Herman Daly, the dean of steady-state economists, died recently at the age of 84. His view that the Earth could only sustain a long-term steady-state economy—rather than the perpetually growing economy envisioned by most living today—was based on an understanding he reached the beginning of his career. As a doctoral student, Daly became convinced that the economy was a system like any other in the universe and therefore governed by physical laws.
So here are three important things I learned from reading Herman Daly and hearing him once in a lecture a long time ago:
- The economy is a subset of the natural world and as such is governed by the laws of the natural world. Daly particularly focused on the second law of thermodynamics, also known as the law of entropy, which states that we live in a universe in which the distribution of energy and matter becomes increasingly messy. This is the meaning of entropy, and this mess will eventually lead to the heat death of the universe. (Don’t worry; this scary heat death is theoretically 10100 years.) The practical significance of this realization is that human society is “depleting” the Earth’s non-renewable resources in the sense that the resources:
- Are transformed into objects or products that erode and deteriorate over time, thus unintentionally scattering non-renewable resources.
- Are intentionally dispersed (think phosphate rock fertilizers).
- Are burned (think: fossil fuels).
Once scattered or burned, they cannot be economically recovered for reuse. That is, these processes cannot be reversed (except locally by creating more entropy).
To build a civilization that could continue to function indefinitely, we humans should 1) live in a way that does not exploit renewable resources faster than they can be replenished (think trees and fish), 2) use non-renewable resources at a rate that does not exceed our ability to find renewable substitutes before these non-renewable resources become prohibitively expensive or completely inaccessible, and therefore 3) limit consumption (and therefore ultimately population) at a level that will allow this balance. This would be the steady state economy.
- Some things can grow in the steady state economy and some things can’t.. While the flow of material and energy resources might not grow beyond a point that reaches equilibrium with natural replenishment, other areas of human civilization might continue to “develop.” We could grow and deepen our relationships with others. We could do the same with our spiritual lives (if we are inclined to pursue such a thing). We could continue to grow in aesthetic understanding and artistic expression. In short, we would focus on our social and intellectual development and our well-being would not simply be equated with per capita consumption.
Some say that such a society would be stagnant. This is not the case because over time businesses would die and other businesses would replace them. Innovation would continue but would focus on technology and practices that would allow humans to do more with less resources and energy. Intellectual achievement would continue in the arts and sciences. Style in the design of buildings, clothing and manufactured goods would evolve over time with the changing vision of designers and the needs of consumers. Ideally, physical products would be fully recyclable.
- Growth has become uneconomic. Daly skillfully used the arguments of establishment economists (called neoclassical economists) against them. Growth itself creates ‘disutilities’, ie negative costs or outcomes. When the costs of growth outweigh its benefits, we must stop growing. The costs are all around us in the environment and in our very unequal distribution of wealth and prosperity.
But establishment economists refuse to recognize the downsides of perpetual growth. They thus violate their own precepts by endorsing perpetual growth without ever recognizing that the costs of growth must ultimately outweigh the benefits (and they almost certainly have already done so). This could be because most economists depend on the wealthy for the salaries they earn in the financial sector or for the endowments and research funds that support their professorships. And the rich generally get rich because of the growth dynamics and wealth inequalities inherent in our system of perpetual growth.
Perhaps Daly’s most famous text is “Economics in a Complete World”, which appeared in American Scientist in September 2005. Seventeen years later, Daly’s message is all the more relevant as nothing has been done to curb the growth juggernaut.
By developing a clear blueprint for a sustainable society, Daly showed that rigor in economic thinking is possible. Unfortunately, the policy-making institutions of our society remain largely in the grip of establishment economists who have a natural incentive to please their paymasters in the worlds of finance, politics and academia.
The result is a policy that accelerates us toward an inevitable cliff of disruption as natural systems ultimately fail to meet the needs of our growing population and consumption. The cascading hazards we see in the climate are just one manifestation of the many breakdowns occurring in the natural systems we depend on for our survival.
Humans will one day live in stable economies. Physical laws assure it. For now, it increasingly seems that human societies will arrive at such a state of equilibrium unintentionally as a result of catastrophic disruption rather than intelligent planning.
Image: An image of the Earth taken by the VIIRS instrument aboard NASA’s Earth observation research satellite from a low orbit at an altitude of approximately 826 km (2012). Author: NASA/NOAA/GSFC/Suomi NPP/VIIRS/Norman K. Via Wikimedia Commons https://commons.wikimedia.org/wiki/File:North_America_from_low_orbiting_satellite_Suomi_NPP.jpg