Center for the Advancement of the Steady State Economy
Regular Contributors:  Herman Daly, Brian Czech, Brent Blackwelder, James Magnus-Johnston, and Eric Zencey. Guest authors by invitation.

Peace, Love, and the Gift

by James Magnus-Johnston

“You can’t have community as an add-on to a commodified life” Charles Eisenstein

Johnston_photoFor many Westerners, Christmas Day is one of the most sacred days of the year. Perversely, perhaps, the holidays are also marked by excessive materialism, consumerism, and the creation of false needs. Today happens to be “Boxing Day” in Canada, Black Friday’s Christmas equivalent, marked by mad and even obscene rushes for the best post-holiday deals. How have we reached such a disconnect between the meaning of our traditions and the way we practice them?

It might be hard to see with our consumer lens, but there is a deeply important connection between the sacredness of December 25th and the practice of gifting. As Charles Eisenstein has eloquently and passionately argued, gifts are an expression of love that begins with the gift of life itself:

We didn’t earn being born, being fed as babies, having an earth to live on, air to breathe, water to drink. All came as a gift. Ancient cultures often recognized this explicitly; theirs was a gift cosmology that was echoed in their economic systems.

Therefore our natural state, he says, is gratitude. And therefore, we have a built-in desire to give and be generous.

An obsession with money, on the other hand, has contributed to “alienation, competition, and scarcity, destroyed community, and necessitated endless growth.” Today, money acts as a profane separator when seen as an end in itself rather than a means to an end. Rather than understanding money as a tool that helps facilitate the exchange of goods or truly improve our quality of life, we tend to see money–its accumulation and growth–as the ultimate end. Undoubtedly, money is required to move us towards a level of material sufficiency, but beyond sufficiency, more money won’t make you happier. Are you dissatisfied with your life regardless of how much money you’re making? Will the growth imperative behind the accumulation of money improve the planet’s life support system?

Millennia of ancient thought–including that of the Christian tradition–reminds us that traditional gift practices are expressions of love. Expressions of love aren’t luxury items any more than the planet’s life support system is. Expressions of love keep human beings connected, because they remind us that we actually need one another! Eisenstein writes,

One thing that gifts do is that they create ties among people–which is different from a financial transaction. If I buy something from you, I give you the money and you give me the thing, and we have no more relationship after that. . . But if you give me something, that’s different because now I kind of feel like I owe you one. It could be a feeling of obligation, or you could say it’s a feeling of gratitude. What’s gratitude? Gratitude is the recognition that you’ve received, and the desire to give in turn. And that’s why we are driven to give. Because everything we’ve received is a gift.

Gifts - Andy Noren

Let’s take a step back from the excessive materialism of the holiday season to think about why we really give gifts. Photo Credit: Andy Noren

Peace, love, and community are fostered through the gifts we provide for one another not only on December 25th, but throughout every day of the year. In the grand cosmic scheme of things, gift practices can make us more aware of the miracle of life itself, and the gift of existence we received–and continue to receive–from planet earth and the universe, or God, depending on your inclination.

The purpose of our existence can’t be quantified in monetary terms. Perhaps as this year comes to a close, it’s worth taking a moment to consider the gifts you received at birth or the gifts you have honed and developed throughout your life. Why are you here? Are you able to express your innate gifts? Do you need to unplug from the formal economy to explore and give of yourself more meaningfully?

If you can’t make more money exploring your gifts and skills, embrace the challenge. If we are to degrow the economy towards a steady state, we’re going to need to be a whole lot more generous, a whole lot happier, and more grateful for what we have already. Gift practices might shrink the formal economy a little, but they will engender precisely the love and community that we often feel is missing in modern life.

