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Environment Forum

Latest Posts

Steady-State Economy

Posted by Andrew Bone Monday, 5th September 2016

The Steady-State Economy is one way of interpreting the meaning of long-term sustainability, particularly in terms of our current concepts of growth and its relationship to quality of life. Within the Sustainability framework, the Steady-State Economy concept addresses the issue of the classical economics presumption that economic growth is necessarily equivalent to increasing material wealth. 
Measurements of GDP or GNP are not accurate as an indicator of 'progress', even in a purely material sense. They hide costs which are real but intangible, or inconveniently unequatable to monetary value. Since neo-classical economics sets the value of a good to zero if it cannot be entered in the account books, environmental economics is obliged to attempt to relativise and rank environmental resources, services, and intrinsic goods in terms of human economic value, exemplified by cost-benefit analyses. This contradiction leads to an exaggeration of the importance of private ownership, and systematic undervaluing of common goods.

The falsity of the GDP as a measure of progress is evident when one considers that the loss of a free (zero monetary value) natural resource (e.g. drinkable tap water) by pollution, and its replacement by a monetarised substitute (bottled water), although clearly not a move towards a sustainable economy, is registered as a positive on the GDP account. Similarly, car accidents generate employment and provide economic stimuli (car repair and replacement, employment for police and traffic control, medical personnel, invalid care, legal system, funeral services, insurance....), all appear as positives in the GDP calculation, but can hardly be considered to be beneficial to the state or human condition as a whole. My calculations lead to the conclusion that without the car accident 'industry', western economies would show perennially negative GDP.

Although it is generally unchallenged that quality of life increases with income, H.E. Daly (1990) proposes that this is only for a certain range - there is a point at which quality of life ceases to improve with increasing wealth. There is a debate about at what point over-development is detrimental to overall well-being. Over-population, traffic congestion, environmental deterioration, loss of cultural and social goods and values, high crime rates, inequality and alienation of minorities, all result from excessive wealth feeding social competition in an overtly material society.

The Steady-State Economy suggests natural or imposed regulation of factors such as population dynamics, wealth distribution, opportunity justice and social mobility, and addresses the crucial issue of dependence on material flow. Material flow rates in the post-industrial west (aka north) have been extremely high. The post-war (WWII) dominant economic theories have supported the concept that stability (presented in the guise of growth) can be regulated directly by material flow. This fits well the industrial output/consumer model of determining economic strength, but fails to address the question of whether this measures quality of life, and whether this dependence is a weakness in the long-term since the availability of raw materials and market dynamics may not be sustainable. In this sense, automating production and eliminating labour costs appears 'efficient', but is ultimately self-defeating because it erodes the necessary condition that there be a consumer market able to purchase the goods being produced.

The Steady-State Economy principle states that physical growth is economic only if marginal benefits of growth exceed the marginal costs. Once the basics of life have been provided (sufficient food, shelter and essential medical care and social infrastructure), each additional unit of material provision becomes less advantageous compared to the environmental and social costs it entails. Increasing the range of personal mobility, with constantly proportional air pollution and noise, beyond a certain point is merely providing for the whims of the wealthy at the cost of the health of those forced into unhealthy areas. Increasing car ownership and subsidising fuel prices leads to increased inquality, not only in access to these goods, but in the burden of environmental degradation reaulting from the increase. SSE would ensure that increasing mobility would not lead to inequality in burden.

Bibliography

  1. Prof. M. Thring Income and Quality of Life bell curve, 'societal over-engineering'. [Carley and Christie, Managing Sustainable Development, p. 31, personal communication).
  2. H.E. Daly (1990), Herman Daly: Steady-State Economics Island Press, 1977.
  3. John Stuart Mill: chapter in Principles of Political Economy, 'On the Stationary State'.

 

Posted by Andrew Bone Tuesday, 6th September 2016

To hear a podcast of this essay, go to: Steadystate Economy Podcast.

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