A steady state economy

2009-05-06

in Economics, Politics, Science, The environment

Cup with a nose and lips on it

One key tenet of ecological economics is that we need to move from a political and economic system focused on the growth of production (GDP) to one focused on constant biophysical throughput. The latter concept is basically an amalgamation of everything humanity takes from the physical world and all the wastes that are returned to it. On the first side of the ledger are withdrawals like ore and hydrocarbons; on the other are wastes including greenhouse gasses and other forms of pollution. While it could not be expressed in the form of a single number, it is fairly easy to imagine a suite of key physical and energy flows through which the aggregate size of human throughput could be summarized.

The basic idea has appeal for several reasons. Most obviously, it addresses the concerns that exist about how much impact humanity can have on the world without causing key biological and physical systems to fail. It also partially addresses the question of how to ensure that human lives become sustainable without becoming unnecessarily unpleasant. It’s the human throughput that actually weighs on the world, not GDP. Even in a situation where the throughput was constant, welfare per person could still increase in many ways: things could become more technologically advanced, better designed, more elegant, etc. They could also be improved significantly by more effectively eliminating situations of needless suffering, as with the treatable diseases that continue to take a terrible toll in the developing world. Of course, per-capita improvements could also be achieved with constant throughput and a falling population.

One objection to the idea is that, when it comes to renewable power, we are nowhere near the physical limits of what is possible. The total quantity of solar, wind, and tidal energy available is momentous, and it doesn’t seem sensible to focus on the total size of human withdrawals from those flows. As such, perhaps the steady-state approach is better suited to non-energy resources, while on the topic of energy, the drive must be from unsustainable forms (oil, gas, coal) to semi-sustainable forms (nuclear fission, etc) and eventually to fully sustainable options like concentrating solar thermal, hydroelectric, and geothermal.

In the end, the prescription for humanity seems to resemble a cheesy grocery store magazine diet: avoid carbon-intensive fuels, manage resource use and waste flows, and feel free to use all the renewable energy and carbon- and resource-neutral technological advancement as you can manage.

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{ 29 comments… read them below or add one }

Emily May 6, 2009 at 2:38 pm

I love the photo.

Your low carbon energy diet just needs an overenthusiastic info-mercial ready trim blonde guy to manically present it on day-time television.

“Expect results in less than 50 years! Or your money back!*”

*Really the least of your concerns..

R.K. May 6, 2009 at 2:44 pm

“One objection to the idea is that, when it comes to renewable power, we are nowhere near the physical limits of what is possible.”

The same used to be true of many other limits we are now breaching: such as exploiting marine fisheries, or cutting old growth forest.

There is no need for a special rule for renewable energy. It’s physical inputs (metal for turbines, etc) need to be managed like anything else, and if we ever get close to the total energy flows available, conservation will be needed on that front.

Milan May 6, 2009 at 2:53 pm

I love the photo.

The photo was taken during the Chinatown remixed event.

The cup was provided by a kid-operated Limeade stand (one of the kids), a friend of Andrea’s provided the modeling, and my brother Sasha held a reflector to keep her from being a silhouette against the bright background.

Anon May 6, 2009 at 4:36 pm

One factor to consider is that technology changes resource use patterns. There wasn’t much use for uranium before fission was understood, and aluminum was useless until someone learned to refine the ore.

In all probability, future technologies will have similar effects on the ‘biophysical throughput’ of humanity. Constraining human beings to using exactly the mix of resources they do now doesn’t make much sense, in those circumstances.

Tristan May 6, 2009 at 5:08 pm

While the population can’t increase forever, we should stop and notice that the “needs” we have, fulfilled by biophysical production, are mostly constructed by corporations and advertising, and newer than 1920. Nowhere is it written that a commodity has to be biophysical, and therefore there is no principle need for growth (qua wealth) to end.

The earth’s limits at population sustenance are the limits of the people who can be fed and housed. If everyone went vegetarian, something like one sixth the land would be required to feed the same number of people. Is eating meet so important that we curtail the population? Of course meat is just one of many luxurious needs. Other things we don’t need – a new laptop every 4 years, fast food, restaurant prepared food, hotels, advertising, private cars, plastic grocery bags, pre-prepared food. It’s also good to think in terms of what we don’t need to have the right to throw away, i.e. appliances (at least after they’ve been replaced by efficient ones), bicycles, perfectly good furniture, etc…

The basic problem is, in our society wealth is measured by the transfer of wealth – our GDP does not include the enjoyment of things which do not change hands. If I build a bike from parts abandoned on the side of the street, this does not show up in the GDP – but it does increase wealth.

