Beyond Growth: The Economics of Sustainable Development.

• Author: Wenig, Michael

The warning of "global environmental crisis" is being sounded more and more frequently by scientists, politicians, and other observers. The doomsday predictors of the 1960s, like ecologists Paul Ehrlich(1) and Rachel Carson,(2) have been joined by an ever-growing chorus of doomsayers in the 1990s.(3) Rachel Carson's concerns regarding pesticides were prominent in the early 1960s; today, concerns about the potential myriad of ecological effects from global warming predominate. Loss of biodiversity from habitat destruction, pollution, and other threats is also a major present concern.(4)

The proliferation of environmental alarms has, as expected, been accompanied by claims of critics that the alarms are overstated.(5) Besides denying the existence or magnitude of environmental threats, these critics question the priorities of the leading environmental advocates and their focus on government regulation, rather than the market, to address those priorities.(6)

Underlying the debate over whether humans' demands on the Earth have exceeded its ecological carrying capacity is a debate over the propriety of economic growth, the primary goal for rich and poor countries and for most international institutions.(7) The doomsayers generally see humans' unbridled pursuit of economic growth as a major root of all or most environmental evils; their critics generally see growth as providing a solution to environmental problems.(8)

While this debate has continued, there has been increasing consensus behind the concept of "sustainable development," which became a global future through its adoption by the United Nations-sponsored Brundtland Commission in a 1987 report entitled Our Common Future.(9) That report defined sustainable development vaguely as development that "meet[s] the needs and aspirations of the present without compromising the ability to meet those of the future."(10) Although that concept has helped raise the prominence of environmental protection on national and global policy agendas, it has not unseated economic growth as the primary public policy objective.(11)

Some economic growth advocates argue that environmental and growth objectives go hand in hand--while growth improves the environment, growth likewise cannot continue without a healthy environment.(12) But growth advocates generally deny that growth and environmental protection are inconsistent objectives.(13)

Since the early 1970s, economist Herman Daly has been at the forefront of those who have questioned the economic growth paradigm of modern society and advocated an alternative, "steady state" economic model.(14) Daly's 1977 and 1989 books, Steady State Economics(15) and For the Common Good,(16) respectively, are leading treatises in the field of "ecological economics." According to an economist with the U.S. Environmental Protection Agency, Daly has been

one of America's most articulate critics of our economic behaviors,

goals, and assumptions, defrocking the goal of economic growth

and bigger-is-better .... In all of his writing, Daly has challenged

our societal faith in economic growth and our denial of fundamental

ecological limits to that growth.(17)

In his latest book, Beyond Growth--The Economics of Sustainable Development,(18) Daly applies his views on the limits to growth to the popular concept of sustainable development. In the book's introduction, Daly observes that the Brundtland Commission's approach of vaguely defining sustainable development was a "good political strategy" for achieving consensus.(19) But Daly believes that vagueness is now a "breeding ground for disagreement" and a potential boon for opportunists.(20) Daly warns that widespread acceptance of the term "sets the stage for a situation where whoever can pin his or her definition to the term will automatically win a large political battle for influence over our future."(21) Daly's mission in Beyond Growth is to properly define sustainable development according to his "steady state" economic model and based on his notion of the ecological limits to economic growth.(22)

This Essay addresses Beyond Growth first from the practical perspective of whether Daly's steady state economic model provides a sufficiently clear framework for determining and implementing specific environmental protection policies. My conclusion is that the model does not provide a readily adaptable framework, nor does it indicate where existing environmental policies have erred. But Daly's model is nevertheless appropriate for redirecting policy discussions toward fundamental objectives that often get buried or ignored under the conventional economic growth paradigm.

