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The Poison Beer of GDP

 

By Herman Daly, CASSE Economist Emeritus – October 3, 2018

Disaggregating reported GDP growth to reveal the differences in growth by income class, as per the Schumer-Heinrich Bill, is a good idea. After all, telling us, say, that average income grew by 4% is not nearly as informative as telling us that the richest ten percent received the entire growth increment while the bottom ten percent suffered a decline in income. Average income and growth rates are like the famous recipe for “50% rabbit stew”—one rabbit, one horse. We already know the extreme inequality in the distribution of wealth, of income, and of the growth increment, even without the Schumer-Heinrich Bill. However, if that information is incorporated every time new GDP figures are reported it will be much harder to ignore. Of course, that is exactly why the bill will be opposed by those who want us to believe that we are all getting 4% better off every year or that “a rising tide lifts all boats”, when in fact a rising tide in one place means an ebbing tide somewhere else.

Once we correct GDP for ignoring distribution, then perhaps we can go on to correct other defects, such as the fact that it adds defensive expenditures made to protect ourselves from the unwanted costs of growth (pollution, depletion, congestion, crime, etc.) while failing to subtract as a cost the damages that made the defensive expenditures necessary in the first place. For example, damages caused by an oil spill are not deducted, but expenditures to clean up the spill are added; depletion of soil fertility is not deducted, but expenditure on fertilizer is added, etc.

In addition, the very concept of income in economics is defined as the maximum amount that a community can consume this year and still produce and consume the same amount again next year, and the years after. The income from a fishery is its sustainable catch; the income from a forest is its sustainable cut. Consuming more than that is capital consumption, not income. Yet, as far as GDP is concerned, we can cut the entire forest and catch every fish this year and count it all as income—there is no rule against counting consumption of natural capital as income in GDP accounting.

If our main goal is to increase GDP rapidly, then we will not want to slow it down for concern about equity of distribution, or by correcting the asymmetric accounting of defensive expenditures, or by correcting the fundamental economic error of counting capital drawdown as income.  Maximizing GDP growth will lead to less concern for distributional equity, more depletion and pollution, and more consumption of natural capital.

I am reminded of a story told by G. K. Chesterton. A pub was serving poison beer and customers were dying. Alert citizens petitioned the local magistrate to close down the offending establishment. The cautious magistrate said, “You have made a convincing case against the pub. But before we  can do something so drastic as closing it down, you must consider the question of what you propose to put in its place…”.  Contrary to the magistrate you don’t need to put anything in the pub’s place. Nor is it really necessary to put anything in the place of the poison beer of GDP. As it happens, however, there are in fact better things to put in its place, such as the Index of Sustainable Economic Welfare, National Welfare Index, and Genuine Progress Indicator.


Herman DalyHerman Daly is an emeritus professor at the University of Maryland School of Public Affairs and a member of the CASSE executive board. He is co-founder and associate editor of the journal Ecological Economics, and he was a senior economist with the World Bank from 1988 to 1994. His interests in economic development, population, resources and environment have resulted in more than 100 articles in professional journals and anthologies, as well as numerous books.


What is Wrong with a Zero Interest Rate?

by Herman Daly

Herman DalyThe stock market took a dip, so the Fed will likely continue to keep the interest rate at zero, in conformity with its goal of supporting asset prices by quantitative easing. What is wrong with a zero interest rate? Doesn’t it boost investment, growth, and employment?

There are many things wrong with a zero interest rate. Remember that the interest rate is a price paid to savers by borrowing investors. At a zero price, savers will save less and receive less return on past savings. Savers and pensioners are penalized. At a near zero price for borrowed funds, investors are being subsidized and will invest in just about anything, leading to many poor investments and negative returns, furthering the economy’s already advanced transition from economic to uneconomic growth. Zero interest promotes an infinite demand for savings with zero new supply. But the “supply” is provided artificially by the Fed printing money. The infinite demand would be checked by the rising costs of natural resources and environmental damage if those costs were internalized, but they are not. Yet the environmental costs are real and do not disappear just because they are not counted. With free money and uncounted environmental costs, why not invest heavily in fracking? A very unequal distribution of income does check demand, at least for non-luxury goods. Rich people have an increasing surplus of money to invest, which also helps hold down the interest rate. Yes, mortgage rates fall, and that benefits citizens as home buyers, but they lose more in terms of their retirement accounts. And there is still a significant spread between the zero rate paid to savers and the positive rates charged on credit card and other debt, so the banks are doing quite well.

Also think for a moment about the calculation of present value in finance—a perpetual stream of future income divided by the interest rate gives its capitalized value. If the interest rate is zero, then the capitalized present value of any positive perpetual income stream becomes infinite. To put it another way, a zero interest rate is equivalent to saying that a hypothetical stream of income into the infinite future is all totally available today. Supply of financial capital in terms of its present value is infinite. But financial capital is supposed to be a measure of real capital, which is not infinite. Furthermore, the interest rate, to a significant degree, reflects the risk of loss. With infinite capital it matters little if you lose some, so risk too is uncounted.

U.S. Treasury.Elfboy

U.S. Department of the Treasury, Washington, D.C. Photo Credit: Elfboy

Zero interest rates encourage aggregate growth in scale of the macro-economy to ecologically unsustainable, as well as uneconomic, levels. Zero interest rates also neglect risk of loss, while encouraging microeconomic misallocation to stupid projects. At the same time, it redistributes income inequitably. Does all this make you think that something might be screwy with the policy of zero interest rates? Economists pride themselves on their knowledge of advanced mathematics, but they don’t seem to mind the fact that their policies imply dividing by zero!

Granted that with severe unemployment it is worthwhile, as Keynes said, to hire people just to dig holes and fill them up again in order to increase spending. However, this would better be done by the Treasury paying the hole diggers with new Treasury money than by the Fed doing it by distorting the scale, distribution, and resource allocation of the whole economy with zero interest rates in order to create new bank money. Also, the money created by the Treasury costs no interest to the public, while the money created by the Fed costs us the positive rate charged to borrowers, not the zero rate paid to depositors. Money is a public utility like a road. Should private banks be allowed to set up a tollbooth and charge us for using public roads? By the way, the Fed is owned by its member private banks.

How does the Fed keep the interest rate at zero? By printing money—quantitative easing, so called. Some hyper-Keynesians want a negative nominal interest rate (we already have a negative real rate when corrected for inflation) because we still don’t have full employment even at a zero interest rate. But this is so crazy that it requires a separate discussion of its own.