Actually, I think I can make this clear with two scenarios. Scenario 1 – I buy a new bicycle every 2 years, and never maintain them. This costs me 300$ every two years. I also work at a store that sells bicycles, and we sell bicycles exclusively to people who do not maintain them and replace them every two years. I earn 150$ a year. Call it part time.

So, just looking at these two transactions – we can say the GDP of our scenario is 600$ every two years. 600$ change hands, and notice, I come out even. Continue this for ten years, the wealth of this system is now valued at 3000$

Now, scenario 2, I buy a bike and maintain it, and it lasts me ten years. The bike costs 300$, and maintaining it costs 30$ a year not including the first year. I work at the bike shop as well, but after two years I scale back my hours so that overall, I don’t earn any more than the bike costs me to maintain. So, after ten years the bike will have cost me 570$, and I will have earned 570$. The total value of this economic system is just 1140$ – almost 2000$ less than scenario 1.

But – is there any less wealth in scenario 2? I will be richer in spirit, understanding how my bicycle works. I will have more spare time – I don’t need to put in those long hours at the bike shop. But, the GDP is way down – what gives?

Milan May 6, 2009 at 5:22 pm

Tristan,

Your criticism of GDP is a common and accurate one. That being said, it’s not clear how useful alternative measures could be constructed. Per capita GDP is certainly a better measure of welfare, but even that is relatively rarely considered in the media and policy circles. For instance, Japan’s apparently lacklustre recent economic growth looks a lot better relative to the US when considered on per-capita terms.

The Speth book I am reading supposedly later discusses some alternative measures. If they are compelling, I will mention them here.

Other things we don’t need – a new laptop every 4 years, fast food, restaurant prepared food, hotels, advertising, private cars, plastic grocery bags, pre-prepared food.

Arguably, people care a lot more about the freedom to have whatever they want than they do about the actuality of exercising it. To you or me, owning a horse may seem indulgent. To someone else, having their right to do so threatened feels profoundly illiberal. The same goes for plenty of the things on your list: lots of jobs require a laptop capable of running powerful software, lots of people value restaurants highly or rely on them because they lack time or cooking facilities, many jobs are car dependent, plastic grocery bags aren’t really a problem, and not everyone has the time and desire to cook. On a more conceptual level, people will always differ about what we don’t need: at least some would say we don’t need universities, libraries, philosophy departments, etc. Indeed, lots of extreme minimalists (think Amish) are among those who think so.

Personally, I think efforts to curb consumption through public policy will almost always fail – short of forcing people into genuine poverty. What we need to do is convert the inputs and outputs of consumption into forms (and levels) consistent with a stable and acceptable global environment.

Milan May 6, 2009 at 5:23 pm

Anon,

This point is an important one, and strikes at the question of how ‘biophysical throughput’ should be understood and measured. It seems wrong to say: “We should aim to use the same amount of copper every year, forever.”

What are necessary are measures of the key impacts on physical and biological systems, as well as the limits beyond which they start to become progressively more degraded.

Milan May 6, 2009 at 5:25 pm

R.K.,

There is no need for a special rule for renewable energy. It’s physical inputs (metal for turbines, etc) need to be managed like anything else, and if we ever get close to the total energy flows available, conservation will be needed on that front.

Fair enough.

It makes sense to acknowledge that there are limits to how much of anything (even sunlight!) can be sustainably harvested. We should be worried when we are obviously well beyond limits (as with our greenhouse gas emissions) and aware but not immediately concerned in cases where the limits seem to be far off.

Tristan May 6, 2009 at 5:47 pm

I don’t want to discredit sustainability – but I get sometimes that sustainability comes to mean “this is the rate which we can throw things out – sustainably”. That just seems wrong, we throw out lots of things we shouldn’t and we should not reduce throwing out perfectly good things – but eliminate it. This requires a better thrift store systems, but also a change in production methods towards things made to be repaired.

I don’t mean to imply that no one needs a new laptop every 4 years, or to eat out, or to use plastic bags, etc… Of course the needs we have relate to the kinds of lives we live, if we understand “needs” in the wide sense anyway. But, if the cost of these luxuries is that the planet can sustain less people – what right do we or anyone have to them?

The digitization of the world seems the perfect oppertunity to get rid of disposal. But it won’t happen on its own – we need legislation to encourage the right kind of behaviors.

Tristan May 6, 2009 at 5:59 pm

The fact that we don’t have a better measure than per capita GDP is a good reason to use per capita GDP – but it is also a good reason to develop a different measure.

