The Trophic Theory of Money, with Apologies to Peter Victor

by Brian Czech

In my critical review of Peter Victor’s biography, Herman Daly’s Economics for a Full World, I focused on two major and several lesser weaknesses of the book. The two major weaknesses, in my opinion, are the confusion over GDP as an indicator of environmental impact, and the absence of CASSE in a book that, in many ways, CASSE helped make possible or at least more marketable. These two weaknesses turn out to be interrelated, as I’ll explain.

Portrait of Peter Victor

Peter Victor. (CCA)

But first, I must extend a sincere apology to Peter Victor. While I was left incredulous over the omission of CASSE, I overstepped the bounds of civility by speculating on a “fishy smell emanating from this biographic smorgasbord…[that] might emanate from a funding source, a competitive urge, a legacy-building strategy, or just a mere personal problem.” While I found myself fishing for reasons for the shocking omission of CASSE, it was irresponsible to invoke fish of such foul lineage. I ended up catching nothing for the effort but a bad case of flak. More importantly, the fishing expedition impugned Peter Victor’s character, and I regret doing that.

While “funding sources, competitive urges,” etc. do cause issues in the halls of academia, I have little reason to believe that such factors tainted the biography, especially after discussing the matter at some length with Victor. Rather, I have to acknowledge his explanation that he simply overlooked CASSE’s role in advancing and defending the work of Herman Daly. He knows the omission of CASSE was a mistake, lessening the quality of the biography and effectively damaging the reputation of CASSE. It happens to be an ironic mistake, to the extent that the biography was intended to advance the ideas of Herman Daly, particularly the steady state economy.

Steady State Economics: Bigger than Any Author

The phrase and concept of “steady state economy” is associated first and foremost with Herman Daly. I believe it always will be, and should be. What Adam Smith was to classical economics, or Alfred Marshall to neoclassical economics, Daly will be to steady-state economics. I, for one, will continue singing the praises of Daly, as I did in my chapter (“May There Be Dalyists”) of the Herman Daly festschrift.

It would be a grave mistake, however, to think everything written by Daly comprises the whole of steady-state economics, or that steady-state economics redounds exclusively to the writings of Daly. If such were the case, we could hardly expect the field to grow, much less flourish into a body of ever-evolving literature replete with timely political and policy relevance. What we need is not only Beyond Growth in the libraries, but “Beyond Daly” in the curriculum, politics, and policy. We need a supra-Dalyist steady-state economics that makes sense to all with an open mind and a sufficient conceptual toolkit.

In some ways, the world has passed us by in this endeavor (“us” referring to steady staters, starting with Daly). The linguistically efficient and rhetorically powerful “degrowth” has seemingly eclipsed “steady state economy” in the hearts and minds of sustainability-minded reformers. The eclipse has its technical merits; we need degrowth in the wealthy countries before a steady state economy can be sustainably settled into.

An image of binary planets coming into focus.

Degrowth and steady-state economics: binary planets coming into focus. (CC BY 4.0, International Gemini Observatory)

It needn’t be a total eclipse of the steady-state sun, however. A more virtuous metaphor would be that of binary planets, with degrowth and steady-state economics revolving around the existential gravity of limits to growth. The unifying slogan, then, would be “degrowth toward a steady state economy.”

Unfortunately, many European degrowthers seem to have developed something approaching disdain for the Dalyist vision of steady-state economics. They’ve thrown shade, exacerbating the eclipsing effect of the political Degrowth movement instead of brightening it with complementary steady statesmanship.

No doubt the aversive attitude is unwarranted—misplaced and unjust—and the perpetrators have been misleading with their portrayals of Daly. They’ve attempted to frame Daly as some apologist for capitalism, simply because he has recognized the market as a reasonable mechanism for the allocation of (rival and excludable) goods.

