This Pioneering Economist Says Our Obsession With Growth Must End

cigaretteman

HR King
May 29, 2001
72,322
52,014
113
Growth is the be-all and end-all of mainstream economic and political thinking. Without a continually rising G.D.P., we’re told, we risk social instability, declining standards of living and pretty much any hope of progress. But what about the counterintuitive possibility that our current pursuit of growth, rabid as it is and causing such great ecological harm, might be incurring more costs than gains? That possibility — that prioritizing growth is ultimately a losing game — is one that the lauded economist Herman Daly has been exploring for more than 50 years. In so doing, he has developed arguments in favor of a steady-state economy, one that forgoes the insatiable and environmentally destructive hunger for growth, recognizes the physical limitations of our planet and instead seeks a sustainable economic and ecological equilibrium. “Growth is an idol of our present system,” says Daly, emeritus professor at the University of Maryland School of Public Policy, a former senior economist for the World Bank and, along with the likes of Greta Thunberg and Edward Snowden, a recipient of the prestigious Right Livelihood Award (often called the “alternative Nobel”). “Every politician is in favor of growth,” Daly, who is 84, continues, “and no one speaks against growth or in favor of steady state or leveling off. But I think it’s an elementary question to ask: Does growth ever become uneconomic?”


There’s an obvious logic to your fundamental argument in favor of

a steady-state economy,1
1 One in which the population and the stock of capital no longer grow but, as John Stuart Mill has put it, “the art of living would continue to improve.”
which is that the economy, like everything else on the planet, is subject to physical limitations and the laws of thermodynamics and as such can’t be expected to grow forever. What’s less obvious is how our society would function in a world where the economic pie stops growing. I’ve seen people like Peter Thiel, for example,
say that without growth we would ultimately descend into violence.2
2 Speaking on the Portal podcast in 2019, the billionaire tech investor and libertarian-leaning conservative power broker said, “But I think a world without growth is either going to be a much more violent or a much more deformed world. . . . Without growth, I think it’s very hard to see how you have a good future.”
To me that suggests a fairly limited and grim view of human possibility. Is your view of human nature and our willingness to peacefully share the pie just more hopeful than his?
First, I’m not against growth of wealth. I think it’s better to be richer than to be poorer. The question is, Does growth, as currently practiced and measured, really increase wealth? Is it making us richer in any aggregate sense, or might it be increasing costs faster than benefits and making us poorer? Mainstream economists don’t have any answer to that. The reason they don’t have any answer to that is that they don’t measure costs. They only measure benefits. That’s

what G.D.P. is.3
3 More specifically, it’s the monetary value of the final goods and services produced by a nation.
There’s nothing subtracted from G.D.P. But the libertarian notion is logical. If you’re going to be a libertarian, then you can’t accept limits to growth. But limits to growth are there. I recall that
Kenneth Boulding4
4 An economist, longtime professor at the University of Colorado and former president of the American Economic Association. He died in 1993 at age 83.
said there are two kinds of ethics. There’s a heroic ethic and then there’s an economic ethic. The economic ethic says: Wait a minute, there’s benefits and costs. Let’s weigh the two. We don’t want to charge right over the cliff. Let’s look at the margin. Are we getting better off or worse? The heroic ethic says: Hang the cost! Full speed ahead! Death or victory right now! Forward into growth! I guess that shows a faith that if we create too many problems in the present, the future will learn how to deal with it.



Do you have that faith? [Laughs.] No, I don’t.


Historically we think that economic growth leads to higher standards of living, lower death rates and so on. So don’t we have a moral obligation to pursue it? In ecological economics, we’ve tried to make a distinction between development and growth. When something grows, it gets bigger physically by accretion or assimilation of material. When something develops, it gets better in a qualitative sense. It doesn’t have to get bigger. An example of that is computers. You can do fantastic computations now with a small material base in the computer. That’s real development. And the art of living is not synonymous with “more stuff.” People occasionally glimpse this, and then we fall back into more, more, more.