I doubt, however, that we don’t have a better measure. I can’t say for certain, but I think lots of people work on quality-of-life indexing. For instance, the Overseas Development Index famously ranks Cuba has 3rd in quality of life among North American countries.

Milan May 7, 2009 at 11:14 am

The digitization of the world seems the perfect oppertunity to get rid of disposal. But it won’t happen on its own – we need legislation to encourage the right kind of behaviors.

I think the major form of this encouragement will come through the internalization of environmental externalities. For instance, internalizing the costs of climate change will increase the price of energy and make recycling more appealing. Similarly, charging people for harmful wastes released into rivers, the sea, etc.

I doubt, however, that we don’t have a better measure. I can’t say for certain, but I think lots of people work on quality-of-life indexing.

Quality-of-life indexing is very subjective. What goes into the figure? Infant mortality? Education (what kind?)? Political freedoms?

Also, most plausible quality-of-life measures would change only quite gradually, making it hard to use them as a yardstick for the performance of governments.

Milan May 7, 2009 at 12:12 pm

On plastic grocery bags:

“In a nutshell, what’s in the bag matters a lot more towards stopping global warming than what the bag is made of — around 186 times more, according to some 2007 data crunching by a blogger at The Daily Score. “This number was calculated using the concept of embodied energy,” wrote Justin Brandt, “the energy used to produce, transport, and dispose of a product over its entire lifetime. For food this includes making fertilizers, processing, transportation, storage, and cooking.”

Using data from the most on-point study I could find, I calculated the energy used to produce, process, transport, store, and cook four servings of two different diets: the first, a meat-based diet that included beef, potatoes, tropical fruit, and drinks such as soda; the second a vegetable-based diet composed of produce grown within the country where is was consumed and a soy-based protein source.

The first diet takes 113 MJ (megajoules) of energy to get to the table, while the second takes 24 MJ of energy. The difference between these two numbers is 89 MJ.

In contrast, it takes about 0.5 MJ, give or take, to produce and dispose of one plastic bag.”

To me, campaigns to ban plastic bags seem rather pointless. They are only especially problematic when they end up in streams, rivers, or the ocean. Campaigns against littering or illegal dumping make more sense than bans, and none of this has much to do with climate change.

Tristan May 7, 2009 at 1:46 pm

“Quality-of-life indexing is very subjective. What goes into the figure? Infant mortality? Education (what kind?)? Political freedoms?”

The physical quality of life index developed for the overseas development council is just literacy rate, infant mortality rate, and average lifespan. http://en.wikipedia.org/wiki/Physical_quality-of-life_index

More complex ones include such “subjective” features as child abuse and health. People at Fordham University have done some work on this, i.e.
http://www.fordhampress.com/detail.html?id=9780823220809

And an index of social health indicators done every year since 1987. 2003’s is available online for some reason: http://www.fordham.edu/images/Graduate_Schools/GSSS/2003%20Index%20of%20Social%20Health.doc

Peter May 7, 2009 at 10:19 pm

There are plenty of quality of life measurements economic and otherwise that address many of the criticisms of GDP. The GPI has become widely accepted. You will have to read about how the measurements are constructed, but the fact that a sizable body of work has been accumulated on this problem reduces your concerns about subjectivity. To borrow an example from Sen, activities that don’t directly lead to an increase in GDP (like supplying washing machines) can lead to significant time savings that should be valued even if the efficiency is gained in the domestic sphere (and thus outside the prevue of GDP). Someone could argue that freeing time from onerous tasks is not an improvement, but it isn’t wildly subjective in the sense that many people would object to it.

. May 8, 2009 at 9:06 am

Recalculating Happiness in a Himalayan Kingdom

THIMPHU, Bhutan — If the rest of the world cannot get it right in these unhappy times, this tiny Buddhist kingdom high in the Himalayan mountains says it is working on an answer.

“Greed, insatiable human greed,” said Prime Minister Jigme Thinley of Bhutan, describing what he sees as the cause of today’s economic catastrophe in the world beyond the snow-topped mountains. “What we need is change,” he said in the whitewashed fortress where he works. “We need to think gross national happiness.”

The notion of gross national happiness was the inspiration of the former king, Jigme Singye Wangchuck, in the 1970s as an alternative to the gross national product. Now, the Bhutanese are refining the country’s guiding philosophy into what they see as a new political science, and it has ripened into government policy just when the world may need it, said Kinley Dorji, secretary of information and communications.