I learned a lesson with my ill-advised speculation over the possible motives of Peter Victor, so I’ll stop short of impugning the integrity or motives of the Daly critics in Europe. Perhaps in their idealistic zeal for social justice and economic reform, they spoke and wrote (in some of their cases) a bit too soon. It’s easy to empathize with that. That said, the Dalyist tradition of steady-state economics can’t be digested from a handful of tweets or a handful of papers. I’m not even sure it can be digested from a handful of years, unless those years are spent in focused steady-state economics, as in a graduate degree program uncensored by neoclassical faculty.

Cover of ecological economics second edition by herman daly and joshua farley.

Top choice for the Dalyist vision of steady-state economics. (Island Press)

The single best way to get started on a Dalyist education in steady-state economics is to carefully read Ecological Economics: Principles and Applications. It’s readily digestible by reasonably intelligent readers, including those without an economics background. It is a textbook, though, and if you can’t find the time, Beyond Growth is still a good bet. If you can’t squeeze that in, at least get the flavor of Daly’s writing and his thoughts on some of the biggest issues with Best of The Daly News: Selected Essays from the Leading Blog in Steady State Economics, 2010-2018. (The latter was the first book off the Steady State Press, CASSE’s imprint and a source for Dalyist and supra-Dalyist literature, hopefully for decades to come.) If you prefer listening to reading, you can hear what Daly thinks in his own words, on The Steady Stater podcast, about markets, capitalism, degrowth and the like. Getting it from the horse’s mouth is always preferable to secondhand accounts.

While it is important to clarify and defend the real Herman Daly—as CASSE has time and time again—the point remains that steady-state economics is not just Daly. Furthermore, while many of us (myself included) view Daly as an intellectual hero, hero worship is not a strategy for policy reform. Conceptually and politically, we need a supra-Dalyist program in steady-state economics, a program embracing the slogan “degrowth toward a steady state economy” as well as other contributions.

A Tragedy of the Uncommon

Just because steady-state economics should encompass more than Daly’s writings doesn’t mean much ground has yet been covered. Some of the usual suspects (for example, Phillip Lawn and Dan O’Neill) have provided perspectives and analyses clearly classifiable as steady-state economics. The contributions of European Degrowth Movement principals such as Giorgos Kallis and Timothée Parrique also ought to be considered so, even if they’ve largely eschewed the linguistics of “steady state economy.” As with any taxonomy, there are more ways than one of categorizing the literature and policy efforts of those addressing limits to growth. Parrique demonstrates this profusely in his Ph.D. dissertation, The Political Economy of Degrowth.

Peter Victor notes in Daly’s Economics some examples of scholarship that complement the steady-state writings of Daly. Unfortunately, given his overlooking of CASSE, he seems to also overlook certain CASSE activities and findings; quite a few of them, in my opinion. One of the most unfortunate results is that Victor leaves readers hanging about the relationship between GDP and environmental impact. This undermines the entire program of steady-state economics.

If we—steady staters, degrowthers, post-growthers at large—don’t recognize GDP as a reliable indicator of environmental impact, what separates us from the neoclassical economists we criticize? Sure, we might identify more negative externalities than they do. We might not buy into the “rising tide lifts all boats” metaphor. We might talk about the economy as a subset of the ecosystem. Yet, on the one crucial subject of how to manage GDP, the mother of all economic indicators, we find ourselves in the same conceptual and political place as the neoclassical growth economist! Our message becomes, without much twisting, “Don’t worry about GDP. We can figure out how to grow GDP while we protect the environment.”

Daly, Victor, and others have hedged their bets—our bets to the degree they would represent the field of steady-state economics—with the clever repartee, “OK, neoclassical policy maker, you think you can grow GDP without impacting the environment? Then let’s protect the environment, and you can grow the GDP all you want.” It’s a bit like the American Cancer Society attempting to rebuke the Seven Dwarves by telling the 103rd Congress, “OK, you think smoking isn’t cancerous? Then let’s protect against cancer, and you can allow all the smoking you want.”

As found in the context of Daly’s body of work, the “go for it” approach to GDP always seemed tongue in cheek, saving it from condemnation as a non sequitur per se, but it’s also been as useful as a rhino horn on a baby buggy. Furthermore, based on Victor’s assessment, there is little indeed in the writings of Daly to definitively establish the fact that GDP cannot be reconciled with environmental protection.

