems, or by ecological tax reform (shifting the tax base away from value added and on to resource throughput), will raise the price of natural resources and natural services of pollution absorption. In addition to providing a more efficient and just source of public revenue through taxes or auction receipts, this will give an incentive to eco-innovations that economise on these previously uncounted costs (uncollected rents). Frugality (reducing quantity of resources used) leads to efficiency as an adaptation to newly recognised scarcity. Currently we pursue efficiency as an alternative to frugality, an escape from scarcity, rather than as an adaptation to it. This results in the “Jevons paradox” – that improvements in efficiency in use of a resource often increase the total amount of the resource used – the throughput – which is just what must be reduced to an environmentally sustainable scale. The steady-state economy limits growth in throughput in order to stimulate development in technical efficiency of resource use, and keep the scale of total resource throughput within ecological limits.

Are we inevitably heading to a steady-state economy? Will it be forced on us by resource constraints?

Herman Daly: Yes, I think we are, but will it be a steady-state at a smaller than present level of population and per capita resource use that is still sufficient for a good life and sustainable for a long time, or will it be a post crash-and-burn steady state, in which the destroyed carrying capacity of the planet can support only a small population at a meagre quality of life? This is the big question – but it is totally ignored by mainstream growth economists who see our future as more growth forever. More growth forever avoids having to share the limited capacity of the earth with the poor, with the future, or with other species. Growth economics is not science, it is an idolatrous religion. It is not science because it flies in the face of the first and second laws of thermodynamics and ignores ecology. It is idolatry because it conceives mankind as all-powerful creator rather than as creature subject to limits.

How can decision-makers, including at regional and local levels, take steps towards a steady-state economy? Is it mainly about convincing the wider public of the concept, or are there practical steps that can be taken already?

Herman Daly: My concern has been mainly with convincing the wider public (and even economists!) of the concept, but local actions and concrete steps may be more effective. Movements toward local self sufficiency, community based agriculture, local banking, alternative currencies, community recycling, consumer and producer cooperatives, local tax structures, etc., are important. But for these movements to prosper they need protection from the forces of globalisation, corporate monopolisation and enclosure of the remaining commons. Collective political action, guided by the vision of a steady-state economy going back to the classical economists, seems necessary to me, however politically unlikely at the present.

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