Can we grow our way to an environmentally sustainable world?¹

Administrator’s note: I’m honored to feature on GIM an essay by Herman Daly. Dr. Daly teaches at the School of Public Policy at the University of Maryland. Previously, he was a Senior Economist in the Environment Department at the World Bank where he helped develop policy guidelines pertaining to sustainable development. He is a co-founder of the journal, Ecological Economics, and author of many books including Steady-State Economics, Valuing the Earth, and Beyond Growth. He’s received numerous awards including an Honorary Right Livelihood Award, commonly known as the “Alternative Nobel Prize.”

Dr. Daly has often been called the “founding father of ecological economics.” And rightly so.

The following essay is a preview from his forthcoming book, Ecological Economics and Sustainable Development: Selected Essays of Herman Daly. It appears in the section of the book titled, “Issues with the World Bank.” My thanks to Dr. Daly for his permission to post it here on GIM. — JF
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Ecological Economics and Sustainable DevelopmentBy Herman Daly:

I have a short answer and a long answer.

Short answer: My short answer is “No.”

But suppose some of you think the short answer should be “Yes.” My question to you then would be—After you grow your way to an environmentally sustainable world, then what? Would you then be willing to stop growing? Or would you want to keep on growing? Is it a state of the world, or the process of economic growth, that you want to sustain? I think the World Bank wants to sustain growth—that is, a process, not a state of the world. I would like to sustain that subsystem of the world called the “economy” in a state compatible with human well-being. I contend that the attempt to sustain growth will be inimical to that end.

When the economy grows it does not grow into the void, displacing nothing and incurring no opportunity costs. Rather it grows into the finite, non-growing ecosystem and incurs the opportunity cost of displaced natural capital and ecological services. Beyond some point growth in production and population will begin to increase social and environmental costs faster than it increases production benefits, thereby ushering in an era of uneconomic growth—growth that on balance makes us poorer rather than richer, that increases “illth” faster than wealth, and that is likely to be ecologically unsustainable. There is evidence that the US has already reached such a point.

That is my short answer. But it would be more productive to debate the longer, more nuanced, answer.

Long answer: A longer answer requires consideration of three subsidiary questions:

  1. Growth in what? Exactly what is it that is supposed to be growing when we say “grow our way to an environmentally sustainable world . . .”?
  2. What is environmental sustainability? Is it just a pair of words that make a rhetorically soothing sound, or does it have an operational definition?; and
  3. Who is “we.”

Let us consider each question.

Growth in what?—throughput, GNP, or welfare? Let’s take the easy ones first—continual growth in physical throughput in a finite, non-growing, and entropic world is impossible, and beyond some point throughput growth becomes the main reason for environmental unsustainability by overwhelming environmental source and sink capacities. At or before that point throughput growth becomes “uneconomic growth.”

What about growth in welfare? That is easy too.Welfare is a psychic magnitude, not a physical one; an experience, not a thing. Maybe welfare can grow forever, but if it can there is no problem since it is non-physical, and the environment is only disturbed by physical throughput. If welfare can grow forever with a constant throughput that is wonderful. Ecological economists usually call that “development” (qualitative improvement) rather than growth (quantitative increase), but that usage, although authorized by most dictionaries, has not caught on with neoclassicals. Most economists use growth and development as near synonyms, conflating quantitative and qualitative change—two very different things.

What economists usually mean by “growth” is growth in GNP. And GNP is the difficult case—is it physical or non-physical; quantitative or qualitative? It is the conflation of both. GNP is measured in value units. Value is price times quantity—P x Q. Now Q is certainly physical—goods are physical, and even services are always of some thing or some body for some period of time, and therefore have a physical dimension. Relative price changes can reflect qualitative improvement in particular goods, but not for goods in general, since the relative price of all goods cannot increase. The absolute price level could increase forever with a constant Q, but that would be inflation, and I am sure no one wants to count inflation as growth. Economists take pains to calculate real GNP in order to eliminate aggregate changes in P and capture only changes in Q.