But there is in the supra-Dalyist steady-state literature, because that’s where we find the trophic theory of money (TTOM).

The Trophic Theory of Money and CASSE

I was shocked to hear, in the wake of my review of Daly’s Economics, the opinion of a colleague who thought the trophic theory of money “has not been a part of CASSE.” Aside from the irrelevance of such an opinion to the validity of the TTOM, any rumors of the apartness of the TTOM from CASSE would be greatly exaggerated. As the author of the TTOM and the founder of CASSE, presumably I should know!

One approach to the rumor would be to ignore it, but the rumoring colleague happens to be a significant presence in steady-state economics, so I take the rumor to be of some import. If it mattered to this colleague, I’m guessing it’s more relevant (albeit not to the validity of the TTOM) than I’d have guessed. So let’s take a trip down memory lane.

Screenshot of Google searchfor Seneca Sawmills

Seneca Sawmill scenes: generating money from the trophic base, perhaps unsustainably. (Notice the prominence of manufactured capital and lack of forest.)

The story of CASSE is largely a story of the trophic theory of money, the roots of which were set on the San Carlos Apache Reservation (east-central Arizona) in 1992. I tell the story in Supply Shock, how we (San Carlos Recreation and Wildlife Department) negotiated the sale of three elk tags for $43,000 apiece; a sale made possible because the reservation was known for the biggest elk antlers in the world. Two of the tags were purchased by the late Aaron Jones, who developed and owned Seneca Sawmill, one of the largest old-growth sawmills in the Pacific Northwest at the time. Two tags, in other words, fetched the tribe $86,000, unheard of even in the world of extreme trophy hunting.

For the current purposes, though, the take-home message isn’t that elk were “generating” money for the San Carlos Apache Tribe. Rather, it was the liquidation of old-growth stands of Douglas fir, western redcedar, and Sitka spruce that generated the money for Aaron Jones, who flew down to the reservation in a Leer jet piloted by “the other John Glenn,” Seneca Sawmill’s chief pilot. I guided Jones for part of his hunt, and the whole spectacle made an impression I’d never forget. None of it was more instructional, though, than the origin of all that money.

It struck me as an ecologist that the money originated at the trophic base of an ecosystem; namely the coastal forest of the Pacific Northwest. Ecologically, we were robbing Peter (not to be confused with Peter Victor) to pay Paul, a conundrum I discussed at length with John Stevens, a San Carlos Recreation and Wildlife commissioner who, as one of the most successful peridot miners in the USA and a member of the San Carlos Cattle Association, was continually active at the trophic base of the San Carlos economy. With the revenue from the elk tags, we bought out a cattle association grazing lease on the reservation, fencing out the cattle and devoting 6,200 acres to elk production, but only at the expense of Oregonian old-growth forest, spotted owls, marbled murrelets, etc. This observation—centered on trophic principles from ecology—helped lead me to the study of ecological economics (and my “discovery” of Herman Daly) during the latter stages of my Ph.D. research later that decade.

The trophic theory of money starts taking shape in Shoveling Fuel for a Runaway Train, a postdoctoral project of mine that was published by the University of California Press in 2000, shortly after I signed on as conservation biologist at the U.S. Fish and Wildlife Service headquarters in Arlington, Virginia. In 2001 I received my first gag order, prohibiting me from speaking about the conflict between economic growth and biodiversity conservation, including the trophic origins of money (which so clearly illuminate the conflict).

Pyramid illustrating the trophic structure of the economy.

Trophic structure of the human economy.

In 2003, frustrated by the gag order, I established CASSE, which allowed me to take leave from the government and wear a different professional hat at conferences, colleges, and universities. I was intent on touting the steady state economy and the name of Herman Daly, along with the nascent trophic theory of money. I drafted the CASSE position on economic growth (which was vetted by Daly and others) and began an aggressive campaign of signature gathering along with soliciting parallel positions by professional, scientific conservation societies such as The Wildlife Society, American Fisheries Society, Society for Conservation Biology, etc. The strategy was published in Bioscience.

