Beyond Growth: The Economics of Sustainable Development

Author: Herman E. Daly (USA), translated by Zhu Da Jian et al.
Translators: Zhu Da Jian, Hu Sheng et al.
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Publishing Date: 2001-09-01
Features: Environmentalists and advocates of sustainable development must truly confront the profound philosophical and religious questions of why their efforts ultimately make sense. Whether it is the sentimental pantheism about "Gaia" or the invention of hypothetical intentions like "biophilia" (love of life), neither can withstand fierce philosophical criticism. However, they are welcome steps away from pure scientific materialism. I have found that the thinking of a few religious thinkers influenced by Whitehead, such as B. Cobb, Houghton, and Charles Birch, provides a far more solid foundation for loving nature enough to fight for its salvation than scientific materialism and traditional theology. Many other religions, along with Christianity, believe in the theology of creation, which is different from the "scientific creationism" in the intellectual world. Therefore, things like "biophilia," when used as persuasive virtues rather than mechanical instincts, have a broad religious foundation. All traditional religions are the enemies of the modern blind worship that considers humans, who accidentally rely on science and technology-based economic growth, as the true creators, while the natural world is merely a purposeless accumulation of material used as tools in arbitrary engineering. If we cannot propose a more internally harmonious cosmology, then we might as well close the warehouse and go fishing—provided there are still fish.
The term "scale" stands for "the physical size or dimensions of human survival in an ecosystem, calculated as population multiplied by per capita resource consumption." The optimal allocation of resources in a given economic flow is one thing (a microeconomic issue), while the optimal scale of the entire economy relative to the ecosystem is a completely different matter (a macro issue). The micro-allocation problem is similar to reasonably distributing a given weight on a boat. Although the weight is distributed reasonably, there is still a question of how much net weight the boat can actually carry. This absolute optimal load capacity is known as the Plimsoll line in maritime regulations. When the waterline reaches the Plimsoll line, the boat reaches its limit of safe load capacity. Of course, if the weight is distributed improperly, the waterline will reach the Plimsoll line prematurely. Even if the weight is distributed reasonably, the waterline will eventually reach the Plimsoll line as the net load increases. If the load is too heavy, even a boat that is optimally loaded will still sink! It must be clarified that optimal allocation and optimal scale are two different issues. The main task of macro environmental economics is to design a system similar to the Plimsoll line to determine the absolute scale of the economy (the weight) so that the economic boat does not sink in the biosphere. The market, of course, operates within the economic subsystem and does only one thing: it solves the allocation problem by providing necessary information and incentives. Although the market does well in solving allocation problems, it does not solve the issues of optimal scale or sustainable development. It is widely acknowledged that the market cannot solve the problem of fair distribution, but there is no consensus on whether the market cannot solve the issue of optimal scale or sustainable development. Denying the independence of the scale problem from the allocation problem leads to confusion. The following dilemma is an example. Which is more stressful to the environment—high discount rates or low discount rates? A common answer is that high discount rates cause greater pressure. This is because they accelerate the depletion of non-renewable resources, shorten the idle period for renewable resources, and reduce turnover. While they significantly alter the allocation of capital and labor to natural resource development projects, they also limit the number of projects. Low discount rates encourage reducing capital use per project while increasing the number of projects. The allocation effect of high discount rates is to increase output, but their scale effect is to reduce output. Although some argue that the scale effect will eventually dominate over a long period, it is difficult to determine which is better. The solution to this dilemma is to recognize that two independent policy goals require two independent policy tools. We cannot use a single discount rate policy to simultaneously solve both the optimal scale and optimal allocation of these two different problems (Tinbergen, 1952). The discount rate should be used to solve distribution problems, but the solution to the scale problem requires a policy tool that currently does not exist, which we can call the "economic Plimsoll line," which can limit the scale of economic output. Economists have recognized that efficient allocation and fair distribution are two independent goals, and they largely agree that prices should reflect efficiency while income distribution policies should reflect fairness. Optimal scale is a third independent policy goal that also requires a third policy tool. The latter view has not yet been universally accepted by economists, but its logic is consistent with the independence of allocation and distribution. The market inevitably affects income distribution in the process of setting factor prices and distributing profits: incentives are needed to change income distribution for efficiency. The key is that the market's standard for income distribution is to provide more incentives for efficient allocation, not for fairness. In any case, the historical conditions of property rights are the main determinants of income distribution, and they have little to do with efficiency and fairness. These two values can conflict, and the market does not automatically resolve this conflict. It should also be noted that the conflict is not just between two parties but among three values: allocation (efficiency), distribution (fairness), and scale (sustainability). Economic logic requires maximizing the productivity of restrictive factors in the short term and investing in increasing their supply in the long term. When restrictive factors change, past economic behavior becomes non-economic behavior. Economic logic remains unchanged, but the world's scarcity pattern changes, and as a result, behavior must change to remain economic. Now, instead of maximizing investment in artificial capital (as in an empty world), we invest in natural capital (as in a full world). This is not "new economics," but rather new behavior must align with the "old economics" of a world with a new scarcity pattern. In summary, since natural capital has replaced artificial capital as the restrictive factor, we should adopt policies to maximize its current productivity and future supply. This conclusion is not insignificant or irrelevant, as it means that maximizing the productivity of artificial capital and the current policy of accumulating it are no longer "economic" even in a traditional sense. Additionally, Hicks' definition of income also adds the condition of capital preservation. If natural capital is the restrictive factor, then the appropriate method of measuring income requires prioritizing the preservation of natural capital. However, without the attention of economists, how could the shift in scarcity patterns be so rapid? Several reasons can explain this development.