Why has this huge monetary expansion not led to more inflation? For one, because the dollar is a reserve currency and other nations hold large dollar assets. Also, other major currencies, following the same expansionary policy, have been depreciating relative to the dollar. This will not likely continue. Furthermore, there really has been inflation, but of a hidden kind. Instead of stimulating new production and employment, the new money has increased the demand for existing assets such as stocks, houses, art, etc., providing little employment and leading to speculative bubbles. The Consumer Price Index (CPI), the official measure of inflation, does not include capital assets. And concurrent cheap-labor policies—off-shoring of production and tolerance of illegal immigration—depress wages, holding inflation in check. In addition, the externalization of increasing environmental costs keeps prices lower than they should be. Further, as any consumer can testify, the quantity per package of food is getting less, and the quality of service of airlines, internet providers, public utilities, etc. is deteriorating. Our leading newspaper, the New York Times, now repeats many of the same articles over and over for weeks at a time. Getting less quantity or quality or more repetition for the same price is equivalent to a price increase—hidden inflation. So the claim that quantitative easing has not yet led to inflation is at best only half true—it has certainly led to inflationary substitutes not measured by the CPI. Some official versions of the CPI even exclude such basics as energy, food, and housing (too “volatile” is the excuse). Do you ever feel that you are being lied to?

It is a bad idea to manipulate the interest rate as a policy variable—it has too many side effects cutting in too many different directions, especially in a fractional reserve monetary system. Better to control the money supply directly by moving to a full reserve banking system. We should abolish the Fed, let the Treasury directly control the money supply, constrained by avoiding inflation, not by a budget. An entity that can create money does not face a budget constraint, and has no need to borrow. But it does have a price-index constraint, and must be disciplined by avoidance of inflation (or deflation). As long as the public wants to hold more money, the Treasury can keep creating and spending it. When the public wants to hold more real goods and less money, they will exchange money for goods driving the price index up, which is the signal to the Treasury to stop issuing money, and if necessary to withdraw some. Money, in a full reserve banking system, becomes non interest-bearing government debt rather than interest-bearing private debt. Seigniorage (profit from creating token money at negligible cost and receiving its face value in exchange) will go entirely to the government, not largely to private banks. Also, banks no longer have the extortionary power to crash the entire payments system that fractional reserves gives them. The interest rate, like other prices, can take care of itself, determined by supply and demand. The policy focus should be to manage the money supply, constrained by a constant price index. In effect, the real value of the dollar is backed by all the commodities in the price index, rather than gold, or the “full faith and credit of the US government.” (See Nationalize Money, Not Banks)

Policies of this general kind, but elaborated on in much more detail, are currently suggested by the British NGO known as Positive Money. They are reviving and updating the sound monetary economics of Frederick Soddy, Irving Fisher, Frank Knight, and other leading economists of the 1920s. Fractional reserve banking supports the whole pyramid structure of Ponzi finance, and we badly need to move toward a full reserve banking system to escape instability.

 

Would the Steady-State Economy Be a Miracle?

By Herman Daly

Herman DalyMany people think that advocating a steady-state economy is like wishing for a miracle. I understand their reasoning and take their point—in the present era of growthism it does seem rather like advocating a miracle. But that raises the question: exactly what is a miracle? And how many other miracles are we wishing for these days? Of course science, by definition of its method, rules out the existence of miracles, if by miracle we mean either something not explainable physically in terms of efficient causation, or else overwhelmingly improbable. Consequently, if a miracle did exist science could not see it. Looking for a miracle with science is like looking for darkness in the narrow beam of a flashlight.

Consciousness, reason, and good and evil are undeniably real, yet we have no convincing explanation for them in terms of efficient causation or biophysical evolution. And the origin of first life (as opposed to its subsequent evolution into different forms) also qualifies as a miracle by the above definition. Sir Francis Crick, co-discoverer of DNA, thinks the origin of life on earth is so physically improbable (miraculous) that it must have arrived here from space—”directed panspermia” is the elegant name for this miraculous sidereal ejaculation. Science considers the whole amazing experience of life on earth as just a cosmic accident.

Given that life on earth is, according to science, eventually going to end, why make extraordinary efforts to prolong it, especially if, as the modern intelligentsia assures us, the universe and all life are just temporary accidents? We, as non-miraculous random events, can have no objective idea of what a good life is. Therefore we cannot know how much per capita consumption is sufficient for a good life. Instead of a steady-state economy the default economic rule of scientific materialism seems to be, “more and more (especially for me) while things last.” Yes, I know that most scientific materialists are good people, but I am suggesting that their goodness must have origins other than their professed materialism.

For some of us materialism is just a methodology, not an ultimate worldview in which divine purpose might replace cosmic random. For Christians, for example, hope in the promise of New Creation (Rom. 8; 1 Cor.15) substitutes for despair over the ultimate impossibility of preserving this Creation forever, as well as over our repeated failures to protect it while it lasts. Like this Creation, New Creation would be a miracle—a generalized resurrection of this mortal Creation.It is a grace-based hope that flies in the face of the hard facts of evil, entropy, and finitude. It is a religious belief that death, decay, and oblivion are not the last words, and therefore it is classed as superstition in the modern secular academy, along with other religions.

Belief that the end of the world will occur soon, with lots of life-support capacity left unused (wasted), is a tenet both of some scientific catastrophists, as well as some religious fundamentalists, who consequently consider themselves exempt from the responsibility of Creation stewardship. Why sacrifice for a non-existent beneficiary, they logically ask? However, Pope Francis, for one, in his Laudato Si strongly affirms the value of this Creation, however transitory, and in this regard he speaks for most Christians and many other religious people, as well as for some thoughtful atheists.

Most scientists (and some theologians) will not be happy with talk about miracles, or with hope in New Creation. They fear that such hope will undercut efforts to prolong the present Creation, which they believe is all there is or ever will be. Yet when faced with the ultimate heat death of the universe, plus the increasing likelihood of self-destruction well before then, and with the meaninglessness implicit (and increasingly explicit) in their materialist cosmology, they sometimes flinch. They look for optimism (if not hope) somewhere within their materialism. They invent the hypothesis of infinitely many (unobservable) universes in which life may outlive our universe.

Monkey-typingThey were led to this extraordinary idea in order to escape the implications of the anthropic principle—which argues that for life to have come about by chance in our single universe would require far too many just-so coincidences among the magnitudes of basic physical constants. To preserve the idea of chance as reasonable cause, and thereby escape any notion of Creator or Telos, they argue that although these coincidences are indeed miraculously improbable in a single universe, they would surely happen if there were infinitely many universes. And of course our universe is obviously the one in which the improbable events all happened. If you don’t believe that Shakespeare wrote Hamlet, you can claim that infinitely many monkeys pecking away at infinitely many typewriters had to hit upon it someday. That such a deification of random would take the meaning and pleasure out of reading Hamlet—or studying anything in “creation” at all—is a carefully repressed thought.

