EcoAxes

Cuyp's settled Dutch countryside: prosperity without growth, Mill's "stationary state".

Aelbert Cuyp, Dutch: Rivierlandschap met ruiter en vee River Landscape with Horseman and Peasants, 1658

EcoAxes / Included ideologies / Liberal, reformist and market environmentalism

Economic theory and policy programme

Steady-State Economics

Herman Daly's proposal for an economy of constant physical size. Policy holds population and the stock of capital at sustainable levels, and the economy keeps improving in quality while it stops growing in quantity, with markets working inside physical limits set by society as a whole.

Key figures
Herman Daly, John Stuart Mill (antecedent), Nicholas Georgescu-Roegen (antecedent), Kenneth Boulding, Brian Czech

Where it stands

  1. Environmental EthicsAnthropocentrismEcocentrism
  2. Economic PhilosophyGreen GrowthPost-Growth
  3. Resource OwnershipPrivate StewardshipCommons Governance
  4. Environmental AuthorityCentralized AuthorityLocal Autonomy
  5. Environmental JusticeAggregate OutcomesDistributive Justice
  6. Technological OutlookTechnological OptimismEcological Precaution
  7. Energy PhilosophyEnergy AbundanceEnergy Sufficiency
  8. Global ResponsibilityNational SovereigntyInternational Ecological Obligation
  9. Ecological Political PriorityIncremental ReformTransformative Change

Daly's programme is explicit on scale, energy and distribution, and on the use of markets within caps; it is national in orientation and sceptical of free trade, which places it toward national sovereignty.

Definition

A steady-state economy keeps its physical size constant at a level the ecosystem can sustain. Its size means the stock of people and of things, and the flow of matter and energy that keeps them going, which Daly called “throughput”. Within that limit, knowledge, technology, quality and fairness of distribution keep improving.

Herman Daly, the economist most associated with the idea, separated growth, an increase in physical size, from development, an improvement in quality. Growth must end, he argued, while development can go on. Society reaches the steady state and holds it there by setting collective limits on scale, and markets allocate resources within those limits.

Historical development

John Stuart Mill welcomed an end to growth as the condition for a better life, in the chapter “Of the Stationary State” in his Principles of Political Economy (1848). Kenneth Boulding’s “The Economics of the Coming Spaceship Earth” (1966) and Nicholas Georgescu-Roegen’s economics of entropy (1971) supplied the physical argument.

Daly set out the programme in Steady-State Economics (1977). His later work, including Beyond Growth (1996) and Ecological Economics, written with Joshua Farley (2004), made it the core of ecological economics, a discipline he helped found. Peter Victor’s Managing Without Growth (2008) and Tim Jackson’s Prosperity Without Growth (2009) brought the argument to people who make policy. The degrowth movement acknowledges Daly as a source.

Principal claims

  • The economy is part of a finite biosphere. Its physical growth has to stop at a size the biosphere can sustain.
  • Three problems must be dealt with, in order. Ecological limits set scale, justice sets distribution, and markets handle allocation.
  • Past a certain point growth becomes “uneconomic”: it costs more in lost natural and social capital than it adds.
  • The steady state is not stagnation. Development, invention and improvement carry on.
  • Society as a whole should set the limits and enforce them through quotas, caps and taxes, with markets working inside them.

Policy implications

Steady-state economists propose systems that cap resource depletion and pollution, auction the permits and allow trading. They want taxes moved off labour and onto the use of resources, limits on inequality including maximum and minimum incomes, and a stable population. They favour cutting throughput itself over relying on efficiency gains. In Daly’s version, national policies are protected from the pressures of free trade and mobile capital.

Internal disagreements

They disagree about whether a steady state can be reached under capitalism or needs its transformation, and about the role of population policy. They differ on how much the North has to shrink before holding steady, which is what separates the steady state from degrowth. Daly’s protectionism on trade is a minority view among ecological economists.

Criticisms and controversies

Growth economists argue that decoupling makes limits on scale unnecessary, and that an economy of fixed size would be unstable and politically impossible to keep. Degrowth thinkers argue that the North has to shrink before it can hold steady. Critics of population policy find that part illiberal. Free-trade economists reject the protectionism.

Supporters point to the growing body of evidence on the limits of decoupling.

Relationships to other traditions

Steady-state economics is the founding programme of ecological economics and the direct ancestor of degrowth, which made it more radical. It is a reformist relative of ecosocialism. It is the opposite of green growth and ecological modernisation, although it shares their respect for markets and prices as tools.

References and further reading

  • Daly, H. E. (1977). Steady-State Economics. W. H. Freeman.
  • Daly, H. E. (1996). Beyond Growth: The Economics of Sustainable Development. Beacon Press.
  • Daly, H. E. and Farley, J. (2004). Ecological Economics: Principles and Applications. Island Press.
  • Jackson, T. (2009). Prosperity Without Growth: Economics for a Finite Planet. Earthscan.
  • Mill, J. S. (1848). Principles of Political Economy, Book IV, Chapter VI, “Of the Stationary State.”