Exponential growth is deceptive. The time it takes for a basin to go from half full to full is the same as the time it takes to go from 1% full to 2% full. Second, although artificial capital and natural capital are essentially complementary, economists have always treated them as substitutes. If the factors are substitutes, then the scarcity of one factor will not limit the production of the other. If they can be well substituted, then no factor is restrictive. Therefore, even if the world goes from 40% full to 80% full in the next 40 years (Vitousek et al., 1986), economists can still maintain relatively empty living conditions by relying on artificial capital to substitute for natural capital. Third, if we subconsciously recognize that production growth cannot continue, the only way to solve poverty is to properly address distribution and population control. Since political "realists" are unlikely to consider these issues, there is no reason to conclude that any reason leading to this conclusion must be wrong. These three biases make us unable to see the obvious—that artificial capital and natural capital are complementary, and natural capital has become the restrictive factor. Increasing amounts of artificial capital do not replace natural capital but rather demand more complementary requirements for natural capital. Rapidly depleting natural capital to temporarily support the value of artificial capital will make the entire natural capital more restrictive in the near future. The problem of optimization methods lies not only in the need for precise calculation methods for the cost-benefit analysis of further stock accumulation but also in the requirement that marginal cost and benefit functions be "well-behaved." This means that the marginal benefit curve is monotonically decreasing, and the marginal cost curve is monotonically increasing. The former is not unreasonable because rational people first meet their most urgent needs. Thus, additional stocks and funds are generally used for less urgent needs. However, the marginal cost curve reflects the depletion of geological capital and the loss of current environmental service functions. It is unreasonable to expect that the loss of environmental functions will follow a certain order—from secondary to primary—under the pressure of increasing flows. A smarter approach is to set the level of accumulation based on ecological sustainability: assume that population multiplied by per capita resource consumption equals or is less than (for safety) the carrying capacity. Sufficientness and sustainability will be the criteria for choosing an accumulation level. Efficiency can be achieved by maximizing the services produced per unit of stock and fund accumulation and minimizing the flow of maintenance and renewal of stocks and funds. Expressed as an equation, maximizing S/A means maximizing S given A. The ratio S/A reflects the intensity of services produced by stock and fund accumulation per unit of time. This intensity depends on how total accumulation is allocated and distributed among different artificial goods and among different people. Maximizing A/T means minimizing T given A. The ratio A/T reflects the durability of stocks and funds, i.e., the amount of time they can continue to provide services. The latter sentence is particularly important, as it provides the basis for many of Soddy's criticisms of viewing the economy as a perpetual motion machine. For humans, like other heat engines, the essence of life is an energy problem. In the early 19th century, people lived on energy income (sunlight absorbed by plants, the "primitive capitalist"): now, people increase this income by consuming energy capital (coal, "sunlight stored in ancient summers"). When people can use coal-powered machinery to reduce labor, they must maintain vitality through new sunlight or new solar energy converted by plants, which are excellent processing factories. Since life depends on this continuous energy flow, the life essentials must participate in natural flows rather than just stocks. This flow can be stored for future use to a certain extent. A significant part of life essentials must come to us in the form of current flow or "income," as some of them cannot be physically converted into storage or infinite accumulation for the future: like the manna that God gave the Israelites in the wilderness, income is renewed daily and must accumulate enough to meet daily needs (not too much and not too little). If it accumulates too much beyond current needs, it will become infested with insects and rot (see Exodus, 16:17–20). The storage of assets helps us enhance our ability to develop energy income, but the income itself cannot significantly increase, and its accumulation is also limited. In fact, to maintain the accumulation of our natural wealth stocks without causing entropy damage, it requires the renewable capability of low-entropy "income" flows. Indeed, nature has stored energy in coal, but it took several geological eras to do so. What we can do is mine it. Additionally, the "extravagant era" of depleting coal capital stock, which Soddy calls "waning," will be followed by a time when the constraints of energy income on life will become clearer and more accurately felt. For Soddy, the fundamental economic question is, how do people live? The answer is: by sunlight. People living in sunlight, whether modern or ancient, must follow the principles of the first and second laws of thermodynamics. In short, "natural science determines the foundation of the state." In Soddy's words, wealth is "matter and energy in forms useful to humans." (Soddy, 1943, p. 6) Wealth has both a natural attribute, being matter/energy governed by rigid mechanistic laws, and a teleological utility attribute,ing to the goals of thought and will. Soddy's concept of wealth reflects his fundamental dualism and the belief that the intermediate world of life and wealth is related to the daily interaction of the material and spiritual dual worlds. Soddy focused on the natural attribute to correct the consequences of past neglect of it. This should not be understood as Soddy advocating materialistic monism of wealth, as Frank Knight misinterprets in what follows.