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.
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.
This Pioneering Economist Says Our Obsession With Growth Must End
“It’s a false assumption,” argues Herman Daly, “to say that growth is increasing the standard of living in the present world.”
www.nytimes.com