Economics in a Full World
Herman Daly
Scientific American, September, 2005, pp. 100-107
Economic
growth is revealed to be not the panacea for all our economic problems (e.g. poverty, unemployment, overpopulation, environmental degradation) that it is made out to be by mainstream, neoclassical economists; politicians; and the media: If the economy is seen to be a subsystem of a finite biosphere and constrained by the laws of thermodynamics, then it must be admitted that economic growth without limit in a finite biosphere as a proposed solution to all our economic problems amounts to a biophysical
impossibility.
Certainly, this is the position taken by ecological economists (who trace their intellectual roots to John Stuart Mill in the 19th century and to Kenneth Boulding, Ernst Schumacher, and Nicholas Georgescu-Roegen in the 1960s and the 1970s). Straining against this biophysical impossibility leads to uneconomic growth in which more “bads” (i.e. public insults such as ecological degradation, depletion, pollution, community disruption) than “goods” are produced (i.e. in the neoclassical sense, private goods and services).
If sustainability is truly desired, then this biophysical impossibility must be admitted. Protestations about the political impossibility of such an admission must be swept aside: If we are asked to choose between surmounting a political impossibility and a biophysical impossibility, then we are well advised to surmount the former rather than the latter. In any case, what we hold as politically impossible is really shaped and maintained by social institutions of our own devising.
What then do we sustain if we wish a sustainable economy? Five candidate quantities proposed by economists themselves are discussed. These are GDP, utility, throughput, natural capital and total capital. What fine
distinctions are to be made in regard of these five candidate quantities so that a determination of what aspects of them are to be dismissed or retained is articulated. The adjustments to economic policy needed to accommodate the fine distinctions made are then discussed.