Beyond Growth The Economics of Sustainable Development

Beyond Growth The Economics of Sustainable Development


  • Paperback
  • 254 pages
  • Beyond Growth The Economics of Sustainable Development
  • Herman E. Daly
  • English
  • 11 May 2016
  • 9780807047095

10 thoughts on “Beyond Growth The Economics of Sustainable Development

  1. Terence Terence says:

    I finished this last week and have been dithering since then with notes and possible angles for addressing the arguments in the bookWell no delay I will post the review Eventually Just not today Anyone who has followed my recent nonfiction reading may have seen a theme – a focus on the deteriorating conditions for life on this planet While the subject has been of interest for a long time my latest venture into it began with Derrick Jensen’s Endgame both volumes Jensen is angry and radical Not only does he predict the imminent end of industrial civilization but he wants people to actively bring it about since the longer we maintain it the worse the aftermath My reading continued with Spencer Wells’ Pandora’s Seed where the author traced many of the problems we’re dealing with today to the Agricultural Revolution which fundamentally transformed how humans lived and interacted with their environment Unlike Jensen Wells finds cause for hope in technology that could ameliorate or reverse the damage we’re inflicting on the ecosystem Herman Daly’s Beyond Growth deals with the same problems from an economist’s POV He’s not angry and he’s radical only to the extent that he believes the current neoliberal growth oriented economic consensus makes no sense and has reached a point of rapidly diminishing returns I don’t think he would advocate blowing up dams or toppling cell phone towers á la Jensen Rather like Wells Daly sees hope that we can contrive a way of life that preserves a decent standard of living for everyone Introduction The assumption of most economists from all schools is that the economy is an open ended system capable of eternal growth There may be disputes about how best to distribute wealth and to allocate resources efficiently but that wealth would always increase and that there would be sufficient resources to fuel it were givens In a pre industrial and early industrial world this was a defensible position The scale of human activity was such that the ecosystem it was a part of could renew itself or absorb the waste and there were plenty of niches yet to be exploited The “golden age” of industrial civilization is coming to an end Scale – the heretofore ignored third leg of the economy – is making considerations of allocation and distribution irrelevant It’s simply not possible to grow into greater prosperity for the near 7 billion people who are living on the planet at the time of this review 2011 It wasn’t possible for the 5 billion living at the time of the book’s writing 1996 And it won’t be possible for the 9 billion who’ll be here by 2050 As Daly might phrase it There is not enough low entropy input and too much high entropy output to support an American style uality of life for the entire planet and even within developed nations many are slipping below even that levelDaly wants to convince readers that we have to contemplate and implement a fundamental shift away from a growth economy to a development economy one that focuses on ualitative improvements instead of uantitative ones and balances exploitation of resources with the need of future generations In this book Daly doesn’t discuss the details of such an economy Here he wants to prove that the current model is unsustainable and describe an overall framework for sustainable development SD which “meets the needs of the present without sacrificing the ability of the future to meet its needs” p 1The introduction distills Daly’s conception of SD into 15 principles which he elaborates upon subseuently1 Preserve and restore natural ecosystems reduce humanity’s footprint on the planet2 Economic development environmental protection and social euity must be balanced against each other3 Private markets can efficiently solve the problem of allocation but they must operate within boundaries of scale and euitable distribution that can only be resolved by communities in their political and social institutions4 Population growth must be controlled5 Consumption must be reduced Limit halt growth to force the development of greater efficiencies6 Reducing poverty is impossible without a euitable distribution of wealth and a significant reduction in the number of consumers7 All segments of society must share environmental costs and benefits8 All economic and environmental decision making must consider future generations and preserve for them the same or greater range of choices as the present9 Where there is damage to public health or the environment the costs should be borne by the consumer of the commodity not the public at large10 SD acknowledges that depreciation of natural capital is just as much a cost as the classical idea of depreciating human made capital11 Countries pursuing SD policies are less likely to go to war Countries operating under the classical paradigm will inevitably come into conflict with others as they compete for dwindling natural capital12 SD is easiest to achieve in a free society13 SD policies must be debated by an informed public14 Technologies that reduce consumption andor increase efficiencies are beneficial and should be encouraged Not all technologies are beneficial15 SD must be tied to national policy and resists “globalization” Unrestricted free trade promotes a race to the bottom in terms of wages and environmental abuse and it weakens a nation’s ability to govern itself Multinationals with no interest in local concerns and focused on short term maximization of profit take overThe final chapters of the book are a departure from the relatively soul less analysis of the preceding pages In these final pages Daly suggests that the only way to convince enough people of the need for SD is to appeal to their spirituality – their sense of purpose Science is excellent at accumulating data and explaining process but it can’t make any claims toward an ultimate purpose On the contrary most scientists actively eschew such a role It’s only by making the preservation of