Changing the ParadigmThe Transition from Uneconomic Growth to Sustainability

The Centerfor the

Advancementof the

Steady State Economy

• 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

Outline

Definition – Paradigm

Thought pattern in a scientific discipline

Proverbial paradigm shift leads to big changes in the scientific worldview

Ecosystem

Economy

Resourceextraction

Wasteproducts

Standard Model ofthe Economy

Growth Paradigm in Economics

Ecosystem

EconomyResourceextraction

Wasteproducts

Reality-Based EcologicalEconomics Model

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

Component 1 – Population

World Population (Millions)

Component 2 – Consumption

U.S. Per Capita GDP (year 2000 dollars)

Definition – Uneconomic GrowthGrowth of the macroeconomy that costs more than it is worth.

Value ($)

Quantity(units producedor consumed)

MarginalBenefit

MarginalCost

Q*

V*

V1C

Q1

V1B

Q2

V2C

V2B

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 SustainabilityHold total capital (natural and human-built capital combined) constant. Assumes the two forms of capital are substitutes.

Strong SustainabilityHold natural capital constant. Assumes the two forms of capital are complements.

Economic growth converts natural capital into human-built capital and goods and services.

• 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

Outline

Thermodynamics

First Law of Thermodynamics: Conservation of mass and energy.Second Law: Entropy never decreases in an isolated system.

$$$

$$$

Standard model of themacroeconomic system

NaturalCapital Waste

Model of the macroeconomic system that accounts for the laws of physics

Time

GD

P Natural capital allocatedto theeconomy

Naturalcapital allocatedtonature

K C a r r y i n g C a p a c i t y

E c

o n

o m

i c

G r

o w

t h

Competitive Exclusion

Cover of the Wildlife Society BulletinSpring 2000

Ecological CarryingCapacity ScenariosIn

divi

dual

s

Time

K-selection

K

r-selection

Economic CarryingCapacity ScenariosG

DP

Time

K

r-selection

K-selection

Trophic Theory

Primary Producers(plants)

Consumers(herbivores)

Carn-ivores

Ecology(economy of nature)

Producers(agriculture,

extractive industry)

HeavyManufacturing

LightManufac.

HumanEconomy

Trophic Theory

Plants

Animals

HumanEconomy

Human-InclusiveEconomy of Nature

Plants

HumanEconomy

With EconomicGrowth

Animals

Limits to Growth - The Evidence

Source LimitsLimits on the quantity of natural resources that are raw materials for the economy.

Sink LimitsLimits on the ability of the environment to assimilate wastes generated by economic production.

Source Limit - Overfishing

Daniel Pauly, UBC

Fishing down the food web

r-selected economy

Source Limit – Resource Depletion

Sink Limit – Climate Change

“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

UrbanizationAgriculture Water diversionsRecreation, tourismPollutionDomestic livestock, ranchingMineral, gas, oil extractionNon-native species HarvestModified fire regimesRoad construction/maintenanceIndustrial development

247205160148143136134115101838381

Czech et al. 2000. Bioscience 50(7):593-601.

Causes of species endangerment

Top Dozen Causes

Combined Sink/Source Limit

EcologicalFootprint

GlobalFootprintNetwork

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.

• 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

Outline

AlternativesIf the economy is not growing, what can it do?

(1)Shrink.

(2) Remain about the same size.

Option 1 = recession or depression,neither of which is sustainable over the long run.

Option 2 = steady state economy,which is sustainable over thelong 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?

A steady state economy is not a failed growth economy. Remember the paradigm.

• Freezing in the dark under a harsh communist regime?

Does a steady state economy mean…

• 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?

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.

Perfectly evendistribution

A bit of a skewed distribution

Distribution withlimited inequality

Just 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.

No market to allocate goods and services

Market with stewardship of

commons

Unchecked market to

allocate goods and services

Efficient Allocation

A Few Elements of Efficient Allocation• Inclusion of non-market values.• Evolution of sectors of the economy.• Efficient use of capital.

Development and Quality of Life

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.

Health, time,prosperity, and

community

Poverty, illness,and unemployment

Over-consumptionand liquidation

of resources

• 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

Outline

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

• 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

Outline

Changing Perceptions

Spreading the information:

We can’t jumpstart a paradigm shift until people know about the new paradigm.

InroadsThe 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.

http://www.steadystate.org/CASSEPositionOnEG.html

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.

www.steadystate.org

rob_dietz@steadystate.org

541-602-3097

The Steady State Economy

Take a Position!

Thank you.