But how would a country continue to raise its standard of living without growing its G.D.P.? It’s a false assumption to say that growth is increasing the standard of living in the present world because

we measure growth as growth in G.D.P.5
5 Daly and others have proposed replacing G.D.P. with the Index of Sustainable Economic Welfare (I.S.E.W.), which takes various negative values into account as well as positive ones.
If it goes up, does that mean we’re increasing standard of living? We’ve said that it does, but we’ve left out all the costs of increasing G.D.P. We really don’t know that the standard is going up. If you subtract for the deaths and injuries caused by automobile accidents, chemical pollution, wildfires and many other costs induced by excessive growth, it’s not clear at all. Now what I just said is most true for richer countries. Certainly for some other country that’s struggling for subsistence then, by all means, G.D.P. growth increases welfare. They need economic growth. That means that the wealthy part of the world has to make ecological room for the poor to catch up to an acceptable standard of living. That means cutting back on per capita consumption, that we don’t hog all the resources for trivial consumption.






You said “make ecological room,” which brings to mind the arguments you’ve made about how we’ve moved from

an empty world to a full one.6
6 Which is to say a world in which nature’s capacity to regenerate is outpaced by the depletion of its resources.
But how do we
know that our world is full and that we’re operating near the limits of the planet’s ecological capacity? What I call the empty world was full of natural resources that had not been exploited. What I call the full world is now full of people that exploit those resources, and it is empty of the resources that have been depleted and the spaces that have been polluted. So it’s a question of empty of what and full of what. Is it empty of benefits and full of cost? Or full of benefits and empty of cost? That gets to that point of paying attention to the costs of growth.



Aren’t the serious difficulties that we’ve seen during past recessions or periods of stagnant growth indicative of what would happen in a steady-state economy? The failure of a growth economy to grow is a disaster. The success of a steady-state economy not to grow is not a disaster. It’s like the difference between an airplane and a helicopter. An airplane is designed for forward motion. If an airplane has to stand still, it’ll crash. A helicopter is designed to stand still, like a hummingbird. So it’s a comparison between two different designs, and the failure of one does not imply the failure or success of the other. But in order to move from our present growth economy to a steady-state economy, that’s going to imply some important design principles — some changes in the fundamental design.




 

cigaretteman

HR King
May 29, 2001
72,322
52,014
113
Let’s say that tomorrow the United States government says it recognizes the need for ecological balance and is going to

de-emphasize growth.7
7 Daly’s policy prescriptions for how this would happen include, among many ideas, establishing minimum and maximum income limits, setting caps for natural-resource use and, controversially, stabilizing the population by working to ensure that births plus immigration equals deaths plus emigration.
Wouldn’t every other country have to make the same decision for it to have the desired ecological effect?
That’s a very difficult question. If you try to enact laws for counting the ecological costs of your production in the United States and then you enter into trading relations with another country that does not count the costs, they have a competitive advantage. They may ruin themselves in the long run, but in the short run they’re going to undersell you. This creates huge problems for the free traders because the answer to the problem is to have a tariff to protect the U.S. industry. At one time I would have tended to favor moving toward a global government. I don’t know what changed my mind. Perhaps spending six years at the World Bank made me think that global governance looks like a chimera. I think you’re stuck with nation-states. But this is globalism versus internationalism. Globalism says to erase national boundaries. Let’s have one global system that we manage globally. Internationalism says national boundaries are important, but they’re not the ultimate thing. This was the philosophy behind the
Bretton Woods agreements.8
8 The International Monetary Fund and the World Bank have their beginnings in meetings held by officials from the United States, Britain and other countries in Bretton Woods, N.H., in 1944.
We said we have a world of interdependent nations, which are fundamentally separate but try to be cooperative. That’s the model that we’re stuck with. So the best road forward is for nations to try to move toward a steady state and accept the fact that you’re going to need to have some tariffs and hope that the resulting benefits are sufficient to convince other nations to follow suit.