Besides considering the practical implications of Daly's steady state model, this Essay also addresses the threshold theoretical debate, which Beyond Growth continues, of whether there are limits to economic growth. However, this Essay does not purport to resolve the limits to growth debate.(23) My objective is simply to identify and unravel the various components of the economic growth debate in order to attempt to understand what issues lie at the core of the debate and the extent to which those issues involve academic disciplines other than economics and the physical sciences. In simple terms, this Essay asks: what are Daly and the economic growth advocates really arguing about? The answer seems to be less about whether there are limits and more about identifying them and ensuring that the relevant limits are not exceeded. Notwithstanding Daly's reference to economics in Beyond Growth's subtitle, the limits to growth debate raises philosophical questions that should be brought to the forefront. My unraveling of the limits to growth debate also suggests that the pro-growth camp's microeconomic positions are inconsistent with their macroeconomic ones.

The last section of this Essay addresses a question which Daly poses in the beginning of Beyond Growth: What kind of moral philosophy is necessary to support a steady state model for sustainable development?(24) To Daly, only religion can provide the necessary ethical underpinning.(25) He castigates those scientists who view human evolution as an accident because he believes that view negates any sense of purpose to protect the environment.(26) This Essay suggests that Daly's criticism is unfounded.

I start by summarizing Daly's steady state model and the policies which Daly proposes for achieving sustainable development.

1. OVERVIEW

   Beyond Growth is generally well organized thematically. The Introduction provides an historical overview of the concept of sustainable development as that concept has been viewed by classical economists, the World Bank (where Daly worked for several years in the mid-1980s), modern academics, and the U.S. Government's Council on Sustainable Development. Daly contrasts his views with each of these perspectives and, by so doing, provides a good summary of his book in the introductory chapter. Part I of his book, entitled "Economic Theory and Sustainable Development," is the heart of Beyond Growth because its three chapters explain Daly's primary thesis. In a nutshell, he claims that the growth of the world's economy has reached critical ecological limits. According to Daly, the macroeconomic policies that have promoted this growth are premised on a mistaken threshold view of the macroeconomy as essentially independent of the environment, thus capable of infinite growth.(27) Daly, by contrast, views the economy as a sub-set of, and ultimately constrained by, the environment.(28)

   Viewing the economy as limited by the environment, Daly then argues that sustainable development should be defined as an "optimum" aggregate throughput of raw material inputs and waste outputs. Daly defines this "optimum" throughput as "both sufficient for a good life for [a country's] population and within the carrying capacity of the environment if generalized to the entire world."(29)

   Daly's "steady state" label for this model is somewhat misleading. What is steady are the aggregate throughput of inputs and outputs, the carrying capacity of the environment, and the good life. But humans' use of that throughput need not be steady. Daly's model allows for development, which he defines as "[q]ualitative improvement in the use made of a given scale of throughput, resulting either from improved technical knowledge or from a deeper understanding of purpose."(30) Daly contrasts his vision of development with growth, which he defines as quantitative "increase in the physical scale of the matter/energy throughput" which sustains the economy.(31) Daly believes that growth, not development, as he defines those terms, is limited by the environment.(32)

   Daly provides the thrust of his proposals for implementing his vision of sustainable development in Part II ("Operational Policy and Sustainable Development"),(33) Part III ("National Accounts and Sustainable Development"),(34) Part V ("International Trade and Sustainable Development"),(35) and Part VII ("Ethics, Religion, and Sustainable Development").(36) One of his primary proposals is to abolish growth in the gross national product (GNP) as the predominant measure of social progress.(37) In an oversimplified form, Daly's argument is that GNP is a function of the supply of natural resources and the human labor and technology for converting that raw natural capital into final products. Although GNP is commonly touted as a measure of a country's wealth,(38) the term does not count various social and environmental costs or, worse yet, it counts many of those costs as positive additions.(39) For example, GNP does not subtract from the value of producing automobiles the environmental costs of pollution resulting from their manufacture or use.(40) In fact, any public expenses incurred in reducing that pollution or in ameliorating the environmental or health costs of the pollution are counted as net additions to GNP.(41)

   In For the Common Good...