The idea of infinitely many universes, or monkeys for that matter, is speculative—at least as speculative as the idea of New Creation. The only evidence that could be offered to support hope for the future miracle of New Creation would be the occurrence of a similar miracle in the past, namely the present Creation. Science understandably tries to account for this Creation, as far as reasonable, in its own materialistic terms, and of course from the beginning rejects “miracle” or God as an explanatory category. I am not objecting to that self-imposed, defining limitation of science. I am just saying that New Creation is not a scientific concept rooted in efficient and material causation. It is a religious hope rooted in the idea of final causation and ultimate purpose. As such it is neither contradictory to nor dependent upon science.

Whether ad hoc postulation of infinitely many unobservable universes violates the self-imposed limitation of science, and belongs more to the category of miracle, I will leave to the reader’s judgment. But the working hypothesis of scientific materialism, however fruitful it has been, should not be sanctified as the Ultimate Metaphysics of Chance. Nor does adding Darwinian natural selection to Mendelian random mutation alter the picture, since the selecting criteria of environmental conditions (other organisms and geophysical surroundings) are also considered to be a product of chance. Mutations provide random change in the genetic menu from which natural selection picks according to the survival value determined by a randomly changing environment.

Such a Metaphysics of Chance precludes explanation of some basic facts, pushing them into the category of miracle: first, that there is something rather than nothing; second, the just-right physical “coincidences” recognized in the anthropic principle; third, the “spontaneous generation” of first life from inanimate matter (which has apparently never happened again); fourth, the creation of an incredible amount of specified information in the genome of all the irreducibly complex living creatures that evolved from the relatively simple information in the first living thing (in spite of the fact that random change destroys rather than creates information); fifth, the emergence of self-consciousness and rational thought itself (if my thoughts are ultimately the product of random, why believe any of them, including this one?); sixth, the amazing correspondence between abstract mathematical thought and empirical natural order; and sixth, the innate human perception of right and wrong, of good and bad, which would be meaningless in a purely material world. Explaining these facts “by chance” strains credulity at least as much as “by miracle.”

Metaphysical humility remains a virtue for both science and religion. The longevity of a steady-state economy is a metaphysically humble goal appropriate for limited creatures in the face of ignorance and mystery. Christianity and science both recognize the fundamental finitude and frailties of this Creation. Christianity offers ultimate hope in New Creation; science necessarily remains mute about that. Scientism, however, seeing no limits to this Creation, offers, instead of hope, the campaigning optimism of, for example, the Coming Singularity of the digital “new creation” with immortal silicon-based consciousness, or IBM’s new creation of “building a smarter planet,” or NASA’s new creation of colonizing Mars.

A moment’s reflection, however, shows that a spaceship, and a space colony, as well as a population of infinitely long-lived silicon “people,” must all operate as the strictest of steady-state economies. If we cannot manage a steady-state economy on the large and forgiving earth out of which we evolved and to which we are evolutionarily well adapted, then how likely are we to manage it on a barren rock under alien conditions, including extreme cold and intense radiation? Yet large amounts of taxpayer’s money is wasted in pursuit of the unnecessary miracle of colonizing Mars, while nothing is invested in the necessary and smaller miracle of attaining a steady-state economy on our finite earth. The pseudo-religion of scientism leads those who reject a steady-state economy on earth as a “miracle” to imagine even bigger miracles to escape it.

 


Notes:

1. For more on the theology of New Creation, see, Jürgen Moltmann, Ethics of Hope. Minneapolis, MN: Fortress Press. 2012; John Polkinghorne, The God of Hope and the End of the World. New Haven, CT: Yale University Press. 2003; and N. T. Wright, Surprised by Hope. New York: Harper Collins. 2008.

 

Thoughts on Pope Francis’ Laudato Si

by Herman Daly

Herman DalyAs a Protestant Christian my devotion to the Catholic Church has been rather minimal, based largely on respect for early church history, and for love of an aunt who was a nun. In recent times the Catholic Church’s opposition to birth control, plus the pedophile and cover-up scandals, further alienated me. Like many others I first viewed Pope Francis as perhaps a breath of fresh air, but little more. After reading his encyclical on environment and justice, dare I hope that what I considered merely “fresh air” could actually be the wind of Pentecost filling the Church anew with the Spirit? Maybe. At a minimum he has given us a more truthful, informed, and courageous analysis of the environmental and moral crisis than have our secular political leaders.

True, the important question of population was conspicuous by its near absence. In an earlier offhand remark, however, Francis said that Catholics don’t need to breed “like rabbits,” and pointed to the Church’s doctrine of responsible parenthood. Perhaps he will follow up on that in a future encyclical. In any case, most lay Catholics have for some time stopped listening to Popes on contraception. The popular attitude is expressed in a cartoon showing an Italian mamma wagging her finger at the Pontiff and saying, You no playa da game; you no maka da rules.” Discussing population would not have changed realities, and would have aroused official opposition and distracted attention from the major points of the encyclical. So I will follow Francis’ politic example and put the population question aside, but with a reference to historian John T. Noonan, Jr.’s classic book, Contraception,1 which sorts out the history of doctrine on this issue.

The big ideas of the encyclical are Creation care and justice, and the failure of our technocratic growth economy to provide either justice or care for Creation. Also discussed was the integration of science and religion as necessary, though different, avenues to truth. And yes, the Pope supports the scientific consensus on the reality of climate change, but, media monomania to the contrary, the encyclical is about far more than that.2

Pope Francis.aletela.org

Pope Francis’ environmental encyclical “Laudato Si, On Care for our Common Home” was released on June 18. Photo credit: Aletela.org

Francis’ voice is of course not the first to come from Christians in defense of Creation. In addition to his ancient namesake from Assisi, Francis also recognized Ecumenical Patriarch Bartholomew of the Eastern Orthodox Church, who has for two decades now been organizing conferences and speaking out in defense of rivers and oceans, including the Black Sea. The Orthodox Church lost a generation of believers to Communistic atheism, but is gaining back many young people attracted to the theology of Creation and the actions it inspires. Liberal mainline Protestant Christians, and more recently, conservative Evangelicals, have also found their ecological conscience. So Francis’ encyclical would seem to be a capstone that unifies the main divisions of Christianity on at least the fundamental recognition that we have a shamefully neglected duty to care for the Earth out of which we evolved, and to share the Earth’s life support more equitably with each other, with the future, and with other creatures. Many atheists also agree, while claiming that their agreement owes nothing to Judeo-Christian tradition. That is historically questionable, but their support is welcome nonetheless.