A lot of what you’re talking about has to do with getting humanity — from individuals to corporations to governments — to accept the idea of having “enough” and that constraining the ability to pursue “more” is a good thing. Those ideas are basically anathema to modern Western society and, especially, certain notions of liberty. So what would the inflection point or mechanism be that might move people away from that mind-set of “more”? So, how do you envision a successful steady-state economy? First, back up and say, How do you envision a successful steady-state Earth? That question is easier because we live in one. Earth is not expanding. We don’t get new materials, and we don’t export stuff to space. So you have a steady-state Earth, and if you don’t recognize that, well, there’s an education problem. But again, there’s this heroic ethic and economic ethic. Maybe the heroic ethic is the right one, but religion’s counsel is to pay attention to the cost. Don’t make people worse off.



Do your religious beliefs influence your economic ideas? I’ll start with the second part of that question. When you study economics, you’re looking at the relationship between ends and means. You want to allocate your means so as to maximally satisfy your ends. But traditionally economics has begun with what I would call intermediate means and intermediate ends. Our intermediate ends might be a good diet, education, a certain amount of leisure, health — the benefits of wealth. We dedicate our means toward these intermediate ends. Our intermediate means are commodities that we’re able to produce: food and industrial goods, education. Economics is going from intermediate means, which are limited, to intermediate ends, which economics says are unlimited. I say, let’s not just talk about intermediate means. Let’s ask what our ultimate means are. What is necessary to satisfy our ends and which we ourselves cannot make but must take as given? Is there an answer to such a big question? I think there is. I learned from my old professor

Georgescu-Roegen9
9 The Romanian economist Nicholas Georgescu-Roegen, who taught Daly at Vanderbilt University and who is best known for his work “The Entropy Law and the Economic Process,” published in 1971.
that it’s matter and low-entropy energy. You need matter and energy to accomplish your physical ends. But the first law of thermodynamics says that matter and energy can never be destroyed or created. You can change its form, and all processes change that form from low-entropy, useful energy to high-entropy, useless energy. Our ultimate means are constrained by the entropy law. But is there an ultimate end? That’s harder to answer.



Can you give it a shot for me? I think we’re all in the position where we have to try to answer it for ourselves. But I can rule out the current answer, which is that growth is the ultimate end. Now, instead of that you could say spiritual improvement is the ultimate end. That gets you into fundamental religious questions: What is the meaning of life? Where did I come from? What’s going to happen when I die? These are questions people used to think of as fundamental. Now they’re marginal, unscientific. My critique of economics as it exists today would be that it is too materialistic because it does not consider the relationship between the ultimate ends and the intermediate ends. At the same time, economics is not materialistic enough because it also refuses to deal with the ultimate means. It doesn’t ask questions about the fundamental limits of the entropic nature of the world, of matter and energy and adapting to these physical limits.


Let me stick with ultimate ends for a second. What do you think the meaning of life is? Everyone has an answer to that, even if it’s just to punt, but I’m a Christian. I do think there’s a creator. I don’t think that you can say life is an accident, which is really what scientific materialism says. Neo-Darwinism has gotten a free ride philosophically for a long time. When you calculate the compound probability of all these infinitesimally probable events happening at once to generate life, it becomes quite absurd. The Neo-Darwinist types say, “Yes, we accept that, that’s mathematics.” It’s totally improbable that life should have originated by chance in our universe. “But we have infinitely many unobserved universes!” Infinitely many universes, unobserved? “Mathematically it could have happened!” And our universe is the lucky one? They look down their noses at religious people who say there’s a creator: That’s unscientific. What’s the scientific view? We won the cosmic lottery. Come on.