Charles Eisenstein’s full book “Sacred Economics” is available on his website at

The Guardian and Monbiot versus Forbes and Worstall

Dalyby Herman Daly

In his Guardian column, criticizing growth as “The Insatiable God,” George Monbiot writes:

Is it not also time for a government commission on post-growth economics? Drawing on the work of thinkers like Herman Daly, Tim Jackson, Peter Victor, Kate Raworth, Rob Dietz and Dan O’Neill, it would investigate the possibility of moving towards a steady state economy: one that seeks distribution rather than blind expansion; that does not demand infinite growth on a finite planet…

It is no surprise that we at CASSE strongly agree with Monbiot. Nor does it come as a surprise that a columnist for Forbes, Tim Worstall, would disagree. What is surprising is that Worstall uses me in support of his position (with which I disagree) and against Monbiot (with whom I agree). How does he manage such a reversal? By conflating growth (quantitative physical increase) with development (qualitative improvement), and claiming that 80% of GDP increase is due to qualitative “growth” (total factor productivity), and is therefore independent of increase in physical resource use–when in reality the “total” factor productivity increase in question is mainly caused by an increase in physical resource throughput. This requires further explanation.

In a previous article, also criticizing Monbiot, Worstall states his position more completely, as quoted below, [my brackets inserted].

Value add [added] is economic growth, not more stuff. And we can take this insight to an extreme as well, that extreme being the steady state economy proposed by Herman Daly. In this world resources are only abstracted from the environment if this can be done sustainably. And we recycle everything of course [not energy or highly dispersed materials]. So, in such a world can we still have economic growth? We have no more access to more stuff to make stuff out of: so is growth still possible? Yes, of course it is. For we can still discover new methods of adding value to those resources that we do have available to us through our recycling. Daly calls this qualitative growth rather than the quantitative growth that we cannot have. [Actually I speak of “qualitative improvement” to emphasize that technology is not a cardinally measurable quantity that can properly be said to grow]. But there’s absolutely no difference at all between this and the more conventional economic descriptions of growth. Qualitative growth is akin to growth through an increase in total factor productivity as opposed to growth via the use of more inputs [only remember that “more inputs” should include natural resources, but does not]. And Bob Solow once pointed out that 80% of the growth in the market economies in the 20th century came from tfp (total factor productivity) growth, not the consumption of more resources. We’re just using different words to describe exactly the same thing here [not really].

Now if this were true we could keep resource throughput constant, avoiding most of the increasing environmental costs of growth, and still have 80% of historical GDP growth. Once matter-energy throughput is stabilized at an ecologically sustainable level we could presumably have significant GDP growth forever with minimal environmental costs, thanks to increasing total factor productivity. I would be happy if that were true, but I am pretty sure that it is not. Nevertheless, if Forbes believes it, maybe they would then endorse a policy of limiting resource throughput (cap-auction-trade or carbon tax), and be content with still significant GDP growth based only on total factor productivity increase? Don’t hold your breath. Worstall explicitly discounts any notion of resource scarcity, so why limit throughput? But, just for good measure, he argues here that even with resource scarcity, technology can, by itself, provide most of our accustomed growth, as it supposedly has in the past.

Worstall’s source for the 80% figure is the “Solow Residual,” which is commonly misinterpreted as a measure of total factor productivity. As calculated, it is a measure of “two-factor” productivity, the two factors being labor and capital. The Cobb-Douglas production function that underlies this calculation omits natural resources, the classical third factor. This means that it cannot possibly be an accurate analytical representation of production. It is like a recipe that includes the cook and the oven, but omits the list of ingredients.

Photo Credit: Claire.Ly

As natural resources becomes increasingly scarce, can we afford to ignore their contributions to increases in production? Photo Credit: Claire.Ly

Value added has to be added to something, namely natural resources, by something, namely labor and capital. The cook and the oven add value to the ingredients, but nothing happens without the ingredients. Our empty-world economic accounting attributes all value to labor and capital, and treats natural resources in situ as superabundant free gifts of nature. But in today’s full world, resources are not only scarce but have become the limiting factor. Leaving the limiting factor out of the analysis makes the Cobb-Douglas production function not only incomplete, but also actively misleading.

Nevertheless, Worstall’s 80% figure comes from respected economists who have used the Cobb-Douglas production function in a statistical correlation–an exercise to see how much of increased production can be statistically explained by increases in labor and capital. The residual, what is not explained by labor and capital increase, is attributable to all causes other than labor and capital, including, for example, technology improvement and increased material and energy throughput (natural resource use).