Certainly J.M.Keynes, one of the founders of the World Bank, defined the growth of the world economy, to which the World Bank would be dedicated, in physical terms—“by expansion we should mean increase of resources and production in real terms, in physical quantity, accompanied by a corresponding increase in purchasing power.” This is the overwhelmingly dominant meaning of “growth.” We can increase GNP to some extent without increasing throughput, but by how much? Just how tight the coupling is between GNP growth and throughput growth is a debatable question—some (Amory Lovins) think GNP can grow tenfold or more with a constant throughput—that is, a tenfold increase in resource efficiency. I tend to doubt it, to believe that the coupling is tighter than that, but if Amory is right that is fine with me—let GNP grow forever as long as throughput is held constant.

In general ecological economists think the throughput–GNP coupling is relatively tight, while neoclassicals tend to think it is loose. Indeed, neoclassicals frequently omit natural resources altogether from their production functions—implying no coupling at all! The coupling may well be a bit loose at the margin in rich countries, but in poor countries (most relevant to World Bank) the throughput intensity of GNP is likely to remain high for some time, since food, clothing, and shelter are resource-intensive. The Global South needs food on the plate—not 10,000 recipes on the Internet.

The other important growth coupling is the one between GNP and welfare. Here neoclassicals think the coupling is relatively tight, while ecological economists think it is loose, or even non-existent beyond a sufficiency threshold. Beyond that threshold welfare is overwhelmingly a function of relative income, and of quality of social relationships and ecological services, not a function of the absolute quantity of commodities consumed. GNP growth reflects only the last, the least important component of welfare beyond the threshold.

What is environmental sustainability? To be an operational concept it has to be defined in terms of throughput—the metabolic flow through the economy from environmental sources of useful, low entropy matter-energy to environmental sinks for waste, high entropy matter-energy.

Neoclassicals try to define sustainability in terms of non-declining utility between generations. This is a non-operational non-starter for three reasons: first, it is throughput, not utility, that directly impinges on the environment; second, utility is unmeasurable; and third, utility cannot be bequeathed. Even if we could measure utility well enough to judge whether it is non-declining, we still could not pass it on from one generation to the next. As any parent knows you can only pass on things, not happiness. Future generations are always free to make themselves miserable or content with whatever we give them.We do not owe the future their happiness, but we do owe them an intact resource base.

A more reasonable and operational definition of environmental sustainability requires that the throughput be within the regenerative capacities of renewable natural resources, and within the assimilative capacities of natural sinks. For non-renewable resources there is no regenerative capacity, and strictly speaking no ecologically sustainable use rate. However, quasisustainability may sometimes be attained by depleting non-renewables at a rate equal to the development of renewable substitutes.What is bequeathed is not utility, but productive capacity, capital in the broad sense, including especially natural capital. Sustainability means maintaining capital intact, avoiding the mistake of consuming capital and counting it as income.Weak sustainability means maintaining intact the sum of natural and manmade capital on the assumption that the two are largely substitutes. Strong sustainability means maintaining natural capital intact on the assumption that the two categories are largely complements, and that natural capital has generally become the limiting factor. For example, the fish catch is no longer limited by the manmade capital of fishing boats, but by the natural capital of remaining fish stocks and suitable habitats. Efficiency requires that investment should focus on the limiting factor.

We are very far from meeting these sustainability conditions at present, so it may sound utopian even to state them. But it is more utopian to think that we can continue to ignore them, or avoid the issue with non-operational definitions that allow “sustainability” to mean growth forever.

Throughput growth is the problem, not the solution—we will not “grow our way to environmental sustainability” as long as growth means either throughput growth or GNP growth.Welfare growth with constant throughput is all to the good and would help us bear the burden of limiting throughput to a sustainable level. But this is definitely not what economists and the World Bank have so far meant by growth.