You’ve spent a lifetime arguing rationally and diligently for your ideas, and

there is real discussion happening about alternatives to an economy predicated solely on growth.10
10 By economists like Tim Jackson, Kate Raworth, Giorgios Kallis, Dietrich Vollrath and the Nobel laureates Abhijit Banerjee and Esther Duflo.
But growth is still king. Is that at all disappointing?
My duty is to do the best I can and put out some ideas. Whether the seed that I plant is going to grow is not up to me. It’s just up to me to plant it and water it. Of course, I don’t think burning the world is ethically mandated by the ultimate end, so I like to see the ideas of ecological and steady-state economics move forward. But you’re asking about disappointment. I get a lot of criticism in the sense of “I don’t like that; that’s unrealistic.” I don’t get criticism in the more rational sense of “Your presuppositions are wrong” or “The logic which you reason from is wrong.” That is a disappointment. Georgescu-Roegen made many of the same arguments, and he was also completely ignored. In his case he had made other contributions to mathematical economics, which should have given credibility to his more radical ideas but didn’t. I lacked that independent thing, so it’s even more unlikely I would be taken seriously. But unlikely things do happen.
 
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Titanhawk2

HR Legend
Jul 14, 2011
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How about our government's obsessions with "moving" our society forward? Our society was not created or improved by our government. Why do people continually want our government to "transform" us?
 

seminole97

HR Legend
Jun 14, 2005
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“John Stuart Mill has put it, “the art of living would continue to improve.”
which is that the economy, like everything else on the planet, is subject to physical limitations and the laws of thermodynamics and as such can’t be expected to grow forever.”


The growth of value is not limited by anything physical.
That observation fails to grasp that value is subjective, not objective.
A canvas and a palette of oil paints is easily valued less than $100.
Unless Monet used those paints on a canvas, then what is the value?
Is it really determined by the amount of paint applied? Or the size of the canvas?

We had this discussion when Rudy was pimping ‘de-growth’.
Take a laptop computer and imagine dividing it into its constituent elements (copper, silicon, carbon, etc). As piles of physical matter would the value of it approach even $5? You’d probably pay someone to clean it up. But apply the accrued wisdom of mankind to those elements and arrange them in a way that others find useful and suddenly you have a computer worth over a thousand dollars.
Was the limitation on value ever actually material scarcity?
 

Finance85

HR Legend
Oct 22, 2003
18,269
19,657
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Economic growth is the result of adding value to goods. The greatest growth is via the manufacturing process. A 100% service economy is simply passing around the same dollars. Theoretically, increases in the money supply are a reflection of economic growth. Increases in the money supply without economic growth leads to inflation, and in some cases hyperinflation.

When it comes to government spending, the popular liberal solution is to raise rates on higher incomes. This solution will never raise as much tax revenue as simply growing the economy. That takes us full circle to greedy politicians and history. History has proven that while tax revenue is maximized though economic growth, politicians will increase spending even more. This was shown to be true in the late 1980's in the US, and again in Ireland in the 1990's.

I personally think people in the US are too focused on materialism. I also believe too many people think consumer spending drives the economy more than production, though I understand how that notion exists in a vacuum, and the resulting trade deficits with producer countries.

In summary, current fiscal policy in the US won't allow us to not put an emphasis on economic growth unless we want to see high inflation.
 

desihawk

HR Heisman
Oct 1, 2002
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1. the idea is reasonable but not implementable. not every country will sign on and nobody wants to lose out.
2. this will become doable however once we start to colonize other planets.
 

billanole

HR Legend
Mar 5, 2005
12,236
13,328
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Growth for growth’s sake ($$$) is the fool’s bargain.

Growth that perpetuates healthy living and an “all needs are met” system seems so foreign to many.
 

sober_teacher

HR Legend
Mar 26, 2007
13,991
17,460
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How about our government's obsessions with "moving" our society forward? Our society was not created or improved by our government. Why do people continually want our government to "transform" us?

Conversely, what about people who want to use government to prevent society from evolving?

I don’t disagree with your premise that change cannot necessarily be forced - tho I’d argue that government interfering to end segregation is one situation that was warranted. Change for the sake of change shouldn’t be the point of progressives.

But I’ve also had the sense for awhile that conservatives are also overly focused on the idea that any change is bad.
 
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