This theology of Creation should not be confused with the evolution-denying, anti-science views of some Christian biblical literalists (confusingly called “Creationists” rather than “literalists”). Mankind’s duty to care for Creation, through which humans have evolved to reflect at least the faint image of their Creator, conflicts headlong with the current dominant idolatry of growthism and technological Gnosticism. The idea of duty to care for Creation also conflicts with the materialist determinism of neo-Darwinist fundamentalists who see “Creation” as the random result of multiplying infinitesimal probabilities by an infinite number of trials. The policy implication of determinism (even if stochastic) is that purposeful policy is illusory, both practically and morally. Creation care is also incompatible with the big lie that sharing the Earth’s limited resources is unnecessary because economic growth will make us all rich. Francis calls this magical thinking. He skates fairly close to the idea of steady-state economics, of qualitative development without quantitative growth in scale, although this concept is not specifically considered. Consider his paragraph 193:

In any event, if in some cases sustainable development were to involve new forms of growth, then in other cases, given the insatiable and irresponsible growth produced over many decades, we need also to think of containing growth by setting some reasonable limits and even retracing our steps before it is too late. We know how unsustainable is the behaviour of those who constantly consume and destroy, while others are not yet able to live in a way worthy of their human dignity. That is why the time has come to accept decreased growth in some parts of the world, in order to provide resources for other places to experience healthy growth.

In the last sentence “decreased growth” seems an inexact English translation from the Spanish version “decrecimiento,” or the Italian version “decrescita” (likely the original languages of the document), which should be translated as “degrowth” or negative growth, which is of course stronger than “decreased growth.”3

Laudato Si is already receiving both strong support and resistance. The resistance testifies to the radical nature of Francis’ renewal of the basic doctrine of the Earth and cosmos as God’s Creation. Pope Francis will be known by the enemies this encyclical makes for him, and these enemies may well be his strength. So far in the US they are not an impressive lot: the Heartland Institute, Jeb Bush, Senator James Inhofe, Rush Limbaugh, Rick Santorum, and others. Unfortunately they represent billions in special-interest money, and have a big corporate media megaphone. The encyclical calls out the opponents and forces them to defend themselves. To give them the benefit of the doubt, they may really think that Francis is rendering to God what actually belongs to Caesar’s oligarchy. But neither Caesar, nor the market, nor technology created us, or the earth that sustains us. Thanks to Francis for making that very clear when so many are denying it, either explicitly or implicitly.

 


Notes:

1. John T. Noonan, Jr., Contraception: A History of its Treatment by the Catholic Theologians and Canonists, Belknap Press, 1986. Noonan demonstrates the lack of a biblical basis for opposition to contraception, as well as the origins of church doctrine in secular Roman law, which was absorbed into canon law. The ancient Roman meaning of “proletariat” was “the lowest class, poor and exempt from taxes, and useful to the republic mainly for the procreation of children.” Clearly contraception was not indicated for them, although tolerated for patricians. This literal meaning of proletariat as the prolific class was lost when Marx redefined the word to mean “non owners of the means of production.” But the Malthusian connection with overpopulation and cheap labor has remained real, even if downplayed by Marxists as well as Catholics.

2. The Pope’s condemnation of carbon trading reflects a common misunderstanding of the cap-auction-trade policy, unfortunately shared by some leading climate scientists. See Joseph Heath, “Pope Francis’ Climate Error,” New York Times, June 19, 2015.

3. Thanks to Joan Martinez-Alier for pointing this out.

 

Seismic Political Shifts Reveal Desire for Serious Change

by James Magnus-Johnston

If you demonstrate to people that the NDP [New Democratic Party] can win in Alberta, suddenly anything seems possible. —Paul Fairie, University of Calgary political scientist

 

James Magnus-JohnstonOn the problematic political spectrum, neither the right nor the left have become wholesale champions of the steady state economy. Then again, embracing something perceived as ‘new’ has never been the strong suit of the politician. It takes years of ideological evolution among the grassroots before seemingly new and different ideas become politically palatable. Seismic political shifts like the one in Alberta suggest that big ideological evolutions are underway in the unlikeliest of places, and that steady state solutions may not be far behind.

The Canadian province of Alberta—which includes Canada’s oil patch—revealed its desire for serious change in its election of an NDP government last week. While the social democratic NDP doesn’t have an explicitly ‘green’ agenda, some policy shifts acknowledge the limits to growth—growth in the oil patch, growth in debt, growth in inequality, growth in carbon emissions, and growth in overall environmental costs. Growing the oil patch at all costs has left the province vulnerable to swings in the petroleum economy, and it isn’t building a stable economy for generations to come.

Alberta’s newly-elected NDP premier, Rachel Notley. Photo Credit: Dave Cournoyer via Flickr, Creative Commons

Alberta’s newly-elected NDP premier, Rachel Notley. Photo Credit: Dave Cournoyer via Flickr, Creative Commons

The political shift represents a strong movement away from a half-century of Alberta’s Conservative ‘conventional thinking,’ including relaxed regulations for the oil and gas industry as well as an export-first policy designed for economic growth as if there were truly no tomorrow. Time will tell whether or not Premier Notley will introduce measures to supplant carbon-intensive growth with a renewable steady state, but there are signs of movement in this direction.

In March, as opposition leader, Notley introduced a motion calling on the government of Alberta to phase out the use of coal for electric power generation in Alberta. Alberta’s oil sector produces almost as many GHG emissions as do the mining and extraction of oil from the oilsands.

This week, one of the largest oil and gas companies in Canada called upon Premier Notley to introduce a carbon tax, a measure which sits at number two on Herman Daly’s top ten list of steady state policies. The call counts as either a brilliant coordinated manoeuvre on the part of the NDP and the oil patch, or the beginning of a serious change in the way Canada’s oil and gas industry perceives its responsibilities in the face of climate change.

The NDP victory also signals a willingness to tackle point three on Mr. Daly’s top ten list—limiting the range of inequality in income distribution. While Premier Notley has not signalled a willingness to institute a ‘maximum income’ level, she has designs on raising the minimum wage to $15 per hour from the country’s second lowest minimum wage of $10.20. The NDP have also vowed to reintroduce progressive income taxes, and raise corporate taxes.

This is not a promotion for social democracy per se. Social democratic governments in different jurisdictions, like my home province of Manitoba, can sometimes reflect neoliberal economic thinking rather than focus on designing an economy for fairness. But in Alberta’s example, folks have acknowledged the problems associated with half a century of growth in the extractive industry, environmental degradation, and inequality. As the political pendulum shifts in other jurisdictions, there is an opportunity for political parties of various stripes to reconsider how they can respond to growing grassroots frustration with a debt-ridden, environmentally destructive, inequitable economy.

As the costs of uneconomic growth continue to escalate, and as a new generation prepares to bear those costs, we can be sure that further movement in the direction of a steady state economy will not only become more palatable, but absolutely essential.

 

The Puzzling Flattening of Carbon Emissions and the Problem of Global Growth

by Kurt Cobb

Editor’s Note: the below was originally published by Resource Insights.

Kurt CobbLast week we learned that maybe, just maybe, global carbon emissions were flat in 2014 even though the global economy supposedly grew by 3 percent. As Brad Plumer of Vox (whose work I greatly respect) points out, carbon emissions have moved up almost in lockstep with economic growth for the entire industrial age except during recessions and one year of growth 40 years ago.