A large residual indicates weak explanatory power of the theory being tested–in this case the Cobb-Douglas theory that production increase is due only to capital and labor increase. But instead of being embarrassed by a large unexplained residual, some economists were eager to “explain” it as an indirect measure of technological progress, as a measure of improvement in total factor productivity. But is technology the only causative factor reflected in the residual? No, there are surely others, most especially the omitted yet rapidly increasing flow of natural resources, of energy and concentrated minerals. The contribution of energy and materials from nature to production is also part of the residual, likely dwarfing technological improvement. Yet the entire residual is attributed to technology, to total factor productivity, or more accurately “two-factor” productivity, in the absence of natural resources, the classical third factor.

As the natural resource flow greatly increases, and capital and labor transform that growing resource flow into more products, then of course the measured productivity of capital and labor increases. This increased “total” factor productivity, due mostly to increase in the ignored factor of natural resources, is then appealed to as evidence of the unimportance of natural resources, given the “empirical finding” that total factor productivity improvement (technology) “explains” so much of the observed increase in production. This reasoning is clearly specious. It is the increased resource use that explains the increase in total factor productivity (i.e. two-factor productivity), which cannot then be used as a reason to discount the importance of its own cause, namely an increased flow of natural resources. Indeed, the unimportance of natural resources could not possibly be an empirical finding of any statistical analysis based on the Cobb-Douglas production function, because that function assumes the unimportance of natural resources from the beginning by omitting them as a factor of production. This is a big confusion and Worstall is not the only one misled by it.

In conclusion, I think the Guardian and Monbiot’s position is not in the least weakened by the criticism from Forbes and Worstall, but that reliance on the Cobb-Douglas production function should certainly be weakened.

The Role of Cities in Moving Toward a Sustainable Economy

by Brent Blackwelder

The story of a hippy flower-child who leveraged big economic decisions that ushered in renewable energy and sensible land-use for Austin and the State of Texas.

BlackwelderI encounter many young adults who are discouraged by America’s failure to respond to big issues affecting the future of Planet Earth and human civilization. They do not see much opportunity to make major changes, especially at the governmental level. But empowering examples can illustrate how significant changes can be made in governance at many levels. Cities can and have provided some model changes, but we will never get to a sustainable, steady state, true-cost economy when major energy and land-use decisions continue to take us in the opposite direction.

Cities like Seattle, San Francisco, Portland (Oregon), and Chicago have led the way with enlightened environmental and economic policies. In Washington, DC, I served on Mayor Gray’s “green ribbon” panel to help fashion a comprehensive green plan for the nation’s capital.

This post focuses, however, on a lesser known city, Austin, Texas, that made big economic decisions that changed the dynamics in energy, transportation, land-use, and self-reliance.

The post is about what a hippy flower-child was able to do in Austin by getting elected to the city council. Max Nofziger left his family’s farm in northwest Ohio over 40 years ago and went to live in Austin. He was a hippy and initially made his living selling flowers on street corners, but managed to get elected to the city council and his persistence and rationality helped lead the way for some significant changes.

Working at first with the leaders and organizations in Austin who were advocating wind and solar power, Max began an improbable run in the 1980s for city council on an anti-nuclear, pro-solar platform with a “Run-for-the-Sun” campaign theme. Even though he lost four races–two for city council and two for mayor–he kept educating the public and used common sense logic when he spoke.

His popularity with the voters grew and he got 20% of the vote in his second run for Mayor. Recognizing Max’s growing support, the newly elected mayor appointed him to the advisory board for the local utility. Max helped in some basic clean energy efforts, such as defeating a lignite coal power plant proposal, getting solar panels placed over the 3-M Company’s parking lot, and helping close the antiquated and dirty gas plant in one of Austin’s poorer neighborhoods.

The key long-term action was to get Austin to build the first wind farm in Texas in 1994-5. The success of this city-owned facility helped convince the State legislature in the late 1990s to pass a five-year plan to incentivize wind power in Texas. Governor George Bush signed this legislation, which proved so successful that it was renewed for a second five-year period while Bush was President of the United States. Today, Texas is the number one state in wind power, with 12,755 megawatts installed and 7,000 currently under construction.

Max was influential in two big land-use decisions–the Austin International Airport and the Convention Center. He helped avert land-use idiocy and save hundreds of millions of tax dollars.

In the 1980s, there was widespread support for a new city airport to replace the half-century-old small airfield that abutted increasingly crowded neighborhoods. Voters approved a new site, but it was one that wealthy developer interests had purchased in anticipation of making big money.