life – and not just human life – a sacred obligation that we can hope to bring civilization within sustainable boundaries and hope to ensure a reasonably good uality of life for everyone and their descendants Economic Theory and Sustainable Development Part one discusses the outlines of what Daly calls the “steady state economy” SSE SSEs grow to the sustainable limits of their ecosystem at which point any enhancements to productivity are ualitative rather than uantitative Dale shies away from the details of a SSE except to say that it would maximize a “good life” for everyone that is indefinitely sustainable There are two arguments for preferring a SSE to a growth economy GE The first is based on physical law especially the second law of thermodynamics A GE extracts resources and produces waste Technological innovation has so far managed to keep ahead of resource depletion but only by substituting one resource for another andor at the expense of the ecosystem eg the Green Revolution expanded crop yield but at the cost of chemical pollution limiting seed choice erosion destruction of vital ecosystems and population growth that is now outstripping carrying capacity There is also an ethical argument against GEs The desirability for growth in the present is based on the theft of resources for the future Growth crowds out other species whose existence is vital for environmental health eg mounting evidence that marine phytoplankton upon which the entire oceanic food chain depends is failing A third consideration is that while absolute wants food shelter health etc are limited ie a consensus of what is sufficient is possible relative wants access to of what everyone else has are not and the driving demand for aggregate growth corrodes moral standards by encouraging the baser instincts in the human soulA final consideration arguing against a GE is the “cult of money” – which manifests as in increasing distance between money the symbol of production and the commodities it’s meant to represent Daly traces four stages in the development of an economy The first is the barter stage a simple exchange of commodities C C’ At some point as economies grow money becomes a medium for exchange but it still represents something real C M C’ The third stage is capital circulation Theoretically the money changing hands represents real or future wealth but the transaction focuses on the exchange of money M C M’ As long as the cash economy doesn’t overwhelm its ecosystem stage 2 and 3 look a lot alike But the former inevitably reaches a physical limit; a limit that doesn’t restrain money The final stage – the paper economy – cuts the ties between reality and exchange and profit is measured by the manipulation of figures M M’ The system can stumble along fairly well as long as the participants have confidence in the future productivity of the economy When that’s lost however you have “hiccups” the Great Depression the ‘70s oil shock the financial collapses of the Asian Tigers and Mexico in the ‘90s the dotcom implosion at the turn of the century and the ongoing meltdown that began in 2008 The hiccups are coming freuently are of greater scope and the recoveries benefit fewer and fewer people as the human economy continues to crowd out the overarching ecosystemThere are a few points Daly makes that he’ll elaborate on in future chapters The first is that gross national product GNP – the chief metric of economic health at least in the media and in political debate – is hokum It’s a measure of capital consumption and a poor reflection of reality So poor in fact that Daly advocates abandoning it entirely The second point is that by ignoring scale in their economic fantasies free market enthusiasts and classical economists make the commandcentralized economies they abhor inevitable as resources natural capital become scarcer and the actors scramble to secure them eg the mounting tensions among the nations bordering the Arctic Sea as melting ice makes its resources accessible The final point is that in a SSE the ultimate goal of policy should be to minimize production and consumption in order to maintain the capital stock Operational Policy and Sustainable Development In this section Daly shows that natural capital has become the limiting factor in the production of wealth and argues that pro growth policies that refuse to recognize this are becoming increasingly uneconomical and destructive In their place he presents four new policies1 Stop counting the consumption of natural capital as income It should rather be treated as a cost in so far as they are nonrenewable andor over exploited2 Tax labor and income less and resource throughput ; thus shifting the cost of manmade exploitation closer to the source3 Maximize productivity of natural capital ualitative development4 Abandon free trade ideology in favor of localregional developmentThis last point is Daly’s most radical as it flies in the face of 30 years of global economic policy but it’s necessary to restore some measure of control to communities that have lost it to multinationals and it strengthens institutions capable of and interested in carrying out policies for the common good He uotes Keynes “I sympathize therefore with those who would minimize rather than those who would maximize economic entanglement between nations Ideas knowledge art hospitality travel – these are the things which should of their nature be international But let goods be homespun whenever it is reasonably and conveniently possible; and above all let finance be primarily national” p 93 National Accounts and Sustainable Development One of the Daly’s least attractive features as a writer is that he too often writes like the World Bank bureaucrat he once was Thus a reader must endure acronyms and formulae – lots of acronyms lots of formulae In this section we are introduced to yet another one – ISEW – the index of sustainable economic welfare which is meant to replace GNP as a measure of economic health It would incorporate measures of consumption income distribution depletion of natural resources and debt levels among other measures While not a perfect reflection ISEW still accurately reflects the uality of life vs GNP Measuring economic health by the ISEW Daly charts a parallel rise with GNP through the mid ‘70s In the ‘70s the GNP continued to grow but ISEW flattened out and from the ‘80s it has declined relative to GNPISEW’s decline illustrates the overgrowth of the developed world – it can only sustain itself by exploiting natural capital from abroad not only denying them to the future but denying them to many in the present The outcome uoted from Global 2000 Report to the President from 1980 is that “if present trends continue the world in 2000 will be crowded polluted less stable ecologically and vulnerable to disruption than the world we live in now Despite greater material output the worlds’ people will be poorer in many ways than they are today” Daly notes that in order to provide an American lifestyle to the 5 billion living at the time of writing 1995 would involve a seven fold increase in the exploitation of natural resources Population and Sustainable Development Daly looks at carrying capacity in section 4 – the optimum number of people in a SSE Beyond the moral uandaries of population control human carrying capacity is difficult to determine because four relatively constant controlling factors among other animals become variables with us Among nonhumans1 Standards of living are relatively stable over time2 Relatively uniform per capital resource consumption3 Technologies are endosomatic and adapted to the environment by and large chimpanzees for example are known to use tools4 The level of exchange between species is constantThe import of humans being able to control or strong influence these factors has been a population explosion that long ago passed the point of sustainability and now impoverishes the majority consuming natural capital like a cancerAs with his position on global trade of which below Daly’s on population is 180 degrees from the current “wisdom” at least in America Any rational population policy would promote zero if not negative growth – a diminution of the human presence Such a policy would also preserve or increase carrying capacity by appropriate uses of land redistribution of resources to satisfy basic needs and investment in moving to renewable resources A first step in limiting population is the democratization of birth control – from education to contraception to abortion The best options have to be available to everyone International Trade and Sustainable Development In this section Daly returns to the baleful impact of free trade and expands on the case against To begin there is the cost of transportation which consumes nonrenewables to move commodities over enormous distances Where communities come to depend upon distant markets they become vulnerable to developments outside their control Globalizing economies reduces the range of livelihoods within a community and entail a social cost hard to uantify and thus ignored in economic analyses And finally there is a standards lowering competition to externalize costs The proverbial “race to the bottom” in environmental standards workings conditions and wages The two objections to this analysis that Daly considers the most serious are that growth will compensate and Ricardo’s law of comparative advantage To the first he recaps all that has come before to show that “growth” will not compensate as there’s no place to growth into To the second which suggests that countries should specialize Daly points out that Ricardo assumed that capital was immobile In a free trade world capital if free moving and follows the law of absolute advantageAnd just as free capital weakens community control and social cohesion so too does free labor Both free labor and capital might make sense in a global economy with global standards on wages environmental protection etc but there are no such things and no acceptable enforcement mechanism is there wereFree trade conflicts with getting prices “right” as responsible nations that internalize costs lose business to those less responsible Open trade eualizes profit and labor – the former upward the latter downward Free trade removes ownership control from regional concerns A true international community – as opposed to the current footloose class of money managers who make up short term coalitions of economic interest – would be a federation of regionally focused economies Free trade results in huge trade imbalances and unsustainable debt Europe 2011; America 2012? Free trade violates scale Participating GEs preserve consumption by importingexporting among themselves but inevitably run up against environmental limits By globalizing the scale of economic activity every country hits the limits at the same moment causing unmanageable catastrophic problems worldwide as opposed to hopefully manageable local onesDaly concludes with the observation that SD demands an economic sophistication we’re not capable of at the moment and we may have reached a point where we have little luxury for experimentation Two Pioneers in the Economics of Sustainable Development Part six comprises two essays about Daly’s intellectual mentors – Frederick Soddy 1877 1956 major work Wealth Virtual Wealth and Debt and Nicholas Georgescu Roegen 1906 1994 major work The Entropy Law and the Economic ProcessSoddy was originally a chemist but became interested in economics when he contemplated how atomic energy would be used – primarily for war – and wondered why the economic system made that inevitable and how that could be changed He argued that economists ignored the physical basis of the economy – that all life depends upon using energy Up to the Industrial Revolution humans relied upon energy “revenue” immediately available and difficult to store The industrial age allowed massive exploitation of energy “capital” Economists also confuse “wealth” with “debt” Wealth is a positive physical uantity Debt is a mathematical abstraction Wealth is limited by the ecosystem Debt is unlimited as long as people trust each other to continue paying it At some point wealth reaches its physical limit but debt continues to grow The result is debt repudiation inflation bankruptcy and confiscatory taxationSoddy concluded that allowing wealth and debt to get a divorce my analogy not Soddy’s has led to an ultimately unsustainable situation that promotes violence instability and ineuitable socialeconomic hierarchies Concluded in the Comments section