This is why I use “supposedly” when referring to the global economic growth number. It’s because there is another obvious and plausible explanation for the flat carbon emissions, namely, that the global economy did not grow by the stated percentage, that it may have grown only a fraction of that amount or not at all.

Economic measures are constantly being revised, and I think it is very likely that the global economic growth number for 2014 will be revised downward. Probably not to zero, but downward nonetheless. It’s also possible that estimates of carbon emissions are too low. Plumer cites “notoriously unreliable” Chinese emission numbers as one reason to be skeptical.

But, even if 2014 turns out to be a year of growth without rising emissions, we shouldn’t get particularly exercised. Nor should we be particularly excited if it continues for a time. This is because the only trend that will actually address climate change is a RAPID DECLINE in worldwide emissions (as Plumer rightly points out).

Plumer makes one very telling statement in this regard:

If we ever hope to stop global warming, we’ll have to sever that relationship [of economic growth to emissions] — and figure out how to have economic growth while reducing emissions. (Alternatively, we could halt economic growth, but no one wants that.)

“Alternatively, we could halt economic growth, but no one wants that.” Two questions arise from this observation: Is it true that “no one wants that”? Who specifically wants economic growth to continue and why?

The answer to the first question is no; there is, in fact, a small minority of people advocating an end to growth. Herman Daly, former World Bank senior economist, is the acknowledged dean of the steady state economy movement. In a September 2005 Scientific American piece, “Economics in A Full World,” he outlined his case for why there is little room for economic growth and why growth in recent decades has been uneconomic, that is, the cost of such growth has outweighed the benefits.

There are also the deep ecologists who value other species on the planet as much as our own, a view which implies not only an end to economic growth but a serious rollback of industrial civilization. Perhaps Derrick Jensen is the best known of the deep ecologists whose views about how to achieve the proper role for humans on planet Earth varies greatly.

Given that there are people who want to halt or even reverse economic growth, we must now ask the second question: Who wants growth and why?

If we follow Herman Daly’s logic, we have long since passed the point of economic growth and now have “uneconomic growth,” growth that imposes costs greater than the growth is worth: social costs in terms of inequality and environmental costs that undermine the long-term sustainability of human society.

So, who benefits from such growth? We now have a name for this group, the one percent. Those with the highest incomes and greatest financial wealth continue to benefit from such growth since they can both reap disproportionate rewards from it and insulate themselves from the costs associated with it–leaving others to bear them.

When Plumer says that no one wants economic growth to end, what he is unwittingly saying is that the power elite in the world does not want to face the grand implication of a steady state economy–namely, that lower-income groups cannot be assured of a better material existence through economic growth and so such betterment would, of necessity, have to come from the redistribution of wealth.

As long as the chimera of perpetual growth can be sold to the masses, no one will have to deal with the thorny issue of redistribution as the primary method for the economic betterment of the middle and lower classes.

And yet, growth ended for many people around the globe in 2008. According to the International Labour Organization (ILO), if you earn the median wage in Kenya, your real income has declined 26 percent from 2008 through 2013. For Greece, the decline has been 24 percent. For prosperous Singapore and Japan the number is minus 1 percent. Egyptian real median income declined 10 percent; the United Kingdom declined 7 percent; Iceland and Italy, 6 percent; Taiwan, 5 percent; Spain and the Netherlands, 3 percent; Ireland, 2 percent; Austria, Luxembourg and the Philippines, all hovered around zero percent growth.

Of course, some prospered. Median wages in Romania, Panama, Paraguay, Norway, Jordan, Poland, Vietnam and Morocco all rose more than 10 percent from 2008 onward. There were standouts: The Brazilian median wage grew by 21 percent; Thailand by 26 percent; China by 74 percent; Mongolia by 75 percent. Ukrainian workers enjoyed a media wage increase of 43 percent through 2013 though it is likely that much of that has since been wiped out by the war and currency crisis there. In the United States, the median wage registered a one percent increase according to the ILO, though homegrown analysis suggests a decline.

The metaphorical tide of economic growth that is supposed to lift all boats is lifting far fewer people much more selectively than before.

On the other hand, if you possess substantial financial assets, you have prospered quite nicely as financial markets post daily records in the face of ever more precarious economic growth numbers around the world. But, only a small portion of the world’s people have any financial assets at all. The fate of a large number of the others has been stagnant or falling incomes or unemployment in an increasingly uncertain world.

Whether economic growth for all the world’s people will return is an open question. The system by which we’ve governed the world economy, a system dependent on central banking, central government spending, the build-up of huge and unsustainable debt, and the ever more rapid depletion of fossil fuels and other resources is showing its decrepitude.

Six years of pedal-to-the-metal monetary policy and government deficit spending have barely nudged world growth forward while levitating financial markets to unsustainable levels (and thereby exacerbating inequality). Such policies in the past would have had the world economy quickly overheating with central bankers responding by hoisting interest rates sky high to rein in inflation and financial excesses.

Instead, the economy remains so weak that the U.S. Federal Reserve had to reassure the world that despite language in its recent public statement that would indicate an imminent increase in interest rates for the first time in 10 years (that’s not a typo), the central bank really wouldn’t be raising them anytime soon after all.

So, maybe flat carbon emissions are actually telling us something “no one” wants to hear: that economic growth has faltered or even halted for a large portion of the world’s people and that we are going to have to deal with the consequences of that until we design a new system that can either grow for the benefit of everyone–a difficult proposition–or that can sustainably, equitably and successfully manage a steady state economy–an even more difficult proposition.

Kurt Cobb is an authorspeaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Cold War Left Overs

by Herman Daly

Herman DalyThose of us old enough to remember the Cold War will also remember that it involved a growth race between Capitalism and Communism. Whichever system could grow faster would presumably win the allegiance of the uncommitted world. The idea of a steady state was therefore anathema to both sides. The communist growth god failed first because of political repression and economic inefficiency. But the capitalist growth god is now failing as growth becomes uneconomic due to environmental and social costs, and is propped up only by fraudulent accounting, monopoly, and financial corruption. Neither system can accept the idea of a steady-state economy, but neither can attain the impossible alternative of growing forever.

Advocates of the steady-state economy are long accustomed to attacks from capitalists, which have by no means disappeared. We are less accustomed to attacks from the left, not from communists who have virtually disappeared, but from remaining Marxists and socialists. Although Marxism is largely discredited (along with other manifestations of 19th century determinism, such as Freudianism and Eugenic Darwinism), one cannot by any means take that as a vindication of capitalism, which has only gotten worse in its quest for unending growth. In spite of my overall negative view of Marxism, there are some “green Marxists” who, in my opinion, are worth reading (e.g. John Bellamy Foster, Brett Clark, Richard York, The Ecological Rift). Recently, another socialist (I am not sure if he considers himself a Marxist) has criticized the steady-state economy for being essentially capitalist. This is economic historian Richard Smith. He sees the steady-state economy as a distraction from “eco-socialism.”