Then a momentous global surprise occurred as the Berlin Wall came down. One immediate repercussion was that the Air Force decided its Bergstrom base in Austin was no longer needed. Max realized that Austin owned the land the Bergstrom airport was on and the city could now reclaim it. With the Air Force’s decision to close the base, the city could have use of the fully functional airfield with its 10,000-foot runway. This choice would save the city at least $500 million in land and runway construction costs.

The problem was that all the politicians had received contributions from the developer interests and were not about to change; however, Max was able to obtain a referendum on the siting choice and it won easily.

Austin-Bergstrom Airport - Shay Tressa DeSimone

More than a sensible land-use decision, the Austin-Bergstrom Airport reflects the city’s culture and commitment to local food and artists. Photo Credit: Shay Tressa DeSimone

Not content with a victory on the siting decision, Max led an effort to make sure the new airport terminal reflected Austin culture, featured local food, and provided facilities for local artists to perform. Despite initial opposition by agribusiness food lobbyists, the plan went ahead and continues to be a success. There have been over 7,000 music performances to date.

This example illustrates a significant reuse of perfectly good resources, as well as prevention of a waste of taxpayer money on developer enrichment schemes. Incorporating good architecture for the terminal and boosting the city economy with local food and performances by local musicians points to the importance of looking comprehensively at all the changes that are possible with major land-use decisions.

The second important land-use decision was on the siting of the Austin Convention Center. As a city council member, Max knew the developer lobby had “pre-selected” the place they wanted for the Center, and had greased the pockets of decision makers to ensure that it was selected, even though it was a poor site from the standpoint of requiring a lot of driving and creating congestion. Max proposed a sensible location that would help avoid traffic jams and unnecessary driving, and would be near the evening entertainment zone. Top architects were hired to design the facility and solar collectors were put on the roof, which had the additional advantage being visible to interstate auto traffic and educating the public on the efficacy of solar.

The energy and land-use decisions that Austin made enabled progress to occur toward a prosperous, sustainable economy. Had they gone in a different direction, there would be less hope for achieving a sustainable, steady state, true-cost economy.

Hedonism, Survivalism, and the Burden of Knowledge

by James Magnus-Johnston

Johnston_photoIn my last post, I asked whether human beings are naturally predisposed to deny the precarious reality of our planet’s health, which would help explain the undeserved endurance of the growth narrative. Self-imposed ignorance, in other words, is bliss. It absolves us from the responsibility of action.

What about the rest of us? For those of us that have ‘quit denial,’ so to speak, can conscious awareness be channeled to motivate positive action? Or is hope futile in the face of an enormous task?

A recent article by Madeline Thomas in Grist featured the headline, “Climate depression is for real. Just ask a scientist.” Scientists’ intimate understanding of climate change has led to depression, substance abuse, suicide, and post-traumatic stress disorder. Camillie Parmesan, who shared the Nobel Peace Prize for her work as a lead author of the Third IPCC Assessment Report, became “profoundly depressed” at the seeming futility of her work. She had been screaming from the scientific rooftops, yet the best we could offer in response was little more than a call for more carbon-intensive growth.

Evolutionary psychologists Ajit Varki and Danny Brower believe that some of the earliest humans fell into depression due to their awareness of mortality, while others were able to carry on without becoming crippled by this realization. Mind-over-reality became humanity’s defining characteristic, enabling us to maintain sanity in the face of danger. On a society-wide basis, anxiety and depression could cause an avoidance of procreation, which would be an evolutionary dead-end.

We’re now confronting not only our individual mortality, but perhaps even the mortality of our species, according to a few controversial voices. Ecologist Guy McPherson is among those who have suggested that near-term human extinction is inevitable. James Lovelock, author of the Gaia hypothesis, believes that climate catastrophe is inevitable within 20 years. With an awareness of the rate of species loss and climate change, among other symptoms of breakdown, it isn’t hard to fall into paralysis and despair.

But others seem able to carry on without being crippled by this realization. Proponents of the steady state economy are among those who remain optimistic in the face of long odds, and generally, I think we fall into one of three camps: survivalists, hedonists, and denialists.

