Herman Daly is one of the founders of the interdisciplinary field of ecological economics. Formerly a senior economist for the World Bank, he moved to the University of Maryland, College Park in 1994. He received the Right Livelihood Award (the “Alternative Nobel Prize”) in 1996 for his work in developing ecological economics, incorporating “the key elements of ethics, quality of life, environment and community.” The following excerpts are from his interview with ecological economist Tom Green.
Growth is widely thought to be the panacea for all the major economic ills of the modern world. Poverty? Just grow the economy (increase the production of goods and services and spur consumer spending) and watch wealth trickle down. Unemployment? Increase demand for goods and services by lowering interest rates on loans and stimulating investment, which leads to more jobs as well as growth. Overpopulation? Just push economic growth and rely on the resulting demographic transition to reduce birth rates, as it did in the industrial nations during the 20th century. Environmental degradation? Trust in the environmental Kuznets curve, an empirical relation purporting to show that with ongoing growth in gross domestic product (GDP), pollution at first increases but then reaches a maximum and declines.
Relying on growth in this way might be fine if the global economy existed in a void, but it does not. Rather, the economy is a subsystem of the finite biosphere that supports it. When the economy’s expansion encroaches too much on its surrounding ecosystem, we will begin to sacrifice natural capital (such as fish, minerals and fossil fuels) that is worth more than the manufactured capital (such as roads, factories and appliances) added by the growth. We will then have what I call uneconomic growth, producing “bads” faster than goods – making us poorer, not richer. Once we pass the optimal scale, growth becomes stupid in the short run and impossible to maintain in the long run. Evidence suggests that the US may have already entered the uneconomic growth phase.
Humankind must make the transition to a sustainable economy – one that takes heed of the inherent biophysical limits of the global ecosystem.
On What a World with Less Growth Might Look Like
Simply ask the question: What would the US look like if we had one-half of our current energy consumption? I think there are two ways to kind of get a handle on that. The first is to go back in US history to such a time when we did live off of one-half of the current levels of energy consumption. That would put us somewhere around 1960. And gee, life in 1960 wasn’t bad. There were all sorts of good things – you were a long way from freezing in the dark, and life was quite good, materially good, and so forth.
Another way of thinking about it is to take the same year and look for another country with half the energy consumption per capita, like France, and life in France is pretty good. So society could cut energy consumption in half and, if it was done diligently, it wouldn’t be a big deal in terms of how it would affect people’s welfare. If we limit the scale of the economy, certainly there would be much higher energy costs, and so you just have to make adjustments now toward more efficiency. You would also have to address distribution or equity issues, but these examples show limiting scale doesn’t mean well-being has to suffer. I believe it could improve.
It’s also important to ask the parallel question. We’ve just looked at life in a steady-state economy, what does it look like in a continually growing economy? It wouldn’t look like it looks today, over time it would be increasingly different. As we continue to grow, the remaining biosphere becomes more scarce – less air, fewer trees and fish, and more congestion and pollution.
What Students Can Do
As a student taking an economics course, when something doesn’t seem right, raise questions about it. In a polite way, push the issue with the professor in class. For instance, students can ask, “Is it really defensible to base all of our theory on the notion that people are completely self-seeking atoms of utility maximization?”
Another thing students can build on is that economics does recognize a distinction between market versus public goods. Market goods are rival and excludable. My shirt is rival and excludable because it’s my property and if I wear it, you can’t wear it. Students can raise issues with how the whole set of goods that are non-rival are dealt with. Is the best way to deal with non-rival goods going around and making them more artificially excludable? Maybe they should be free? Where is the benefit from making knowledge artificially scarce? Many non-rival goods such as knowledge can be used sustainably in that we can all use a given piece of information as much as we want without using it up.
Certainly, much knowledge could be transferred freely to benefit the developing world. But instead, we see the opposite happening under free market ideology: “free trade” agreements include provisions on “trade related intellectual property rights” (TRIPS). This is not about free trade so much as it is an attempt to police us intellectual property rights worldwide by using the sanction of trade restriction.