Changing the Paradigm
The Transition from Uneconomic Growth to Sustainability
The Center
for the
Advancement
of the
Steady State Economy
Outline
• Definitions
• The Conflict between Economic Growth
and the Environment
• Theoretical Framework
• Empirical Evidence
• Steady State Economy,
the Alternative to Economic Growth
• Policies and Institutional Changes for the
Transition
• Getting Started with the Paradigm Shift
Definition – Paradigm
Thought pattern in a scientific discipline
Proverbial paradigm shift leads to big
changes in the scientific worldview
Growth Paradigm in Economics
Standard Model of
the Economy
Economy
Reality-Based Ecological
Economics Model
Ecosystem
Ecosystem
Resource
extraction
Waste
products
Resource
extraction
Waste
products
Economy
Definition – Economic Growth
• Increase in the production and
consumption of goods and services
(typically expressed in terms of GDP)
• facilitated by increasing:
–population
–per capita consumption
• Not the same as economic development
2000
1000
0
-1000
-2000
-3000
-4000
-5000
-6000
-7000
-8000
-9000
-10000
-10000
-7000
-5000
-3000
-1000
-500
-200
200
500
700
900
1100
1250
1340
1500
1650
1750
1815
1900
1920
1930
1950
1970
1980
1990
2000
2007
Component 1 – Population
World Population (Millions)
7000
6000
5000
4000
3000
2000
1000
0
8000
6000
4000
2000
0
Component 2 – Consumption
U.S. Per Capita GDP (year 2000 dollars)
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
1929
1932
1935
1938
1941
1944
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
-
Definition – Uneconomic Growth
Growth of the macroeconomy that costs more than it is worth.
Value
($)
Marginal
Cost
V2C
V1B
V*
V2B
V1C
Marginal
Benefit
Q1
Q*
Q2
Quantity
(units produced
or consumed)
Definition – Sustainability
Sustainable development is development that meets the
needs of the present without compromising the ability of
future generations to meet their own needs.
• Basic human needs and the world’s poor
• Limits imposed by technology and social organization
- Brundtland Commission
Weak Sustainability
Hold total capital (natural
and human-built capital
combined) constant.
Assumes the two forms of
capital are substitutes.
Strong Sustainability
Hold natural capital
constant. Assumes the
two forms of capital are
complements.
Economic growth converts natural capital into human-built
capital and goods and services.
Outline
• Definitions
• The Conflict between Economic Growth
and the Environment
• Theoretical Framework
• Empirical Evidence
• Steady State Economy,
the Alternative to Economic Growth
• Policies and Institutional Changes for the
Transition
• Getting Started with the Paradigm Shift
Thermodynamics
First Law of Thermodynamics: Conservation of mass and energy.
Second Law: Entropy never decreases in an isolated system.
Standard model of the
macroeconomic system
Model of the macroeconomic
system that accounts for the
laws of physics
$$$
Natural
Capital
$$$
Waste
Competitive Exclusion
GDP
K
Carrying Capacity
Natural
capital
allocated
to
nature
Natural
capital
allocated
to the
economy
Time
Cover of the
Wildlife Society
Bulletin
Spring 2000
Individuals
Ecological Carrying
Capacity Scenarios
K
K-selection
r-selection
Time
Economic Carrying
Capacity Scenarios
K
K-selection
r-selection
Time
Trophic Theory
Ecology
(economy of nature)
Human
Economy
Carnivores
Light
Manufac.
Consumers
(herbivores)
Heavy
Manufacturing
Primary Producers
(plants)
Producers
(agriculture,
extractive industry)
Trophic Theory
Human-Inclusive
Economy of Nature
With Economic
Growth
Human
Economy
Animals
Plants
Human
Economy
Animals
Plants
Limits to Growth - The Evidence
Source Limits
Limits on the quantity of
natural resources that are
raw materials for the
economy.
Sink Limits
Limits on the ability of the
environment to assimilate
wastes generated by
economic production.
Source Limit - Overfishing
Fishing down the food web
Daniel Pauly, UBC
Source Limit – Resource
Depletion
r-selected economy
Sink Limit – Climate Change
12,000
10,000
25,000
20,000
8,000
15,000
6,000
10,000
4,000
2,000
0
5,000
Thousands of Barrels Per Day
Billions of Year 2000 Dollars
U.S. GDP and Oil Consumption (1965 - 2005)
GDP
Oil
Consumed
0
“If humanity wishes to preserve a planet similar to that on which civilization
developed and to which life on earth is adapted, paleoclimate evidence and
ongoing climate change suggest that CO2 will need to be reduced from its
current 385 ppm to at most 350 ppm."
Combined Sink/Source Limit
Causes of species endangerment
Urbanization
Agriculture
Water diversions
Recreation, tourism
Pollution
Domestic livestock, ranching
Mineral, gas, oil extraction
Non-native
Topspecies
Dozen Causes
Harvest
Modified fire regimes
Road construction/maintenance
Industrial development
247
205
160
148
143
136
134
115
101
83
83
81
Czech et al. 2000. Bioscience 50(7):593-601.
Combined
Sink/Source
Limit
Ecological
Footprint
Global
Footprint
Network
Final Thought on Limits
A challenge from the realm of common sense… Can you cite
examples of Earthly things that continuously grow without
approaching a limit?
Even the biggest of the big have limits.