Photo Credit: hardworkinghippy

The survivalists among us are easiest to spot. Photo Credit: hardworkinghippy

We all know the survivalists among us. They’re the lot that want to voluntarily extricate themselves from known civilization before the imagined $h!t hits the fan in some kind of imagined catastrophic event. They dream of a semi-pastoral existence in the agrarian hinterlands, far from the commercialized zombies who wouldn’t know how to take care of themselves without the convenience of a department store. They’re hard workers who romantically hope to re-kindle the low-carbon self-sufficiency of generations past.

Then there are the hedonists, and I’d be willing to wager that a great many well-educated millennials fall into this category, sometimes by accident. Hedonists might accept the ecological challenges we face and withdraw from the growth-obsessed formal economy. But rather heading for the hills, they do what they love. I think these are many of the artists, dumpster-divers, and coffee-enthusiasts among us. You can’t measure their contribution to change in terms of GDP. Both McPherson and Lovelock seem to prescribe hedonism, with Lovelock calling for us to “enjoy life while we can” because “in 20 years, global warming will hit the fan.” McPherson, for his part, calls upon us to “passionately pursue a life of excellence,” and practice the radical generosity associated with hospice care. For the hedonist, “carpe diem” is the modus operandi. They’re always asking themselves: what must we do, knowing that we only have a little bit of time left?

And finally, the denialist. A little bit of overconfidence and denial can come in pretty handy from an evolutionary perspective, because it keeps us from obsessing about the abysmal end. In this case, I’m not referring to outright denial of climate change–the “climate deniers.” I’m referring to those of us who accept planetary life support breakdown, but hope that maybe–just maybe–human civilization has enough wiggle room to squeak by. Just enough methodological uncertainty to restore this blue dot to health. After all, careful skepticism is the essence of good science. Hydrogeologist Scott Johnson, for instance, has written a long rebuttal to the claims of Guy McPherson. Denialists would be more inclined to lean on the kind of methodological uncertainty emphasized by Mr. Johnson, and reject the kind of claims offered by McPherson and Lovelock.

I fall into each of these camps from time to time. As a survivalist, I hope to learn how to garden a little bit every summer and support the DIY economy. As a hedonist, I will do what I love and passionately engage in conversations about catalyzing the steady state economy, because I believe it sets a new standard of excellence for the 21st century. In fact, all things considered, I believe the steady state economy represents a balanced “middle way” between the ignorance and paralysis. And with a healthy dose of denial, I will continue to hope that somehow, the margin of error is just wide enough to turn spaceship earth around.

Animal Welfare: Seeing the Forest for the Denizens

by Brian Czech

BrianCzechIf you’re a Huffington Post reader, your love of animals has been nurtured by “Hedgehogs Being Adorable,” “Baby Hippo Has Won Our Hearts,” and other such gems. The Post, The Animal Blog, and various animal-lover media take a heartfelt approach to the appreciation of animals–wild as well as domesticated–reminding us of the needs and vulnerabilities of our fellow creatures. It’s a refreshing approach, compared to the stodgy science and economics of conservation.

And it’s important. Mahatma Gandhi said, “The greatness of a nation and its moral progress can be measured by the way in which its animals are treated.” Abraham Lincoln said, “I care not much for a man’s religion whose dog and cat are not the better for it.” Animal welfare is a barometer of national “goodness” in a sense that resonates with our common sense.

Yet if we are serious about animal welfare, we have to get beyond the mere adoration of hedgehogs and hippos. We have to face up to the big-picture, systematic erosion of wild animal welfare. It’s all around us and getting worse by the day, and our public policies precipitate it.

The most prevalent source of animal suffering is habitat destruction. Habitat includes food, water, cover, and space. When any of these elements are destroyed or depleted, wild animals suffer and often die more miserable deaths than if killed by hunters or predators.

Some animals survive an initial wave of habitat destruction only to be stranded in an unfamiliar, unforgiving environment. When a food or water source is destroyed, wild animals may starve, die of thirst, or suffer from malnutrition and the associated agonies. When thermal cover is lost, animals expend valuable time and energy trying to regulate body temperature. This lowers the time and energy available for feeding, playing, and mating. When hiding cover is lost, wild animals experience fear and stress, seeking cover from predators that may or may not be present.