  2. Jonathan Jonathan says:

    Herman Daly's preanalytic vision is that the economy is a open growing sub system of a finite closed ecological system This may sound like jargon but the implication of accepting such a concept is portentous for the economic and political consensus Put simply further economic growth is increasingly unsustainable as we approach a full world and an alternative economic model is needed The answer according to Daly is to move towards a steady state economyA steady state economy Daly explains is one where capital stocks remain constant and population growth is kept at a sustainable level Such a model allows for development ualitiative improvement but not growth uantitative increase The means of achieving development but not growth according to Daly include ecological tax reform a cap and trade system which sets a limit to overall pollution minimum and maximum income levels measures to constrain population growth and besides Such measures are inevitably contentious the idea of limiting population growth is far from politically correct on the right or the left neither is the idea of an increased emphasis on redistribution including maximum income levels currently increased growth is predominantly seen as the means of mitigating class conflict thus dodging the issue However Daly argues that optimal scale of the economic sub system has already been reached meaning an alternative is imperative Yet such ideas are not new Daly has been championing them in one form or another for many years whilst the mainstream of economics continues to stick its fingers in its ears The uestion is as crises start to bite in coming years will the politically inconceivable limitations on economic growth be forced onto the agenda?


  3. Bill O& Bill O& says:

    Daley is a pioneering economist here exposing the absurdity our pursuit of infinite economic growth on a finite planet The reading is a bit theoretical at times but Daly is a decent writer and his main point is well made Most standard macroeconomics models and hence most standard texts assume that natural resources are a subset of the human economy when in fact it is the other way around His suggestions for a way forward put faith in the market economy than I think is warranted but he does have some interesting ideas like pricing nonrenewable resources at the price of the next cheapest renewable euivalent


  4. Elinor Hurst Elinor Hurst says:

    This is a book that I will keep and re read and dip into from time to time as a first principles bible of sustainable economicsOthers have complained that this book was a dry read and it is true that it is dense but for me it was a pleasure to read as the concepts explained within it were so logically and methodically laid out with the meticulousnous of a trained economistThe basic aims of economics need to be to address allocation efficiency distribution euity and scale sustainability Yet mainstream economics concerns itself almost solely with the first only peripherally and reluctantly with the second and not at all with the last This is Daly's crucial message of the book and he unpicks the flaws in conventional economic thinking along the way along with proposed solutions to the problem It is a disgrace that his message and proposals have been so roundly ignored by a largely moribund discipline and we find ourselves worse off than ever 20 years after this seminal book was published


  5. Jen Jen says:

    I gave this two stars because I didn't actually finish it and then I had to return it to the library I was hoping for a layman's guide to a sustainable economy but it seemed uite academic and dry The author spent a while complaining about some recommendations he had made for a report that weren't included Yawn It didn't help that the type was tiny Trying to save paper? I might give it another try at some point or look for something accessible I want to read about this because I really don't agree with the current culture of consumption is always better economic growth is always good


  6. Chris Chris says:

    Visionary economics that probably aren't taken seriously Ex World Bank economist Herman Daly makes newer arguments for Sustainable Steady State economics that he has been making since the early 70's The tragic flaw in current economic theory is in assuming that resource availability and waste removal is not finite that the economy is not properly considered as a subsystem of the overall ecosystem which leads invariably to economic growth policies as solutions to problems of development and distribution His concept of economic development rests not on increases in raw material throughput but rather increases in efficiency of production and sensitive mechanisms to shift production emphasisesWhat I find really interesting are his Marxist I think underpinnings and explicit spirituality He chastises the late and late biologists E O Wilson and Stephen Jay Gould for their antagonistic relationship with religion Daly seems to have a real problem with scientific materialism freuently citing JS Mill and Alfred North Whitehead the kind that seems to be the bedrock of most modern environmentalism I think his ideas are ultimately justified spiritually rather than by mutual self interest schemes a course which even at the most cynical is far sighted Very interesting book


  7. Kenneth Kenneth says:

    Incredible book challenging many of the underlying assumptions of modern economic thought including the idea that all growth is good or that an economy can grow indefinitely Daly a former Chief Economist for the World Bank who left in disgust seems likely to be fully appreciated in the years to come Read him now and see what the future holds


  8. Pat Pat says:

    Great book A very interesting attack on the growth is best mentality that now permeates all spheres of economics It's a not a hippie waxing poetic about how the world should be its a very well reasoned argument that the rules of economics we live by were brilliant 150 years ago when we thought them up but entirely out dated now and in need of revision


  9. Eric Eric says:

    This is an economics text written for sober non economists Daly critiues the growth oriented world view shared by mainstream economists and policymakers He proposes that economists begin to consider that the world economy is physically bounded by and dependant on the Earth and its natural systems; and offers a few policy prescriptions This is a sane thoughtful well written book


  10. Beth Barnett Beth Barnett says:

    Discussion of growth and alternatives to the GNP index to measure economic well being Daly talks about environmental capital unhealthy economic growthspending and challenges the sacred cow of growth itself as it is currently seen by mainstream economists


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Beyond Growth The Economics of Sustainable Development❰Download❯ ➾ Beyond Growth The Economics of Sustainable Development Author Herman E. Daly – Capitalsoftworks.co.uk Daly is turning economics inside out by putting the earth and its diminishing natural resources at the center of the field a kind of reverse Copernican revolution in economics  Utne ReaderConsidered Daly is The Economics ePUB ☆ turning economics inside out by putting the earth and its diminishing natural resources at the center of the field a kind of reverse Copernican revolution in economics  Utne ReaderConsidered by most to be Beyond Growth PDF \ the dean of ecological economics Herman E Daly elegantly topples many shibboleths in  Beyond Growth Daly challenges the conventional notion that growth is always good and he bucks environmentalist orthodoxy arguing that the current focus on 'sustainable Growth The Economics eBook ´ development' is misguided and that the phrase itself has become meaningless Mother JonesIn  Beyond Growth  Daly derides the concept of 'sustainable growth' as an oxymoron Calling Mr Daly 'an unsung hero' Robert Goodland the World Bank's Growth The Economics of Sustainable PDF or top environmental adviser says 'He has been a voice crying in the wilderness'  G Pascal Zachary  The Wall Street JournalA new book by that most far seeing and heretical of economists Herman Daly For years now Daly has been thinking through a new economics that accounts for the wealth of nature the value of community and the necessity for morality Donella H Meadows  Los Angeles TimesFor clarity of vision and ecological wisdom Herman Daly has no peer among contemporary economists   Beyond Growth is essential reading David W Orr Oberlin CollegeThere is no basic ethical uestion than the one Herman Daly is asking  Hal Kahn  The San Jose Mercury NewsDaly's critiues of economic orthodoxy deliver a powerful and much needed jolt to conventional thinking Karen Pennar  Business WeekNamed one of a hundred visionaries who could change your life by the Utne ReaderHerman Daly is the recipient of many awards including a Grawemeyer Award the Heineken Prize for environmental science and the Alternative Nobel Prize the Right Livelihood Award He is professor at the University of Maryland's School of Public Affairs and coauthor with John Cobb Jr of  For the Common Good.