One should be grateful to one’s critics–it is much better to be criticized than ignored. Richard Smith kindly takes me as his exhibit A for a position that he misleadingly labels “steady-state capitalism.” I have never used that term, always speaking of a steady-state economy, which is neither capitalism nor socialism, although it draws features from both. Indeed, in the Cold War context it was thought to offer a Third Way, a possibility for uniting the best features of each system. Change is impossible unless you start from where you are. As noted, I am more accustomed to attacks from capitalists, so it is at least a refreshing change to be attacked, and on balance rather politely, by a socialist who, unlike many neoclassical growthists, has taken the trouble to learn about the steady-state economy. Disagreements will follow, but my appreciation for his critical attention needs to be expressed.

Richard Smith characterizes capitalism as a system that must “grow or die.” It then follows immediately that since capitalism must grow, it cannot be a steady state. OK then, if capitalism cannot be a steady state, then neither can a steady state be capitalism. So let’s not speak of “steady-state capitalism.” I, for one, never have–although Mr. Smith tendentiously attributes that term to me. By the same logic, following Marx, one might define socialism as a classless society based on overwhelming material abundance arrived at through rapid economic growth under the centrally planned dictatorship of the proletariat. Socialism also depends on growth. Therefore steady-state socialism is impossible. It was precisely to avoid such sterile definitional disputes that I always said “steady-state economy,” and never “steady-state capitalism,” or socialism for that matter.

Empty world models will no longer work in our full world. Photo Credit: www.TheEnvironmentalBlog.org

Would it not be more productive to start by defining a steady-state economy, followed by arguments for its necessity and desirability? We could then avoid ideological classifications based on abstract definitions of what capitalism or socialism “essentially must always be.” We now live in a full world. Capitalism and socialism are both from the empty-world era in which growth was the desideratum. Must we insist on pouring new wine into old wineskins, and then watching them burst?

Smith’s unhappiness with me derives most specifically from my preference for the market over centralized planning as a tool for dealing with the single technical problem of allocative efficiency. Steady-state economics deals with three problems: sustainable scale, just distribution, and efficient allocation. It takes the first two issues, scale and distribution, away from the market. It calls for quantitative ecological limits on the throughput of resources so that the market can no longer determine the physical scale of the economy relative to the biosphere. It also advocates social limits to the range of income inequality, so that the market can no longer generate large inequalities of wealth. Subject to these two prior macro-level aggregate constraints, it then relies on the market to efficiently allocate resources. This is not advocacy of the Market with a capital M, the deified master evaluator and controller of life. This is market with a small m, a limited tool for rationing, communicating, and exchanging goods and services.

Reliance on markets for allocation (now within prior ecological and distributional limits) is further constrained, even within traditional microeconomics, by opposition to monopoly, and restriction of market allocation to rival and excludable goods. Non-rival and public goods have long been recognized to require some degree of non-market allocation. Even so, Mr. Smith is still unhappy with any role for markets.

Richard Smith deserves credit for recognizing and opposing the real evils of financial-monopoly-crony capitalism as it currently exists. And, unlike both traditional Marxists and neoclassical economists, he realizes that we cannot grow forever, and that we have in many dimensions already far overshot optimal scale. And he takes the trouble to debate critical issues rather than ignore them. However, he thinks only socialism can somehow cure these evils. The operative word here is “somehow.” Somehow we must wipe the slate clean of any institutions associated with markets, such as property, division of labor, exchange, and profit. How? By violent revolution? By rational persuasion? By moral conversion? That is left vague. It is all very well, for example, to point out the real problems with excess reliance on the profit motive. But if we abolish profit as a source of income then we also abolish self-employment. Everyone must then become an employee earning a wage. Who then is the employer? Do we all then work for Ajax United Amalgamated Corporations? Or for the Universal State Monopoly? Is there something about the mere act of exchange, and the category of profit, (not just excessive inequality and monopoly ownership of the means of production) that offends or confuses Marxists?

Nevertheless, if Marxists now advocate limiting growth, that is a big change. Maximizing growth to achieve overwhelming material abundance has been seen as the path to the “new socialist man,” who, according to Marx, can only be freed from his bourgeois greed by objective abundance, by the abolition of scarcity, not by the “utopian” morality of sharing. I have never seen a Marxist proposal to limit the scale of the macro economy to an ecologically sustainable level–nor for a maximum as well as a minimum income to limit the range of distributive inequality to a reasonable and fair degree. Rhetorical calls for absolute equality and abolition of private property abound, but are neither realistic nor fair.

Marxists also go far out of their way not to recognize overpopulation and the need to limit population growth (a critical dimension of both scale and distributive inequality, given class differentials in fertility and access to contraception). A stationary population is part of the definition of a steady-state economy. Furthermore, a limited range of income inequality would restrict the ability of the rich to bid necessities away from the poor in the market. Unjust distribution of income does get reflected in markets, but let us attack the cause, not the symptom. And quotas on basic resource throughput could raise prices enough to eliminate most frivolous and wasteful production, as well as stimulate recycling, and increase efficiency while ruling out the Jevons effect. If we start with depletion quotas on basic resources, then the resulting increase in resource prices and efficiency cannot lead to more use of the resource. Auctioning transferrable quotas rather than giving them away (markets rather direct government allocation, pace Mr. Smith) will raise enough revenue to greatly reduce taxes on the poor.

It is not at all clear why Smith thinks markets must always be bad masters rather than good servants. If we forgo markets, should we then perhaps have another go at central planning and collectivization of agriculture? Would Mr. Smith have preferred War Communism to Lenin’s New Economic Policy because the latter was really just “state capitalism” that re-established significant reliance on markets? To be fair, we do not know what Smith thinks about any historical experience with the abolition of markets because he does not mention any.

If “eco-socialists” reject the steady-state economy as “inherently capitalistic,” then what specific policies do they recommend? How do their policies differ from those of steady-state economics? Are there some policies we agree on?

Critics of the present growth economy, whether steady-state economy or “eco-socialist,” are, however, united in humility before a common dilemma–namely that the bought-and-paid-for government that would have to enact the programs needed for a steady-state economy is the same government that would have to run a socialist economy. A government that cannot even break up too big to fail monopolies, or provide debt-free money as a public utility, or tax carbon, will certainly not be able to administer a centrally planned economy–nor even a steady state. We have deeper problems of moral and spiritual renewal (in addition to recognition of finitude and laws of thermodynamics) that transcend both capitalism and socialism. It is admittedly hard to envision the source for the basic moral renewal required to face the enormous problems that are looming, but Marxist dialectical materialism and collectivism seem to me already to have historically demonstrated their failure in this regard. We need something new. Although things look bleak, we never know enough to justify giving up hope. But we should avoid repeating past mistakes.

