The End of Growth

notes on Daly, Herman. “The End of Growth.” The European Magazine. 05 September 2011.

Daly went to the World Bank to work with economists who primarily disagreed with him — “it is of no use preaching to the choir.” At the World Bank, everyone had come from the same elite schools, the same teachers, believing the same doctrines about growth above all.

People at the World Bank were no cynics but true believers in growth, and environmental protection was seen as an impediment to growth.

Why should we question growth? We are in a situation where growth has begun to cost more than it is worth…We need to build the physical constraints of a finite biophysical environment into our economic theory.

People are not just “atomistic independent individuals” connected through markets (a la Adam Smith) — they’re “constituted by their relationships with others,” and this collectivity should not be ignored by economics.

Everyone is operating within the same paradigm, and there is no longer an accepted form of interdisciplinary criticism.

Frederick Soddy [Daly’s paraphrasing]:

An increase in debt is just a numerical increase. An increase in wealth requires real labor and energy. Money can grow without limits, growth in wealth is limited by the law of entropy and the scarcity of matter and energy.

It is an idiocy to get so fixated on the symbolic and mathematical side of the economy and confuse that with real wealth.

We should separate the GDP (a now-useless measure) into beneficial and costly activity, and compare them at the margin.

You cannot make a sandwich out of labor and capital.

Economic theory has become to abstracted to deal with the finite realities of our resources today.

Tax the resource flow — make scarce things expensive and thus increase efficiency.

Three problems of economics: allocation, distribution, scale. Efficiency can help solve allocation problem, cap-auction-trade can help with scale.

You put a cap on a resource, and then the government auctions off the right to deplete that resource.

The proceeds (resource scarcity rents) from our interaction with the environment are a social patrimony that should be socially collected and distributed.

We continue growing, even if it’s making us poorer, because

The costs and benefits are typically not borne by the same group. [Growth] is still working very well for the people who have figured out how to make it work for them. They capture the privatized benefits while socializing the costs.

Daly on optimism vs pessimism, hope vs despair:

There needs to be a dialogue between science and religion. We dismiss religious arguments as folly, and we tend to dismiss scientific arguments as lacking ontological insights. From a policy perspective, they need to be brought together. We need to understand how the world works. We also need to reason about what constitutes a good state of the world.


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