About the Author: Herman E. Daly

Herman Daly The Economics ePUB ☆ is an American ecological economist and professor at the School of Public Policy of University of Maryland College Park in the United States He was Senior Economist in the Environment Department of the Beyond Growth PDF \ World Bank where he helped to develop policy guidelines related to sustainable development While there he was engaged in environmental operations work in Latin America He is closel.


10 thoughts on “Beyond Growth The Economics of Sustainable Development

  1. Terence Terence says:

    I finished this last week and have been dithering since then with notes and possible angles for addressing the arguments in the bookWell no delay I will post the review Eventually Just not today Anyone who has followed my recent nonfiction reading may have seen a theme – a focus on the deteriorating conditions for life on this planet While the subject has been of interest for a long time my latest venture into it began with Derrick Jensen’s Endgame both volumes Jensen is angry and radical Not only does he predict the imminent end of industrial civilization but he wants people to actively bring it about since the longer we maintain it the worse the aftermath My reading continued with Spencer Wells’ Pandora’s Seed where the author traced many of the problems we’re dealing with today to the Agricultural Revolution which fundamentally transformed how humans lived and interacted with their environment Unlike Jensen Wells finds cause for hope in technology that could ameliorate or reverse the damage we’re inflicting on the ecosystem Herman Daly’s Beyond Growth deals with the same problems from an economist’s POV He’s not angry and he’s radical only to the extent that he believes the current neoliberal growth oriented economic consensus makes no sense and has reached a point of rapidly diminishing returns I don’t think he would advocate blowing up dams or toppling cell phone towers á la Jensen Rather like Wells Daly sees hope that we can contrive a way of life that preserves a decent standard of living for everyone Introduction The assumption of most economists from all schools is that the economy is an open ended system capable of eternal growth There may be disputes about how best to distribute wealth and to allocate resources efficiently but that wealth would always increase and that there would be sufficient resources to fuel it were givens In a pre industrial and early industrial world this was a defensible position The scale of human activity was such that the ecosystem it was a part of could renew itself or absorb the waste and there were plenty of niches yet to be exploited The “golden age” of industrial civilization is coming to an end Scale – the heretofore ignored third leg of the economy – is making considerations of allocation and distribution irrelevant It’s simply not possible to grow into greater prosperity for the near 7 billion people who are living on the planet at the time of this review 2011 It wasn’t possible for the 5 billion living at the time of the book’s writing 1996 And it won’t be possible for the 9 billion who’ll be here by 2050 As Daly might phrase it There is not enough low entropy input and too much high entropy output to support an American style uality of life for the entire planet and even within developed nations many are slipping below even that levelDaly wants to convince readers that we have to contemplate and implement a fundamental shift away from a growth economy to a development economy one that focuses on ualitative improvements instead of uantitative ones and balances exploitation of resources with the need of future generations In this book Daly doesn’t discuss the details of such an economy Here he wants to prove that the current model is unsustainable and describe an overall framework for sustainable development SD which “meets the needs of the present without sacrificing the ability of the future to meet its needs” p 1The introduction distills Daly’s conception of SD into 15 principles which he elaborates upon subseuently1 Preserve and restore natural ecosystems reduce humanity’s footprint on the planet2 Economic development environmental protection and social euity must be balanced against each other3 Private markets can efficiently solve the problem of allocation but they must operate within boundaries of scale and euitable distribution that can only be resolved by communities in their political and social institutions4 Population growth must be controlled5 Consumption must be reduced Limit halt growth to force the development of greater efficiencies6 Reducing poverty is impossible without a euitable distribution of wealth and a significant reduction in the number of consumers7 All segments of society must share environmental costs and benefits8 All economic and environmental decision making must consider future generations and preserve for them the same or greater range of choices as the present9 Where there is damage to public health or the environment the costs should be borne by the consumer of the commodity not the public at large10 SD acknowledges that depreciation of natural capital is just as much a cost as the classical idea of depreciating human made capital11 Countries pursuing SD policies are less likely to go to war Countries operating under the classical paradigm will inevitably come into conflict with others as they compete for dwindling natural capital12 SD is easiest to achieve in a free society13 SD policies must be debated by an informed public14 Technologies that reduce consumption andor increase efficiencies are beneficial and should be encouraged Not all technologies are beneficial15 SD must be tied to national policy and resists “globalization” Unrestricted free trade promotes a race to the bottom in terms of wages and environmental abuse and it weakens a nation’s ability to govern itself Multinationals with no interest in local concerns and focused on short term maximization of profit take overThe final chapters of the book are a departure from the relatively soul less analysis of the preceding pages In these final pages Daly suggests that the only way to convince enough people of the need for SD is to appeal to their spirituality – their sense of purpose Science is excellent at accumulating data and explaining process but it can’t make