Thought Control in Economics

Herman Daly

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.

On Growth

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.

Comments on the article “Herman Daly”

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Anonymous

I was just mentioning to my children today that if anyone doubted global warming, they haven't walked across an asphalt parking lot in Florida during the month of August. No wonder there is warming, with paving every spot of Earth and cutting down so many trees

Anonymous

I was just mentioning to my children today that if anyone doubted global warming, they haven't walked across an asphalt parking lot in Florida during the month of August. No wonder there is warming, with paving every spot of Earth and cutting down so many trees

John Fernbach

I love Herman Daly's dedication to showing up the fallacies of the growth illusion; it's something he's been doing for a generation, and doing well.

I believe all would-be leftists, revolutionaries, insurrectionists, counter-culturalists, and even mild reformers have a collective need to learn from him.

OTOH in his earlier works, at least, Prof. Daly has made a case for a "no growth" or "steady state" economy within a basically capitalist context, and I wonder if that is logically conceivable. I think it's not. Adam Smith in "The Wealth of Nations," in his chapter on the wages of labor and how wages are determined, essentially concludes that wages are adequate and life is comfortable for working people ** only ** under conditions of fairly rapid economic growth.

Only when a market society is in a "progressive state," or rapidly growing, Adam Smith wrote, will the demand for labor be high enough, relative to the supply of labor, for the ordinary worker to be able to negotiate a fair wage from the boss. When the economy is neither growing nor shrinking, Smith wrote, living standards are mediocre, because labor is plentiful and the boss can offer his employees fairly low wages on a "take it or leave it" basis. When the economy is shrinking, in the absence of a modern welfare state at least, Adam Smith thought the working people were likely to starve.

Marx in his analysis of capitalism reached essentially the same conclusion, and with the exception of John Stuart Mill, most students of capitalism since the days of Marx and Mill have agreed with Adam Smith on the desirability & indeed the ** necessity ** of growth.

I'm something of a materialist, but I think one problem with the "steady state" paradigm as promoted by many environmentalists & many anarchists is that we make a preference for Dr. Daly's ideas into a moral & ethical choice, into a test of individual virtue: will you, Jane American Consumer, selfishly continue your evil & greedy ways and support suicidal forms of growth? Or will you repent of your wickedness & embrace a no-growth future out of ethical responsiblity to Mother Earth?

It is important to repent of our evil consumerist ways, I think, and ecological virtue is essential. But what Adam Smith's analysis of the labor market suggests to me is that we can't embrace a "no-growth" future w/o also bankrupting our society and destroying jobs for the poor -- unless, that is, we both question & effectively organize to alter the normal rules of capitalism, especially those rules governing the hiring and compensation of labor.

Are there some knowledgeable "steady state" economists who can provide a plan on how do that last part? And if such politically savvy no-growth economists exist, can we get them talking to the more apolitical environmentalists, so that we can build a majority movement to create a no-growth economy that's truly workable for all?

John Fernbach

I love Herman Daly's dedication to showing up the fallacies of the growth illusion; it's something he's been doing for a generation, and doing well.

I believe all would-be leftists, revolutionaries, insurrectionists, counter-culturalists, and even mild reformers have a collective need to learn from him.

OTOH in his earlier works, at least, Prof. Daly has made a case for a "no growth" or "steady state" economy within a basically capitalist context, and I wonder if that is logically conceivable. I think it's not. Adam Smith in "The Wealth of Nations," in his chapter on the wages of labor and how wages are determined, essentially concludes that wages are adequate and life is comfortable for working people ** only ** under conditions of fairly rapid economic growth.

Only when a market society is in a "progressive state," or rapidly growing, Adam Smith wrote, will the demand for labor be high enough, relative to the supply of labor, for the ordinary worker to be able to negotiate a fair wage from the boss. When the economy is neither growing nor shrinking, Smith wrote, living standards are mediocre, because labor is plentiful and the boss can offer his employees fairly low wages on a "take it or leave it" basis. When the economy is shrinking, in the absence of a modern welfare state at least, Adam Smith thought the working people were likely to starve.

Marx in his analysis of capitalism reached essentially the same conclusion, and with the exception of John Stuart Mill, most students of capitalism since the days of Marx and Mill have agreed with Adam Smith on the desirability & indeed the ** necessity ** of growth.

I'm something of a materialist, but I think one problem with the "steady state" paradigm as promoted by many environmentalists & many anarchists is that we make a preference for Dr. Daly's ideas into a moral & ethical choice, into a test of individual virtue: will you, Jane American Consumer, selfishly continue your evil & greedy ways and support suicidal forms of growth? Or will you repent of your wickedness & embrace a no-growth future out of ethical responsiblity to Mother Earth?

It is important to repent of our evil consumerist ways, I think, and ecological virtue is essential. But what Adam Smith's analysis of the labor market suggests to me is that we can't embrace a "no-growth" future w/o also bankrupting our society and destroying jobs for the poor -- unless, that is, we both question & effectively organize to alter the normal rules of capitalism, especially those rules governing the hiring and compensation of labor.

Are there some knowledgeable "steady state" economists who can provide a plan on how do that last part? And if such politically savvy no-growth economists exist, can we get them talking to the more apolitical environmentalists, so that we can build a majority movement to create a no-growth economy that's truly workable for all?

Robyn Bracey

Hi John Fernbach,

That's an impressive, articulate analysis.. so good to read.

Yes, that's a key question.. how to transfer to a steady state economy without causing economic mayhem - given the way our economy is presently set up.

An economist who's doing good work on this is Peter Victor - Canadian. He wrote 'Managing without Growth; Slower by design and not by disaster' (2008)

Another recent, exciting work is the UK Sustainable Development Commission's report in March this year - "Prosperity without Growth?" authored by Prof Tim Jackson. This draws on Victor's concepts but has much else besides. It's a really superb work in my opinion.

Victor developed a model for transition to a steady state economy in Canada, without huge hardship/unemployment etc, over a 30 year span. We might need something a little quicker than that . But still, it's a start. Apparently one idea of Victor's is the need for greater job sharing or something. Sorry I'm so vague. Obviously we need many more economists doing this crucial work. I think the whole underlying idea is that societies can't make this transition to a steady state economy unless they also put in place certain adjustments at the macro economic level, which will deal with the predictable effects of coming off a growth economy..

best wishes

Robyn Bracey

Hi John Fernbach,

That's an impressive, articulate analysis.. so good to read.

Yes, that's a key question.. how to transfer to a steady state economy without causing economic mayhem - given the way our economy is presently set up.

An economist who's doing good work on this is Peter Victor - Canadian. He wrote 'Managing without Growth; Slower by design and not by disaster' (2008)

Another recent, exciting work is the UK Sustainable Development Commission's report in March this year - "Prosperity without Growth?" authored by Prof Tim Jackson. This draws on Victor's concepts but has much else besides. It's a really superb work in my opinion.

Victor developed a model for transition to a steady state economy in Canada, without huge hardship/unemployment etc, over a 30 year span. We might need something a little quicker than that . But still, it's a start. Apparently one idea of Victor's is the need for greater job sharing or something. Sorry I'm so vague. Obviously we need many more economists doing this crucial work. I think the whole underlying idea is that societies can't make this transition to a steady state economy unless they also put in place certain adjustments at the macro economic level, which will deal with the predictable effects of coming off a growth economy..

best wishes

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