Who is “we”? Is “we” both the North and the South? The South only? The poorest of the poor? An average of rich and poor, and if so do we choose the mean, the median, or the mode as our measure of central tendency? I think the World Bank has viewed the problem of sustainable development as mainly a problem for the South. The South has yet to develop, and they are now told to do it sustainably. The North has already developed, and is falsely assumed to be sustainable now that it has reached a developed state and presumably has climbed down the far slope of the “environmental Kuznets curve,” a relationship that has absolutely nothing to do with Simon Kuznets, whose name is used only to lend the patina of credibility to a shaky concept.

Let me end with a multiple-choice question: From the viewpoint of sustainable development, what is the best growth policy for the North to adopt for itself in order to help the South overcome poverty?

a. The North should grow its GNP as fast as possible to provide markets
in which the South can sell its exports, and to accumulate capital to
invest in the South. A rising tide lifts all boats, and it doesn’t matter if
the North grows faster than the South.

b. The North should continue its welfare and efficiency development, but
stop its throughput growth, in order to free up resources and ecological
space for the South grow into—at least enough to eliminate absolute
poverty, and ideally enough to catch up with the North. If the latter is
ecologically impossible, then the North should reduce its throughput.

It is clear that the World Bank has effectively opted for (a), although without, to my knowledge, ever explicitly asking the question. The World Bank should explicitly ask the question. The closest they have come to doing so, I believe, is the question we have been asked to debate today. This is therefore an event worth celebrating!

By the way, the correct answer to the multiple-choice question is (b).

China, although considered a part of the Global South, is replacing the US as the world’s largest absolute consumer of resources, even though per capita consumption is much lower. Therefore the frugality and efficiency of China’s development strategy is even more critical to sustainability than that of the US. However, the rich cannot preach frugality and efficiency to the poor unless they practice these virtues themselves. And the sequence is also important: frugality first induces efficiency second; efficiency first dissipates itself by making frugality appear less necessary. Frugality keeps the economy at a sustainable scale; efficiency of allocation helps us live better at any scale, but does not help us set the scale itself.

NOTE

1. World Bank, Washington, DC, March 2, 2004, Debate.

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14 responses to “Can we grow our way to an environmentally sustainable world?¹

  1. For someone with an analytical bent like me, this essay is a gold mine. (John, nicely done in getting a guest contribution from someone like Herman Daly!)

    Daly’s discussion fits the way I’ve thought about this problem, but I have lacked the proper terms and definitions which he eloquently provides. I like the distinction between two types of growth and their labels: (1) physical throughput, a quantitative value, versus (2) welfare or what we might call the quality of life, a qualitative value. And it hadn’t occured to me that neoclassical econominists “try to define sustainability in terms of non-declining utility between generations” and how that is impossible to do. As Daly says, “you can only pass on things, not happiness” and “We do not owe the future their happiness, but we do owe them an intact resource base.”

    Another part that stood out for me is this conclusion:

    The North should continue its welfare and efficiency development, but stop its throughput growth, in order to free up resources and ecological space for the South grow into — at least enough to eliminate absolute poverty, and ideally enough to catch up with the North. If the latter is ecologically impossible, then the North should reduce its throughput.

    This is what we are fighting for, to get more people to accept the necessity of that last sentence.

  2. “This is what we are fighting for, to get more people to accept the necessity of that last sentence.”

    Yep, and if enough people would read Herman Daly, it would go a long way toward achieving that. His logic is so solid it’s hard to deny.

    Probably mainstream economists will be the last to let go of their own illogic. But I think Herman Daly’s work provides a solid grounding for everyone else to insist to them that they must change their ways.

  3. I’d be interest to know how traditional (or neoclassical?) economists respond to Daly and other ecological economists or if they respond at all. Since they are the mainstream perhaps they just ignore other views. You’d think at least in universities there would be some back-and-forth between the two schools of thought. I wonder what that looks like.

  4. Trin,

    I’m sure Herman or another ecological economist would know much more, but I do know debates happen. In fact, the article above appears to have come from a presentation used at a debate.