any claims toward an ultimate purpose On the contrary most scientists actively eschew such a role It’s only by making the preservation of life – and not just human life – a sacred obligation that we can hope to bring civilization within sustainable boundaries and hope to ensure a reasonably good uality of life for everyone and their descendants Economic Theory and Sustainable Development Part one discusses the outlines of what Daly calls the “steady state economy” SSE SSEs grow to the sustainable limits of their ecosystem at which point any enhancements to productivity are ualitative rather than uantitative Dale shies away from the details of a SSE except to say that it would maximize a “good life” for everyone that is indefinitely sustainable There are two arguments for preferring a SSE to a growth economy GE The first is based on physical law especially the second law of thermodynamics A GE extracts resources and produces waste Technological innovation has so far managed to keep ahead of resource depletion but only by substituting one resource for another andor at the expense of the ecosystem eg the Green Revolution expanded crop yield but at the cost of chemical pollution limiting seed choice erosion destruction of vital ecosystems and population growth that is now outstripping carrying capacity There is also an ethical argument against GEs The desirability for growth in the present is based on the theft of resources for the future Growth crowds out other species whose existence is vital for environmental health eg mounting evidence that marine phytoplankton upon which the entire oceanic food chain depends is failing A third consideration is that while absolute wants food shelter health etc are limited ie a consensus of what is sufficient is possible relative wants access to of what everyone else has are not and the driving demand for aggregate growth corrodes moral standards by encouraging the baser instincts in the human soulA final consideration arguing against a GE is the “cult of money” – which manifests as in increasing distance between money the symbol of production and the commodities it’s meant to represent Daly traces four stages in the development of an economy The first is the barter stage a simple exchange of commodities C C’ At some point as economies grow money becomes a medium for exchange but it still represents something real C M C’ The third stage is capital circulation Theoretically the money changing hands represents real or future wealth but the transaction focuses on the exchange of money M C M’ As long as the cash economy doesn’t overwhelm its ecosystem stage 2 and 3 look a lot alike But the former inevitably reaches a physical limit; a limit that doesn’t restrain money The final stage – the paper economy – cuts the ties between reality and exchange and profit is measured by the manipulation of figures M M’ The system can stumble along fairly well as long as the participants have confidence in the future productivity of the economy When that’s lost however you have “hiccups” the Great Depression the ‘70s oil shock the financial collapses of the Asian Tigers and Mexico in the ‘90s the dotcom implosion at the turn of the century and the ongoing meltdown that began in 2008 The hiccups are coming freuently are of greater scope and the recoveries benefit fewer and fewer people as the human economy continues to crowd out the overarching ecosystemThere are a few points Daly makes that he’ll elaborate on in future chapters The first is that gross national product GNP – the chief metric of economic health at least in the media and in political debate – is hokum It’s a measure of capital consumption and a poor reflection of reality So poor in fact that Daly advocates abandoning it entirely The second point is that by ignoring scale in their economic fantasies free market enthusiasts and classical economists make the commandcentralized economies they abhor inevitable as resources natural capital become scarcer and the actors scramble to secure them eg the mounting tensions among the nations bordering the Arctic Sea as melting ice makes its resources accessible The final point is that in a SSE the ultimate goal of policy should be to minimize production and consumption in order to maintain the capital stock Operational Policy and Sustainable Development In this section Daly shows that natural capital has become the limiting factor in the production of wealth and argues that pro growth policies that refuse to recognize this are becoming increasingly uneconomical and destructive In their place he presents four new policies1 Stop counting the consumption of natural capital as income It should rather be treated as a cost in so far as they are nonrenewable andor over exploited2 Tax labor and income less and resource throughput ; thus shifting the cost of manmade exploitation closer to the source3 Maximize productivity of natural capital ualitative development4 Abandon free trade ideology in favor of localregional developmentThis last point is Daly’s most radical as it flies in the face of 30 years of global economic policy but it’s necessary to restore some measure of control to communities that have lost it to multinationals and it strengthens institutions capable of and interested in carrying out policies for the common good He uotes Keynes “I sympathize therefore with those who would minimize rather than those who would maximize economic entanglement between nations Ideas knowledge art hospitality travel – these are the things which should of their nature be international But let goods be homespun whenever it is reasonably and conveniently possible; and above all let finance be primarily national” p 93 National Accounts and Sustainable Development One of the Daly’s least attractive features as a writer is that he too often writes like the World Bank bureaucrat he once was Thus a reader must endure acronyms and formulae – lots of acronyms lots of formulae In this section we are introduced to yet another one – ISEW – the index of sustainable economic welfare which is meant to replace GNP as a measure of economic health It would incorporate measures of consumption income distribution depletion of natural resources and debt levels among other measures While not a perfect reflection ISEW still accurately reflects the uality of life vs GNP Measuring economic health