Although the linguistic and conceptual progression from the “trophic structure of the human economy” (with the focus on the real sector) to the “trophic origins of money” (moving into the monetary sector) to the “trophic theory of money” (with the focus on GDP and money supplies as indicators of environmental impact) isn’t neatly demarcated, by 2009 CASSE featured an online briefing statement called “The Trophic Theory of the Economy,” and by early 2010 I published the first Daly News article on the “trophic theory of money” per se.

Since then, the TTOM has been a fixture at CASSE, in CASSE research projects, and in CASSE communications including presentations, books, the Daly News, Steady State Herald, The Steady Stater podcast, and social media, including YouTube. It’s as much a part of CASSE as the laws of thermodynamics or the concept of throughput. In fact, it builds upon said laws and concept, adding value such that a clear linkage between GDP growth and the growing ecological footprint can be clearly envisioned and diagrammed.

One critic has suggested that the TTOM, while correct, applies only to the evolutionary roots of money, but is irrelevant for thinking about modern monetary policy. My response is to invoke recapitulation theory from evolutionary ecology, summarized succinctly with the phrase “ontogeny recapitulates phylogeny.” Just as the development of a fetus in a placental mammal roughly mirrors an evolutionary pathway from a single-celled organism to the full-blown species, so does the trophic origin of money (that is, agricultural and extractive surplus) “authorize” the existence of real (meaning adjusted for inflation) money today. It’s not a perfect analogy, but metaphorically we might say, “Monetary ontogeny recapitulates monetary phylogeny.” The biggest difference is that recapitulation theory is shaky; not so with the TTOM.

You can judge for yourself, but I’ll conclude with a story—a lesson in epistemology no less—and challenge you to put yourself therein. You’re seated in a packed symposium on economic growth and fish conservation at the 2005 conference of the American Fisheries Society (AFS) in Anchorage, Alaska. A position on economic growth (modeled after the CASSE position) is being proposed for adoption by AFS. The speaker presents the position in a very deliberate manner, with one slide devoted to each of the 16 clauses. After each slide, he asks the audience if there is any disagreement. No disagreement adheres to the seven “whereas” clauses, so the presenter continues with the nine “therefore” clauses, including the “fundamental conflict between economic growth and fish conservation” clause. Again, no disagreement.

Next, in the discussion about AFS adopting the position—not a single clause of which has been disagreed with—three neoclassical economists complain vociferously that there must be something wrong, because there is no conflict between economic growth and fish conservation! You put on your psychotherapist hat and ponder the particular form of cognitive dissonance so bluntly displayed. End of story.

Now it’s true that a collection of phenomena can sometimes produce emergent properties; that is, subsequent, more sweeping phenomena that aren’t necessarily indicated by the “sum” of the lesser phenomena. Usually, though, any mystery is solved by the addition of lesser phenomena left out of the original collection. Wisdom might just boil down to parsimonious collecting of the relevant facts, as opposed to sophistic parceling of epicycles and equants designed to support a predetermined conclusion.

I’ll conclude with a challenge: Study the trophic theory of money as laid out most recently and see if you can find an invalid assumption or an unsound conclusion. If so, is it a fatal flaw, or something to be corrected conceptually? What is in most need of empirical corroboration? Does the TTOM supersede or counter any existing theories or concepts?

If the theory is sound, as I’ve diligently concluded, then we’re onto something. We have a contribution to a supra-Dalyist steady-state economics, one that gets us past the “Seven Dwarves Hump” of public policy futility. We can go straight to the policy table and call not only for “stabilizing throughput” (which might get us a wink and a prayer), but for stabilizing GDP itself, which will get us closer to stabilizing throughput than we’ve been in centuries.

That’s the mother lode of steady statesmanship.

Brian Czech, Executive Director of CASSEBrian Czech is the executive director of CASSE.

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