    I can point you to a video of an interesting debate between Brian Czech (of the Center for the Advancement of the Steady State Economy) and a mainstream econ professor:

    http://ncseonline.org/temp/steadystate/DebateM.mpg

    My limited impression is that often the neoclassical economists respond to challenges from ecological economics with technical details which miss the big picture issues. Here was an econ grad student (Rob Metcalfe) disagreeing with some ideas in an early post here:

    https://growthmadness.org/2007/01/24/can-ecological-economists-save-us-from-the-mainstreamers/#comments

  5. Thanks, John, I had forgotten that thread. Much to think about.

    One idea that I find helpful is insurance. We have house, car, health, and life insurance and businesses buy all kinds of insurance too. Those are all things that neoclassical economics recognizes. However, there is one kind of insurance that neoclassical economics doesn’t “see”: sustainability insurance or put another way insurance for a viable ecosystem. What you don’t see or don’t measure can’t be incorporated into your system.

    What’d I like is to be able to say, “traditional growth is okay to the extent that you can insure against degrading sustainability.” To do that with any precision, though, we need a way to measure sustainability so we are right back to the arguments in the thread you link to.

    However, precision isn’t everything. Sustainability insurance is what you get when you have a population that is well under carrying capacity. It’s also, I think, akin to Daly’s notion of frugality at the end of his article. When we can see we are living at the margins in terms of land use, clean water, or atmospheric CO2 concentration, it’s time to start buying more sustainability insurance, and the only way to do that is to take land out of production, use less water, turn off systems that emit CO2, encourage lower birth rates, etc.

    In a sustainable world we need a good buffer between what’s available and what we are using. That buffer is our insurance. Neoclassical economics does not begin to address this issue as far as I can tell while ecological economics is based on it. But I’m a economics neophyte.

  6. Hello to all,

    In light of the astute and, for me, uncommon understandings being presented in this thread, perhaps the paper that follows could be considered for your REQUIRED READING LIST.
    http://getresponse.com/t/9345316/631522/186452485

    On the other hand, perhaps I overestimate the importance of the paper, in which case you are invited to comment on its weaknesses.

    Always,

    Steve

  7. Here is another presentation relevant to the one above. This one comes from John Attarian.

    http://www.npg.org/forum_series/steadystate.html

  8. Thanks for those links, Steve. Will read.

  9. NINE TENTATIVE PROPOSALS:

    1. Free, immediate and universal access to contraception is required;

    2. Open access to family and health planning education is made available to everyone; and

    3. The time for the economic and social empowerment of women is now.

    4. As a means of accelerating the present downward movement in birth rates in some countries, a VOLUNTARY policy of one child per family would be initiated worldwide.

    5. The many people who are suffering the unhealthy effects of obesity will share their overly-abundant resources with many too many people who are starving.

    6. Every good idea to conserve energy and scarce material resources will be implemented.

    7. Substanitial economic incentives are necessary for the development of energy resources as alternatives to fossil fuels.

    8. Overhaul national tax systems so that conspicuous per human over-consumption of resources is eschewed and seemingly endless and patently unsustainable production/pollution activities are transformed into Earth-friendly, sustainable enterprises.

    9. Humanity needs a modified economic system, one that is subordinated to democratic principles and more adequately meets the basic needs of a majority of humanity who could choose to live better lives with lesser amounts of energy and natural resources.

    9. Overall, what is to be accomplished is a fair, more equitable and evolutionarily sustainable distribution of the world’s tangible (e.g., food) and intangible (e.g., education) resources, as soon as possible.

    Thanks for your consideration.

  10. Steve,

    Your idea of a more equitable distribution of resources makes me think you’d like this site:

    http://www.stwr.net/

    They picked up one of my articles, and elaborate quite a bit on the idea of a more equitable distrubution.

  11. Dear John,

    The site above is terrific. Thanks.

    I feel as if we are making good forward movement.