by the ISEW Daly charts a parallel rise with GNP through the mid ‘70s In the ‘70s the GNP continued to grow but ISEW flattened out and from the ‘80s it has declined relative to GNPISEW’s decline illustrates the overgrowth of the developed world – it can only sustain itself by exploiting natural capital from abroad not only denying them to the future but denying them to many in the present The outcome uoted from Global 2000 Report to the President from 1980 is that “if present trends continue the world in 2000 will be crowded polluted less stable ecologically and vulnerable to disruption than the world we live in now Despite greater material output the worlds’ people will be poorer in many ways than they are today” Daly notes that in order to provide an American lifestyle to the 5 billion living at the time of writing 1995 would involve a seven fold increase in the exploitation of natural resources Population and Sustainable Development Daly looks at carrying capacity in section 4 – the optimum number of people in a SSE Beyond the moral uandaries of population control human carrying capacity is difficult to determine because four relatively constant controlling factors among other animals become variables with us Among nonhumans1 Standards of living are relatively stable over time2 Relatively uniform per capital resource consumption3 Technologies are endosomatic and adapted to the environment by and large chimpanzees for example are known to use tools4 The level of exchange between species is constantThe import of humans being able to control or strong influence these factors has been a population explosion that long ago passed the point of sustainability and now impoverishes the majority consuming natural capital like a cancerAs with his position on global trade of which below Daly’s on population is 180 degrees from the current “wisdom” at least in America Any rational population policy would promote zero if not negative growth – a diminution of the human presence Such a policy would also preserve or increase carrying capacity by appropriate uses of land redistribution of resources to satisfy basic needs and investment in moving to renewable resources A first step in limiting population is the democratization of birth control – from education to contraception to abortion The best options have to be available to everyone International Trade and Sustainable Development In this section Daly returns to the baleful impact of free trade and expands on the case against To begin there is the cost of transportation which consumes nonrenewables to move commodities over enormous distances Where communities come to depend upon distant markets they become vulnerable to developments outside their control Globalizing economies reduces the range of livelihoods within a community and entail a social cost hard to uantify and thus ignored in economic analyses And finally there is a standards lowering competition to externalize costs The proverbial “race to the bottom” in environmental standards workings conditions and wages The two objections to this analysis that Daly considers the most serious are that growth will compensate and Ricardo’s law of comparative advantage To the first he recaps all that has come before to show that “growth” will not compensate as there’s no place to growth into To the second which suggests that countries should specialize Daly points out that Ricardo assumed that capital was immobile In a free trade world capital if free moving and follows the law of absolute advantageAnd just as free capital weakens community control and social cohesion so too does free labor Both free labor and capital might make sense in a global economy with global standards on wages environmental protection etc but there are no such things and no acceptable enforcement mechanism is there wereFree trade conflicts with getting prices “right” as responsible nations that internalize costs lose business to those less responsible Open trade eualizes profit and labor – the former upward the latter downward Free trade removes ownership control from regional concerns A true international community – as opposed to the current footloose class of money managers who make up short term coalitions of economic interest – would be a federation of regionally focused economies Free trade results in huge trade imbalances and unsustainable debt Europe 2011; America 2012? Free trade violates scale Participating GEs preserve consumption by importingexporting among themselves but inevitably run up against environmental limits By globalizing the scale of economic activity every country hits the limits at the same moment causing unmanageable catastrophic problems worldwide as opposed to hopefully manageable local onesDaly concludes with the observation that SD demands an economic sophistication we’re not capable of at the moment and we may have reached a point where we have little luxury for experimentation Two Pioneers in the Economics of Sustainable Development Part six comprises two essays about Daly’s intellectual mentors – Frederick Soddy 1877 1956 major work Wealth Virtual Wealth and Debt and Nicholas Georgescu Roegen 1906 1994 major work The Entropy Law and the Economic ProcessSoddy was originally a chemist but became interested in economics when he contemplated how atomic energy would be used – primarily for war – and wondered why the economic system made that inevitable and how that could be changed He argued that economists ignored the physical basis of the economy – that all life depends upon using energy Up to the Industrial Revolution humans relied upon energy “revenue” immediately available and difficult to store The industrial age allowed massive exploitation of energy “capital” Economists also confuse “wealth” with “debt” Wealth is a positive physical uantity Debt is a mathematical abstraction Wealth is limited by the ecosystem Debt is unlimited as long as people trust each other to continue paying it At some point wealth reaches its physical limit but debt continues to grow The result is debt repudiation inflation bankruptcy and confiscatory taxationSoddy concluded that allowing wealth and debt to get a divorce my analogy not Soddy’s has led to an ultimately unsustainable situation that promotes violence instability and ineuitable socialeconomic hierarchies Concluded in the Comments section