. May 8, 2009 at 9:07 am

” “Once Bhutan said, ‘O.K., here we are with G.N.H.,’ the developed world and the World Bank and the I.M.F. and so on asked, ‘How do you measure it?’ ” Mr. Dorji said, characterizing the reactions of the world’s big economic players. So the Bhutanese produced an intricate model of well-being that features the four pillars, the nine domains and the 72 indicators of happiness.

Specifically, the government has determined that the four pillars of a happy society involve the economy, culture, the environment and good governance. It breaks these into nine domains: psychological well-being, ecology, health, education, culture, living standards, time use, community vitality and good governance, each with its own weighted and unweighted G.N.H. index.”

. May 8, 2009 at 11:58 am

Metal minerals scarcity:
A call for managed austerity and the elements of hope

Dr. A.M. Diederen, MSc.
TNO Defence, Security and Safety
P.O. Box 45, 2280 AA Rijswijk, The Netherlands
andre.diederen@tno.nl

March 10, 2009

If we keep following the ruling paradigm of sustained global economic growth, we will soon run out of cheap and plentiful metal minerals of most types. Their extraction rates will no longer follow demand. The looming metal minerals crisis is being caused primarily by the unfolding energy crisis. Conventional mitigation strategies including recycling and substitution are necessary but insufficient without a different way of managing our world’s resources. The stakes are too high to gamble on timely and adequate future technological breakthroughs to solve our problems. The precautionary principle urges us to take immediate action to prevent or at least postpone future shortages. As soon as possible we should impose a co-ordinated policy of managed austerity, not only to address metal minerals shortages but other interrelated resource constraints (energy, water, food) as well. The framework of managed austerity enables a transition towards application (wherever possible) of the ‘elements of hope’: the most abundant metal (and non-metal) elements. In this way we can save the many critical metal elements for essential applications where complete substitution with the elements of hope is not viable. We call for a transition from growth in tangible possessions and instant, short-lived luxuries towards growth in consciousness, meaning and sense of purpose, connection with nature and reality and good stewardship for the sake of next generations.

Milan May 8, 2009 at 3:30 pm

From Speth’s The Bridge at the End of the World. p. 130 (hardcover):

[Ed] Diener and [Martin] Seligman report that peoples with the highest well-being are not those in the richest countries but those who live where political institutions are effective and human rights are protected, where corruption is low and mutual trust is high. Other factors positively associated with a sense of well-being at the national level are low divorce rates, high participation in voluntary associations, and strong religious affiliations.

From what I can tell, the well being data comes from population surveys, though the specific methodology used by Diener and Seligman is not spelled out in the book.

The footnote points to: Ed Diener and Martin E. P. Seligman, “Beyond Money: Toward and Economy of Well Being.” Psychological Science in the Public Interest. 5, no. 1. (2004).

. September 2, 2009 at 11:35 am

August 31, 2009
We Are All Madoffs
Our relationship to the natural world is a Ponzi scheme

“Because the horrifying reality is that in our fundamental relationship to the natural world—which is, after all, the fundamental relationship for everyone—we are all Madoffs.

As we have all read, Ponzi schemes are also called pyramid schemes: A relatively small number of initial investors (the pointy tip of the pyramid) get paid off by money received from an ever-larger number of subsequent investors, who can, in turn, only profit if there are yet more investors. By this time, the investors can be identified as “suckers,” because their payoff, instead of being founded on solid reality, depends on another round of entrepreneurial artifice.

It may be counterintuitive, but there is nothing inherently evil about pyramid schemes. They aren’t like murder, rape, or assault and battery, in that no one is necessarily injured, either physically or financially, during their operation. Indeed, early participants can come out ahead, and there is no guaranteed point at which even later investors are bound to lose out. The problem derives from one simple, incontrovertible fact: Pyramid schemes aren’t sustainable. Eventually they fail. It isn’t possible to keep recruiting a never-ending supply of suckers.”

. September 2, 2009 at 11:37 am

“Make no mistake: Our current relationship to the world ecosystem is nothing less than a pyramid scheme, of a magnitude that dwarfs anything ever contemplated by Charles Ponzi, who, before Madoff, was the best-known practitioner of that dark art. Modern civilization’s exploitation of the natural environment is not unlike the way Madoff exploited his investors, predicated on the illusion that it will always be possible to make future payments owing to yet more exploitation down the road: more suckers, more growth, more GNP, based—as all Ponzi schemes are—on the fraud of “more and more,” with no foreseeable reckoning, and thus, the promise of no comeuppance, neither legal nor economic nor ecologic. At least in the short run.

In the long term? We’re all dead, along with the planet.”

