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UNDERNEWS

Undernews is the online report of the Progressive Review, edited by Sam Smith, who covered Washington during all or part of ten of America's presidencies and who has edited alternative journals since 1964. The Review, which has been on the web since 1995, is now published from Freeport, Maine. We get over 5 million article visits a year. See prorev.com for full contents of our site

March 10, 2010

TOWARDS A STEADY STATE ECONOMY

HERMAN DALEY, SOLUTIONS JOURNAL - Let us ask two questions that all students should put to their economics professors.

First, there is a deep theorem in mathematics that says that when something grows, it gets bigger. How big can the economy get, Professor? How big is it now? How big should it be? And most pointedly, what makes economists think that growth (i.e., physical expansion of the economic subsystem into the finite, containing biosphere) is not already increasing environmental and social costs faster than production benefits, thereby becoming uneconomic growth, making us poorer, not richer? After all, real GDP, the measure of so-called economic growth, does not separate costs from benefits, but rather conflates them as "economic activity." How would we know when growth became uneconomic? Remedial and defensive activity becomes ever greater as we grow from an "empty-world" to a "full-world" economy, characterized by congestion, interference, displacement, depletion, and pollution. The defensive expenditures induced by these negatives are all added to GDP, not subtracted. Be prepared, students, for some hand waving, throat clearing, and subject changing.

Second question: do you then, Professor, see growth as a continuing process, desirable in itself, or as a temporary process required to reach a sufficient level of wealth that would thereafter be maintained more or less in a steady state? At least 99% of modern neoclassical economists hold the growth-forever view. We have to go back to John Stuart Mill and the earlier classical economists to find serious treatment of the idea of a non-growing economy, the stationary state. What makes modern economists so sure that the classical economists were wrong? Just dropping History of Economic Thought from the curriculum is not a refutation. . .

Without growth, the only way to cure poverty is through sharing. But redistribution is anathema. Without growth to push the hoped-for demographic transition, the only way to cure overpopulation is by population control. A second anathema. And without growth, the only way to increase funds to invest in environmental repair is by reducing current consumption. Anathema number three. Three anathemas and you're out. . .

Without growth, we must find a different god to worship. The communist growth god has failed, but surely the capitalist growth god will not fail. Let's jumpstart the GDP and the Dow Jones. Let's build another tower of Babel with obfuscating technical terms like sub-prime mortgage, derivative, securitized investment vehicle, collateralized debt obligation, credit default swap, toxic assets, and insider slang like the "dead cat bounce.". . .

Or, let us not do that. Let us ignore the anathemas and instead think about what policies would be required to move to a steady-state economy. They are a bit radical by present standards, but not nearly as unrealistic as any of the three alternatives given above for validating continuous growth.

TEN STEPS TOWARD A STEADY STATE ECONOMY


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