  2. Jonathan Jonathan says:

    Herman Daly's preanalytic vision is that the economy is a open growing sub system of a finite closed ecological system This may sound like jargon but the implication of accepting such a concept is portentous for the economic and political consensus Put simply further economic growth is increasingly unsustainable as we approach a full world and an alternative economic model is needed The answer according to Daly is to move towards a steady state economyA steady state economy Daly explains is one where capital stocks remain constant and population growth is kept at a sustainable level Such a model allows for development ualitiative improvement but not growth uantitative increase The means of achieving development but not growth according to Daly include ecological tax reform a cap and trade system which sets a limit to overall pollution minimum and maximum income levels measures to constrain population growth and besides Such measures are inevitably contentious the idea of limiting population growth is far from politically correct on the right or the left neither is the idea of an increased emphasis on redistribution including maximum income levels currently increased growth is predominantly seen as the means of mitigating class conflict thus dodging the issue However Daly argues that optimal scale of the economic sub system has already been reached meaning an alternative is imperative Yet such ideas are not new Daly has been championing them in one form or another for many years whilst the mainstream of economics continues to stick its fingers in its ears The uestion is as crises start to bite in coming years will the politically inconceivable limitations on economic growth be forced onto the agenda?

  3. Bill O& Bill O& says:

    Daley is a pioneering economist here exposing the absurdity our pursuit of infinite economic growth on a finite planet The reading is a bit theoretical at times but Daly is a decent writer and his main point is well made Most standard macroeconomics models and hence most standard texts assume that natural resources are a subset of the human economy when in fact it is the other way around His suggestions for a way forward put faith in the market economy than I think is warranted but he does have some interesting ideas like pricing nonrenewable resources at the price of the next cheapest renewable euivalent

  4. Elinor Hurst Elinor Hurst says:

    This is a book that I will keep and re read and dip into from time to time as a first principles bible of sustainable economicsOthers have complained that this book was a dry read and it is true that it is dense but for me it was a pleasure to read as the concepts explained within it were so logically and methodically laid out with the meticulousnous of a trained economistThe basic aims of economics need to be to address allocation efficiency distribution euity and scale sustainability Yet mainstream economics concerns itself almost solely with the first only peripherally and reluctantly with the second and not at all with the last This is Daly's crucial message of the book and he unpicks the flaws in conventional economic thinking along the way along with proposed solutions to the problem It is a disgrace that his message and proposals have been so roundly ignored by a largely moribund discipline and we find ourselves worse off than ever 20 years after this seminal book was published

  5. Jen Jen says:

    I gave this two stars because I didn't actually finish it and then I had to return it to the library I was hoping for a layman's guide to a sustainable economy but it seemed uite academic and dry The author spent a while complaining about some recommendations he had made for a report that weren't included Yawn It didn't help that the type was tiny Trying to save paper? I might give it another try at some point or look for something accessible I want to read about this because I really don't agree with the current culture of consumption is always better economic growth is always good

  6. Chris Chris says:

    Visionary economics that probably aren't taken seriously Ex World Bank economist Herman Daly makes newer arguments for Sustainable Steady State economics that he has been making since the early 70's The tragic flaw in current economic theory is in assuming that resource availability and waste removal is not finite that the economy is not properly considered as a subsystem of the overall ecosystem which leads invariably to economic growth policies as solutions to problems of development and distribution His concept of economic development rests not on increases in raw material throughput but rather increases in efficiency of production and sensitive mechanisms to shift production emphasisesWhat I find really interesting are his Marxist I think underpinnings and explicit spirituality He chastises the late and late biologists E O Wilson and Stephen Jay Gould for their antagonistic relationship with religion Daly seems to have a real problem with scientific materialism freuently citing JS Mill and Alfred North Whitehead the kind that seems to be the bedrock of most modern environmentalism I think his ideas are ultimately justified spiritually rather than by mutual self interest schemes a course which even at the most cynical is far sighted Very interesting book

  7. Kenneth Kenneth says:

    Incredible book challenging many of the underlying assumptions of modern economic thought including the idea that all growth is good or that an economy can grow indefinitely Daly a former Chief Economist for the World Bank who left in disgust seems likely to be fully appreciated in the years to come Read him now and see what the future holds

  8. Pat Pat says:

    Great book A very interesting attack on the growth is best mentality that now permeates all spheres of economics It's a not a hippie waxing poetic about how the world should be its a very well reasoned argument that the rules of economics we live by were brilliant 150 years ago when we thought them up but entirely out dated now and in need of revision

  9. Eric Eric says:

    This is an economics text written for sober non economists Daly critiues the growth oriented world view shared by mainstream economists and policymakers He proposes that economists begin to consider that the world economy is physically bounded by and dependant on the Earth and its natural systems; and offers a few policy prescriptions This is a sane thoughtful well written book

  10. Beth Barnett Beth Barnett says:

    Discussion of growth and alternatives to the GNP index to measure economic well being Daly talks about environmental capital unhealthy economic growthspending and challenges the sacred cow of growth itself as it is currently seen by mainstream economists

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