Outline
• Definitions
• The Conflict between Economic Growth
and the Environment
• Theoretical Framework
• Empirical Evidence
• Steady State Economy,
the Alternative to Economic Growth
• Policies and Institutional Changes for the
Transition
• Getting Started with the Paradigm Shift
Alternatives
If the economy is not growing, what can it do?
(1) Shrink.
(2) Remain about the same size.
Option
1 = recession
or state
depression,
Option
2 = steady
economy,
neither
of which
is sustainable
which
is sustainable
over over
the
the long
run.
long
run.
What is a Steady State Economy?
• Stable production and consumption of goods and
services;
• Indicated by stable GDP;
• Stabilized population;
• Stabilized per capita consumption;
• Stabilized throughput; and
• Constant stocks of natural and human-built capital.
What’s the Bottom Line?
Does a steady state economy mean…
• Freezing in the dark under a harsh communist regime?
• Some kind of hippy fantasy about returning to a
bygone era that no longer exists?
• A luddite world where we each farm our own plots of
land using nothing but sticks for tools?
A steady state economy is not a failed
growth economy. Remember the paradigm.
Characteristics of a SSE
1. Optimal Scale
2. Just Distribution
3. Efficient Allocation
4. Development and High Quality of Life
Optimal Scale
• Technical: marginal benefits of growth = marginal costs
• Conversational: Finding the sweet spot. Applying the
Goldilocks principle – not too big, not too small, just right!
A Few Elements of Sustainable Scale
• Elimination of the boom and bust cycle.
• Restoration of natural capital and ecosystem services.
• Secure stocks of natural capital.
• Maintenance and improvement of built capital.
Just Distribution
Perfectly even
distribution
Distribution with
limited inequality
A bit of a skewed
distribution
A Few Elements of Just Distribution
• Equitably assigned property rights for common resources.
• Equal access to the commons.
• Equitable distribution of common wealth.
• Limits to private income and wealth inequality.
Efficient Allocation
No market to
allocate goods
and services
Market with
stewardship of
commons
A Few Elements of Efficient Allocation
• Inclusion of non-market values.
• Evolution of sectors of the economy.
• Efficient use of capital.
Unchecked
market to
allocate goods
and services
Development and Quality of Life
Poverty, illness,
and unemployment
Health, time,
prosperity, and
community
Over-consumption
and liquidation
of resources
A Few Elements of Development and Quality of Life
• High life expectancy.
• Low infant mortality.
• Meaningful work and jobs.
• Increased leisure time.
• Green technologies and systems.
Outline
• Definitions
• The Conflict between Economic Growth
and the Environment
• Theoretical Framework
• Empirical Evidence
• Steady State Economy,
the Alternative to Economic Growth
• Policies and Institutional Changes for the
Transition
• Getting Started with the Paradigm Shift
Herman Daly’s Top Ten 1-5
1. Employ cap-auction-trade systems for basic resources.
2. Institute ecological tax reform.
3. Limit the range of inequality in income distribution.
4. Shorten the working day, week, and year.
5. Re-regulate international commerce.
Herman Daly’s Top Ten 6-10
6. Limit the scope of the International Monetary Fund, World
Bank, and World Trade Organization.
7. Move to 100% reserve requirements instead of fractional
reserve banking.
8. Stop treating the scarce as if it were not scarce, and the
non-scarce as if it were scarce.
9. Stabilize population.
10. Reform national accounts to be able to measure when
growth is economic and when it is uneconomic.
Institutional Arrangements
The Market
• Employment
• Regulated banking systems
• Regulated international trade
• Stock markets and
investments
• Thriving local economies
The Commons Sector
• Property rights for
commons
• Trusts for managing the
commons
The Public Sector
• Governance for
sustainability
• Ecological taxation
• Competent regulatory
agencies
The Private Sector
• Ecologically sound
business operations
• Redesigned corporate
charters
• Limited demand creation
Outline
• Definitions
• The Conflict between Economic Growth
and the Environment
• Theoretical Framework
• Empirical Evidence
• Steady State Economy,
the Alternative to Economic Growth
• Policies and Institutional Changes for the
Transition
• Getting Started with the Paradigm Shift
Changing Perceptions
Spreading the information:
We can’t jumpstart a
paradigm shift until people
know about the new
paradigm.
Inroads
The first text book for college
courses on ecological
economics came out in 2003.
CASSE’s position on
economic growth was
formulated in 2004.
The CASSE Position
• Carefully crafted position statement on economic growth.
• Based on years of study in the fields of ecology and
economics.
• Sanctioned by many leaders in sustainability science.
• Individual signatures for demonstrating widespread
understanding of the conflict between economic growth
and environmental protection.
• Organizational endorsements and adoption of similar
positions by professional societies to build a foundation of
advocacy.
http://www.steadystate.org/CASSEPositionOnEG.html
The CASSE Position
The Whereas Clauses
• Define economic growth, how it occurs, and how it is
measured.
• Point out that economic growth is a top policy goal, there
are limits to growth, and growth has negative effects.
The Therefore Clauses
• Recognize the conflict between growth and the
environment.
• Identify the steady state economy as a positive alternative
to growth.
• Recognize that other nations may still pursue growth to
meet needs.
http://www.steadystate.org/CASSEPositionOnEG.html
The Steady State Economy
Take a Position!
Thank you.
www.steadystate.org
rob_dietz@steadystate.org
541-602-3097