Steady-State Economy

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Steady-state economy

Steady-state economics is a branch of economic thinking which applies the perspectives of steady-state systems developed in thermodynamic physics to economic analysis. This direction in economics is largely associated with the work of Herman Daly, who has written the classic work in the field, Steady-State Economics (1977). While its impact has been relatively minor within the discipline of economics itself, the concept of steady-state economics has gathered a significant audience among life scientists and within the larger environmental movement.

Steady-state economics is closely related to sustainable development , and many consider it as but one component of the larger issue of sustainability. The constraints imposed by the laws of physics determine, in Daly's terminology, the "ultimate means" or the "ultimate supply limit" beyond which no measure of human development can make better use of resources and energy. One of the fundamental criticisms of traditional economic thinking made by steady-state economics is founded on this concept of absolute limits: Standard economics implicitly assumes that it is always possible to cope with population growth and resource shortages by technical advances and the substitution of one resource for another. This is an assumption which steady-state economics views as not only wrong, but dangerously misleading.

For Daly, the greater danger of this perspective is that it is ultimately a form of hubris, of acting as though we can surpass the limitations of the physical world and attain the freedom of the divine. This is the classic sin of pride, and Daly sees its corrective as the corresponding virtue of humility. Science, he claims, "sees man as a potentially infallible creator whose hope lies in his marvelous scientific creativity." He contrasts this with the view of steady-state economics, which "conceives of man as a fallen creature whose hope lies in the benevolence of his Creator not in the excellence of his own creations." In Daly's view, it is only when we are humble that we are able to see human life and the entire evolutionary process in which it is embedded as a gift bestowed upon us by God, not something we have made. For Daly, this gift of the evolution of life is a minimum definition of the "Ultimate End," whose preservation and further development must be the goal of all our actions. The "Ultimate End" is fostering the continuance of the evolutionary process, and the "ultimate means" is determined by the laws of physics; they both define boundaries only within which is it possible to have a steady-state economy and a sustainable society.

Daly offers three large-scale social institutions for the United States to help make a steady-state economy a reality. The first of these is a socially determined limit on the national population, with licenses issued to each person allocating exactly the number of births required to maintain zero population growth (approximately 2.1 births per female). These licenses could be purchased or otherwise transferred between individuals, so that those wanting no children could transfer their licenses to those wishing more than their allotment. The second institution would stabilize the stock of human artifacts and would maintain the resources needed to maintain and replace this stock at levels which do not exceed the physical limits of the environment . A set of marketable quotas for each resource would be the primary mechanism to attain this goal. The third institution would be a set of minimum and maximum limits on personal income and a maximum cap on personal wealth. The first two institutions are designed to structure population and economic production within the fundamental thermodynamic limits or "ultimate means." The third is the extension into human society of the moral boundaries set by the goal of preserving and fostering lifein this case to ensure that all people in the steady-state economy have access to society's resources.

See also Bioregionalism; Carrying capacity; Deep ecology; Family planning; Growth limiting factors; Sustainable agriculture

[Eugene R. Wahl ]



Boulding, K. "The Economics of the Coming Spaceship Earth." In Environmental Quality in a Growing Economy, edited by H. Jarrett. Baltimore: Johns Hopkins University Press, 1966.

Daly, H. Steady-State Economics. 2nd ed. Washington, DC: Island Press, 1991.