. September 9, 2009 at 4:48 pm

The Self Storage Association notes that, with more than seven square feet for every man, woman and child, it’s now “physically possible that every American could stand — all at the same time — under the total canopy of self-storage roofing.”

. October 17, 2009 at 3:26 pm

The “dismal science” truly shines in this optimistic talk, as economist Alex Tabarrok argues free trade and globalization are shaping our once-divided world into a community of idea-sharing more healthy, happy and prosperous than anyone’s predictions.

. January 25, 2010 at 10:33 am

Economic growth ‘cannot continue’

Continuing global economic growth “is not possible” if nations are to tackle climate change, a report by an environmental think-thank has warned.

The New Economics Foundation (Nef) said “unprecedented and probably impossible” carbon reductions would be needed to hold temperature rises below 2C (3.6F).

Scientists say exceeding this limit could lead to dangerous global warming.

“We urgently need to change our economy to live within its environmental budget,” said Nef’s policy director.

Andrew Simms added: “There is no global, environmental central bank to bail us out if we become ecologically bankrupt.”

None of the existing models or policies could “square the circle” of economic growth with climate safety, Nef added.

. October 13, 2010 at 11:26 am
. April 7, 2011 at 10:36 pm

Yet there are still reasons to worry about the party’s rise. The Greens’ visceral hostility to nuclear power is irrational (the state of Baden-Württemberg is hardly prone to Japanese-style tsunamis); closing plants makes electricity costlier and Germany’s (and Europe’s) ambitious targets for reducing carbon emissions harder to meet. The Greens are keen on higher taxes, more regulation and dirigiste industrial policy. Some of them still talk as if economic growth were a problem in itself—which is one reason they opposed the huge infrastructure project at Stuttgart’s railway station. Support for free trade and free markets tends to come very far down the agenda, if it features at all.

Milan April 24, 2011 at 10:33 pm

It seems to me like there are two sorts of economists.

One sort sees economic growth as always being a valuable end in itself. They are roughly akin to a person tending the fire that keeps the boiler in a locomotive running. From their perspective, hotter is always better.

Another sort is more akin to the engineer controlling the whole locomotive – a person who is in a position to know that sometimes the vehicle should slow down or stop.

That being said, it we are going to reduce or eliminate economic growth in order to avoid undermining the capacity of the planet to sustain human flourishing, there will also need to be substantial redistribution from those who are currently unusually wealthy to those living in extreme poverty.

. May 8, 2011 at 11:26 am

Whichever low-carbon technology we embrace, we help to provide the means by which the industrial economy can keep expanding, even if it does so without a major release of greenhouse gases. This threatens to exacerbate all the other issues that concern us. To prevent this from happening, the replacement of fossil fuels should be accompanied by a transition to a steady-state economy. Herman Daly and Tim Jackson have shown us how this can be done technically. How it can be done politically is, at present, quite another matter.

anon May 9, 2011 at 5:24 am

” there will also need to be substantial redistribution from those who are currently unusually wealthy to those living in extreme poverty.”

I think in order for their to be substantial redistribution from the super-rich to the world’s poor, there will need to be a substantial redistribution of power from the tiny elites to the masses. Otherwise the institutional forces remain against social justice, and redistribution relies on the subjective motivation of rich people qua “decent humans”.

If the 3rd Reich taught us anything, it is that institutional forces can make normal humans commit the most heinous crimes explicitly, with their bare hands. How much easier is it for institutional forces to make humans cause brutal suffering when they are disconnected from the results of their actions by thousands of miles?

. June 7, 2011 at 5:48 pm

IT MAY seem obvious that faster economic growth should translate into higher equity returns. So it was quite an upset when academics found some years ago that this had not been the case in advanced countries over the 20th century*. A subsequent paper† discovered that the story was similar for developing economies as well.

These findings are awkward for emerging-market enthusiasts, who usually cite the superior growth prospects of such countries as the reason to invest in them. The counter-attack has duly been led by Jim O’Neill of Goldman Sachs Asset Management, who as a strategist coined the wildly successful BRIC acronym for the big developing economies of Brazil, Russia, India and China. Yet the surprise is not only that the response has been so long in coming but that the case it makes is so limited.

The Goldman paper admits that there is no evidence that equity returns for any given year are correlated with GDP growth in that same year. But it says that “equity markets are a lead indicator of GDP growth and react strongly to expectations about the future.”

This conclusion is hardly new. Stockmarket movements are a standard component of economic lead indicators. But this link is of little use to investors, who are looking instead for a lead indicator for equity performance.

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