News on Blue Planet Prize

Editor’s Note: the below is cross-posted from The Asahi Glass Foundation website. We are very excited Daniel Janzen, INBio, and (especially) Herman Daly’s achievements are being celebrated with this prestigious award. Congratulations! 

Announcing the winners for 2014 Blue Planet Prize

Today, we issued a press release announcing the winners of the 23rd Blue Planet Prize.

The winners are

Prof. Herman Daly (USA) Professor Emeritus, School of Public Policy, University of Maryland

Prof. Daniel H. Janzen (USA) Professor, Department of biology, University of Pennsylvania
Instituto Nacional de Biodiversidad (INBio) (Founded in Costa Rica)

The commemorative lectures by the winners will be held at the United Nations University (Shibuya Ward, Tokyo) on November 13 (Thursday). Details will be posted on our website at a later date.

2014 (23rd) Blue Planet Prize Winners

Herman DalyProf. Herman Daly (USA)
Professor Emeritus, School of Public Policy, University of Maryland

Prof. Daly redefined “steady state economics” through the concept of sustainability by incorporating such factors as the environment, local communities, quality of life, and ethics into economic theory, which lead to building a foundation of environmental economics. He has been questioning whether economic growth brings happiness to humans and has been issuing warnings to society, which tends to overemphasize economic growth. As a consequence, he has had a significant international influence.

23-Janzen_INBioProf. Daniel H. Janzen (USA)
Professor, Department of biology, University of Pennsylvania

Instituto Nacional de Biodiversidad (INBio) (Costa Rica)

Prof. Janzen and the Instituto Nacional de Biodiversidad of Costa Rica (INBio) propose measures and policies on sustainable development in harmony with local environmental conservation and local inhabitants and works on environmental education and the conservation of biodiversity. INBio’s activities serve as a valuable role model, from which people both in developed and developing countries around the world should learn.

Remarks from the Award Recipients upon Notification of their Selection

Prof. Daly
I am both honored and humbled to accept the magnanimous Blue Planet Prize from the Asahi Glass Foundation. The making of such important products as glass and chemicals is already a great benefit to the world. Encouraging and supporting others in their efforts to protect and improve our Earth home, as the Asahi Glass Foundation does, is truly an example of generosity and service. When one is treated generously, then one is inspired to treat others the same way. Thank you for that inspiration, and for including me among a list of recipients whom I have long admired.

This recognition is not only an encouragement to me, but also to many friends and colleagues who have worked hard to protect and preserve our Earth from the destruction caused by excessive growth and careless waste. Among these I especially include my colleagues in the International Society for Ecological Economics. If I have done anything to deserve this Prize it is to have provided a generational connecting link between my best teachers and my best students. May this award strengthen that continuing chain into the future!

Prof. Janzen
We – all of us, including 2.6% of the world’s biodiversity – are delighted and honored to learn of the Blue Planet Prize for us and Costa Rica’s INBio. This honor really is for a cast of thousands of Homo sapiens – Costa Ricans and internationals – dancing with billions of other beasts, each doing their part to keep alive some portion of the nature that produced all of us. It is wonderful and wise that years ago the Asahi Glass Foundation had the foresight to offer this support to attempts to move away from the very human tendency to consume and alter our nest. Yes, we can restore some of what we have destroyed, and yes, we can help the world to become biologically literate. Without bioliteracy, nature is just a green threatening mass and there is little hope of its peaceful coexistence with all of us. We, INBio, and Area de Conservacion Guanacaste, are happy recipients of this recognition of decades of trying to open the doors of conserved wildlands to non-damaging partnerships with humanity. Only through direct understanding of the wild world can society welcome it into the family, village and nation.

INBio
To receive the prestigious Blue Planet Prize, given in recognition of our voluntary efforts to conserve Costa Rica’s rich biodiversity is a great honor, which we appreciate in all of its significance. We are humbled to be among many of the most outstanding authorities and leaders in the quest for solutions to the global environmental problems who have been previously recognized with this award, as well as to share it with Dr. D.H. Janzen, a world authority in tropical ecology and conservation with whom INBio has worked in a mutually beneficial association.

What our National Biodiversity Institute has been able to achieve through its institutional efforts has been largely determined by an enabling national environment; the endorsement of the Government of Costa Rica; the support of bilateral and multilateral development agencies; the collaboration of the scientific community and the profound commitment of INBio’s community with the cause of promoting a greater awareness of the value of biodiversity in our society.

The Blue Planet Prize becomes a new source of inspiration and motivation to continue our search for a harmonious relationship between humanity and our living world.

Approaching a Steady State Economy, Part 2 — Clean Clothes

by Rob Dietz

Dietz_Author_PhotoTo get a sense of how the broader economy works, it’s useful to analyze one particular sector.  In trying to answer the question of how a non-growing economy could work, Part 1 of this article considered methods (categorized as “economizing” and “innovating”) for achieving a sustainable transportation sector.  But the transportation sector is complex enough that it’s worth drilling down even further and analyzing something simpler. “Economy” derives from two Greek words that translate into “management of the household.” Thinking of the economy as a big household is a useful frame. Likewise, thinking of an actual household as a small economy can be a helpful exercise. I have made or been a party to many decisions in an attempt to run my household as a steady state. For example, my wife and I decided to have a one-child family. We also decided to live in a cohousing community founded on sustainability values. In the spirit of drilling down to the smallest scale possible, I want to describe my recent experiment with one “sector” of my household economy: the laundry.

For years I did laundry American style, fighting dirty clothes in a full-on assault with an army of water, detergent, heat, and electricity.  I would:

  • Dump my clothes in a pile after wearing them once;
  • Use a water-hogging top-loader washing machine;
  • Select the hot water setting because — well, because why not?; and
  • Apply the hottest setting in an electric tumble dryer, including a dryer sheet or two.

As I learned more about conservation over time, I began to shift my laundry habits, by both economizing and innovating. For example, my family began using a front-loading machine that conserves water and electricity. I started sorting my laundry, hanging articles of clothing that were suitable for a second wearing. We began using only cold water for washing with no adverse results. We forgot about dryer sheets (no need to smell like a chemist’s over-scented interpretation of “spring fresh”), and then we forgot about the dryer entirely.

The electric tumble dryer is one of the most energy intensive home appliances, but it’s also one of the most unnecessary. As a friend of mine is fond of saying, “Clothes want to get dry all by themselves. You just leave them alone, and that’s what they do naturally.” Line drying clothes, then, is a simple way to cut energy usage. The folks at Project Laundry List see line drying as something even more powerful — an entryway to the world of sustainable behavior.