    There is an impression I would like to share here. It has to do with a deeply rooted wish among many too many well-intentioned people that we wait until 2009 before “taking on” the global challenges that are arraying themselves before humanity on the far horizon. Because time does not appear to be on the side of either life as we know it or the maintenance of the integrity of Earth, given the current scale and unbridled growth rate of global economic expansion, somewhere within the human community we have to locate leadership capable of addressing recognizable, ominously looming threats to human and environmental health.

    The unexpected human predicament with which humanity could soon be confronted, as a direct consequence of unregulated human consumption, production and propagation activities now overspreading Earth, leads me to think now of our “brothers&sisters-with-billions” who are so single-mindedly focused on the accumulation of wealth and power, in feathering their own gigantic nests, frequenting exclusive clubs, exchanging secret handshakes, flying private jets, sailing yachts and visiting exotic hideaways, that they have forgotten how human life utterly depends upon Earth’s limited resources and frangible ecosystem services for its very existence.

    The “powers that be” also appear to have forgotten that the Earth is not flat and endless but round, finite and relatively small. Perhaps one consequence of their adamant denial of the requirements of practical reality is that our scale and rate of per capita consumption, for example, is being encouraged in an unsustainable way, one that plainly dissipates natural resources faster than the Earth can restore them for human benefit. So great is per human over consumption in our time that we can see biodiversity inadvertently extirpated, the environment unintentionally degraded and Earth’s capacity to sustain life as we know it unrelentingly diminished.

    Is the unchecked effort to fulfill the insatiable wishes of unrestrained consumers unexpectedly and perversely tangled up with unbridled big business interests pursuing a course of seemingly endless economic expansion? Is feckless consumption occurring of the very resources needed for the survival of life as we know it?

    Could it be useful for the holders of great wealth and power to begin doing things differently? What would also be of assistance, I am supposing, is for the people who have assumed positions of leadership and accepted requisite responsibilities to do new and different things….some things that will not be easy because they are likely politically unpopular and economically inefficient.

    We can begin by locating some uncommon billionaires, the ones who have not forsaken God for Mammon. They will help us find personally sound and intellectually honest politicians, sufficiently reality-oriented economists, courageous demographers and good scientists.

    Then, perhaps, needed changes in human behavior will begin to occur ubiquitously.

    All this is to say that October 1, 2007 is a good time for the human community to acknowledge and prepare to address the distinctly human-derived challenges that could soon become actual threats to human wellbeing and environmental health.

    Sincerely,

    Steve

  12. Dear Friends,

    Let’s get real. Time is of the essence and is slipping away.

    In the final analysis, IMHO, please note that the human community may be governed in our time by a wealth-worshipping power structure that chooses to protect nothing else, ultimately, but the unsustainable growth of the economic globalization. Despite all their posing, these masters of the universe, these children of men, these men playing God, these soon-to-be erstwhile leaders of the global economy have its unobstructed growth continuously in mind. The success of the political economy is their raison d’etre. That their relentless drive for endless growth of the world’s human economy and for unrestrained per capita consumption of Earth’s irreplaceable resources is scheduled become patently unsustainable later in Century XXI, is not something they want to discuss. Afterall, for them SILENCE IS GOLDEN.

    Always, with thanks to each of you,

    Steve

  13. I find your website inspirational. But I am concerned that no one is discussing the “constructive” population growth that comes from extension of average life expectancies. As the third world gains access to these technologies, many of which are taken for granted in the developed world, their life expectancies will soar. Even if we can drive down the birth rate, we’ll still have too many people. Shouldn’t serious discussions be taking place on how to go beyond the one child policy to perhaps establish an upper limit on the length of human life?

  14. Shouldn’t serious discussions be taking place on how to go beyond the one child policy to perhaps establish an upper limit on the length of human life?

    Well, first, if we had some kind of humane, voluntary one child policy — and some think that might be possible — that alone would have a huge, positive impact.

    In today’s world I could not possibly advocate establishing an upper limit on the length of human life.

    If the science of life extension were to advance to the point where people were living vastly longer lives than they are today, then clearly that would present troubling and vexing social challenges. They’d be less vexing though if we had more time to deal with them, which would be made possible by forthrightly addressing population today.