Steady-State Economics, by Herman E. Daly

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Steady-State Economics: Second Edition with New Essays, by Herman E. Daly, Island Press, Washington, DC, 1991.

These comments are based on notes composed by Darrell Huwe.

The Problem

Stocks and Flows

Steady-State Economy

Constant level of stocks maintained by minimal throughput of flows.

Ends and Means

Classical economists have moral blinders, ignoring ultimate ends and ultimate means.

Ends and means can be viewed in a quasi-continuum (re-drawn from Daly's Fig. 1, page 19):



ReligionUltimate Ends
(good and evil)
 Intermediate Ends
(health, comfort, education, etc.)
 Intermediate Means
(artifacts, labor power)
PhysicsUltimate Means
(low-entropy matter-energy)


Ultimate means regulated by the laws of thermodynamics.

Most recent growth has been achieved by drawdown of geological capital.

Ecosystem and Economy

Daly analyzes the relationship between the ecosystem and the economy in terms of stocks and flows. In particular,


Relative Scarcity

In a free-market society, controlled by supply and demand. Invent money to implement control.

Absolute Scarcity

Ignored by traditional economics. Assumed out of existence. Money is not the same as wealth.

Institutions of Steady-State Economics

1. Distribution

Set limits on ownership of private property. "Tax the rich."

2. Population

Issue licenses for babies, which can be traded in the money economy.

3. Depletion

Set quotas for transformation of non-renewable resources. Can be auctioned off and traded.


[See page 98 and following.]

  • Growth helps nation more easily do environmental cleanup.

  • "Trickle down" - growth needed in order to help the poor.

  • There is no limit to exosomatic capital.

  • Exponential growth can continue if technology can keep up.

  • Reproducible capital can be freely substituted for land and resources.

  • Resources small fraction of GNP [underpriced, capital and labor together exploit resources].

  • Market adjusts for conservation [but not for exponential growth].

  • Sociological need for excess young folks.

  • Technology will always fix any problems [and never create any].

  • Resource efficiency can grow indefinitely.

  • Service sector no drain on resources.

  • Every worker a capitalist.

  • More is better.

  • Misallocation will be fixed by the market.

  • We are no longer dependent on environment.

  • Zero growth means depression.

Energy Considerations

In Chapter 6, Daly discusses energy and growth.

  • He contends that it is better to slow down the economy than to seek energy sources.

  • He contends that nuclear energy is not the answer.

Developing Countries

In Chapter 7, Daly discusses the implications of steady-state economics for developing countries. He begins by commenting that it is, of course, "absolutely a waste of time and morally backward to preach steady-state doctrines to underdeveloped countries before the overdeveloped countries have taken any measure to reduce either their own population growth or the growth of their per-capita resource consumption."

  • Much wiser to control population than to promote growth.

  • Impossible to achieve United States' standard of living.

  • The developed world should consume less.

Cycles of Production and Consumption

In Chapter 9, Daly presents the steady-state economy as an alternative to "growthmania."

  • Standard economics considers ever-growing cycles of production and consumption, but does not consider the role of the supporting ecosystem. Such a view can encourage an economy that can ultimately strain the surrounding environment.

  • Steady-state economics considers cycles of production and consumption that take the surrounding ecosystem into account and try to achieve a state of equilibrium with it.

Integrating Economics and Ecology

In Chapter 11, Daly claims that there are three alternate strategies for integrating economics and ecology. All three start with the notion of the economy as a subsystem of the entire planetary ecology.

Economic Imperialism

In economic imperialism, the economy is expanded to encompass the entire ecology, so that all energy and matter flows are regulated through price mechanisms.

The ecosystem takes in solar energy and releases waste heat, while the economy generates material and releases heat into the ecosystem.

Ecological Reductionism

In ecological reductionism, the economic subsystem is reduced to a minimum, the surrounding ecology is viewed as central.

The ecosystem takes in solar energy and releases waste heat, while the economy takes in material and energy from the ecosystem.

Steady-State Subsystem

Viewing the two previous approaches as thesis and antithesis, this approach is the synthesis: it insists on "maintaining a boundary between the ecology and the economic subsystem and on

  1. drawing it in the right place, and

  2. putting constraints on the physical flows crossing that boundary in both directions."

The ecosystem takes in solar energy and releases waste heat, while the economy takes in material and energy from the ecosystem and generates material and releases heat into the ecosystem.

Dick Piccard revised this file ( on January 21, 2005.

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