In my household, making the switch to line drying turned out to be fairly easy, so I decided to try another step. I wanted to see if I could have a low-water, resource-conserving, electricity-free laundry system that would get my clothes clean. My method is another mix of economizing and innovating.

The setup consists of four pieces of equipment: a five-gallon bucket, a portable clothes agitator that looks like a plunger, a hand-cranked wringer, and a clothesline. The procedure is simple:

  • Put a little soap in the bucket and add a couple of gallons of water;
  • Throw in five or six articles of dirty clothing;
  • Plunge the agitator up and down in the bucket to force water, soap, and air through the clothes for a few minutes;
  • Dump the water on the plants in the backyard and refill the bucket with two more gallons, adding the soapy clothes to rinse;
  • Run each article of clothing through the wringer; and
  • Hang the clothes on a line.
A simple laundry setup in which the wool shirt is the most high-tech item.

A simple laundry setup in which the wool shirt is the most high-tech item.

On the economizing front, the wringer, clothesline, and bucket are old-school technologies that draw energy from only the sun and a bit of personal labor. And there’s much less embedded energy in these tools than in a washer/dryer combo. A note about the labor: I thought it would be a more of a chore, but so far it’s been fun. There’s a degree of mindfulness that comes with washing clothes this way, and it doesn’t take very long. Granted, I’ve been conducting the experiment during the summer when I’m mostly wearing shorts and t-shirts, and the strong Pacific Northwest sun is accelerating the drying sessions.

On the innovating front, the agitator could be considered a new technology, but it’s such a simple device that it’s hard to think of it as being all that innovative. Where technology does come into play is in the clothing itself. This laundry method works much better with quick-drying clothes. I have been experimenting with natural wool clothes. Designers have figured out how to make quick-drying wool garments that are comfortable against the skin and don’t get stinky (as opposed to polypropylene and other synthetic materials). Such clothing can be pricey, but if you’re doing small loads of laundry each day or every other day, you don’t need to own very many of them — another nod toward economizing.

It’s still in flux, but I’ve gotten a good start on changing my behavior in the laundry sector of my household economy, and the change represents progress toward a steady state. Such changes are inconsequential in a numerical sense. My laundry process isn’t going to stabilize the climate or solve the global overshoot problem, but it’s a small step in the right direction. In addition to lowering my ecological footprint, this laundry experiment is helping me understand how the broader economy can economize and innovate to clean up its act.

Approaching a Steady State Economy, Part 1 — Getting Around

by Rob Dietz

Dietz_Author_PhotoSuppose you’re suspicious of the idea of pursuing continuous economic growth on our finite planet. What if you’ve even concluded that an obsession with increasing production and consumption might be a bad thing, especially in the wealthy nations (apparently you’ve been connecting some dots between economic growth and the calamitous combination of climate change, resource depletion, poverty, and inequality)? Having come to such a conclusion leads to a critical question: how would a non-growing economy function? I’ve been thinking about steady state economics most days for the last six years, and I’ve even written a book on the subject, but I still struggle with this question. When in doubt, consult Herman Daly.

Daly has articulated three logical rules that a steady state economy would live by:

  1. Exploit renewable resources no faster than they can be regenerated.
  2. Deplete non-renewable resources no faster than the rate at which renewable substitutes can be developed.
  3. Emit wastes no faster than they can be safely assimilated by ecosystems.

Presuming we can accurately determine depletion and regeneration rates, as well as the resilience of ecosystems, we can use two basic strategies to follow the steady state rules: (1) economizing and (2) innovating. Economizing boils down to reducing the inputs used in economic activities and minimizing the waste outputs. It entails conserving, re-using, maintaining, and generally embracing the wisdom of enough rather than succumbing to the madness of more. Innovating entails doing things more efficiently. It means learning, inventing, adapting, and using appropriate technologies to achieve desired ends. Note that innovation (and the increased efficiency it engenders) is a double-edged sword. In a non-growing economy, increased efficiency can reduce environmental impacts, but in a growing economy, increasing efficiency tends to cause a rebound effect that actually increases environmental impacts. A steady state economy, therefore, will adopt some combination of economizing and innovating to achieve sustainability.

This is all well and good, but terms like “economizing” and “innovating” fall short of painting a detailed picture of day-to-day life in a steady state economy. To paint such a picture, it’s helpful to start with a smaller canvas — that is, focus on a specific sector rather than the entire economy.

The transportation sector of the U.S. economy accounts for about 3% of gross domestic product. The purpose of this sector is to move people and goods to desired destinations. To accomplish this purpose while abiding by the steady state rules requires:

  • Reducing inputs (e.g., using less steel and oil);
  • Developing renewable infrastructure (e.g., using renewable energy sources to power vehicles and renewable resources to construct transportation corridors); and
  • Reducing waste emissions (e.g., decreasing the quantity of carbon dioxide and other pollutants emitted by transport activities).
Wouldn't it be easier (and more practical) to construct some decent bike lanes?

Wouldn’t it be easier (and more practical) to construct some decent bike lanes?

Think tanks like the Post Carbon Institute and the Transition Towns Network provide “economizing” strategies for doing these sorts of things. One of the big ideas is economic localization, which diminishes the need for long-distance transportation by eliminating unnecessary trade. As Daly has pointed out, “Americans import Danish sugar cookies, and Danes import American sugar cookies. Exchanging recipes would surely be more efficient.” The more a community can produce goods and services locally, the less it has to rely on long supply chains and importation of goods from afar. As a bonus, localization curtails the need for workers to undertake long-distance commutes, since the local economy would provide more employment opportunities. Other ideas for economizing in the transportation network include deemphasizing the automobile (World Carfree Day is coming up soon) while promoting walking, bicycling, and transit; paying more attention to neighborhood design; implementing car share programs; and even making more use of sailboats. High parking fees and gasoline taxes are also tools that can curtail the quantity of resources consumed for getting around.

Think tanks also promote plenty of ideas that take the “innovating” approach. The Rocky Mountain Institute suggests constructing ultra-light, low-drag autos and superefficient trucks and planes. The Sustainable Transportation Center at the University of California, Davis conducts research on hydrogen, biofuels, and other energy pathways toward a sustainable transportation infrastructure. And for science fiction fans, ideas about conveyor belt systems first put to paper by writers like H.G. Wells and Isaac Asimov can now be perused in patent descriptions. Even vacuum tubes are entering the discussion… transporter beams can’t be far behind!

It seems, then, that a transportation network in a steady state economy would involve a mix of infrastructure changes, technology changes, and behavioral changes that, in turn, would stem from a selection of policy changes. Given the scope of changes required, it’s still hard to get a handle on how things would turn out (and this is only one sector that represents 3% of the broader economy). Perhaps drilling down further would help.  Part 2 will give it a try.