What kind of a life does that sound like? It would be like getting thrown out of your home, into a perilous world with no social net, no health system, no Salvation Army, and no street corner to beg from. Yet it’s the life we’ve been forcing animals into by the million. How can we stop?

Nervous now, future worse: pronghorn antelope at the edge of a growing economy. Photo Credit: Michael Shealy

Nervous now, future worse: pronghorn antelope at the edge of a growing economy. Photo Credit: Michael Shealy

We often hear of “human activity” being the cause of habitat loss. That’s a start, recognizing our basic role in the problem, but we have to dig deeper to detect precisely what type of human activity is problematic. After all, the habitat destruction caused by humans beings isn’t spiritual activity, or neighborhood activity, or political activity (at least not directly), but almost always economic activity.

The macroeconomic nature of the problem is evident when we consider the causes of species endangerment. These causes are essentially the sectors and byproducts of the whole, interwoven economy, starting with agricultural and extractive sectors such as mining, logging, and livestock production. These activities directly remove or degrade the habitat components required by wild animals.

Another major cause of endangerment is urbanization. Urbanization reflects the growth of the labor force and consumer population as well as a variety of light industrial and service sectors. Few types of habitat destruction are as complete as urbanization. While extractive activities can be a traumatic experience for the denizens of wildlands, logging, ranching, and even mining usually leaves some habitat components. But when an urban area expands, it does so with pavement, buildings, and infrastructure. These developments are devastating to most of the animals present.

The economic system extends far into the countryside, too. Roads, reservoirs, pipelines, power lines, solar arrays, and wind farms are examples.

It would be hard to conceive of a more prevalent danger to animals than roads. Roads and the cars upon them leave countless animals mangled and left, during their final hours, to be picked apart by wild and domestic scavengers. Power lines induce electrocution, a significant source of bird death and crippling. Power line collisions cause their share as well. Wind farms and solar arrays, thought to be the keys to “green growth,” are the latest hurdles for migratory birds.

Pollution is an inevitable byproduct of economic production. Pollution is an insidious and omnipresent threat to wild animals. Whether it’s nerve damage from pesticides, bone loss from lead poisoning, or one of the many other horrible symptoms of physiology gone wrong, pollutants ensure some of the most excruciating diseases and slowest deaths in the animal kingdom.

Climate change is another threat to species, although its mechanisms are less direct. Temperature is a key factor in the functioning of ecosystems and the welfare of the animals therein. Climate change is pushing polar bears and other polar species off the ends of the earth; at what point will this climate-controlled conveyor belt stop? Climate change, too, is a result of a growing (and fossil-fueled) economy.

We should give thanks for the Humane Society, International Fund for Animal Welfare, and Society for the Prevention of Cruelty to Animals. These and related organizations do the good work that Gandhi and Lincoln would have endorsed. Yet when is the last time you’ve heard these organizations give a hoot about economic growth, the single biggest threat to animal welfare?

And why does no one put in a word for our furry and feathered friends when Congress, the President, and the Fed pull out all the stops for GDP growth? Where are the advocates of humane treatment of animals, when the biggest decisions are made about the rate of habitat loss and therefore animal suffering? When a hundredth percentage point less in GDP growth could save hundreds of thousands of animals a year?

Why don’t we have a mainstream media, which isn’t afraid to expose nastiness to horses and chickens, talking about the millions of animals suffering at the cumulative hand of economic growth? Has economic growth become the inconvenient truth for animal welfare?

It’s definitely inconvenient–and that’s an understatement–for millions of animals.

Use and Abuse of the “Natural Capital” Concept

by Herman Daly

Herman DalySome people object to the concept of “natural capital” because they say it reduces nature to the status of a commodity to be marketed at its exchange value. This indeed is a danger, well discussed by George Monbiot. Monbiot’s criticism rightly focuses on the monetary pricing of natural capital. But it is worth clarifying that the word “capital” in its original non-monetary sense means “a stock or fund that yields a flow of useful goods or services into the future.” The word “capital” derives from “capita” meaning “heads,” referring to heads of cattle in a herd. The herd is the capital stock; the sustainable annual increase in the herd is the flow of useful goods or “income” yielded by the capital stock–all in physical, not monetary, terms. The same physical definition of natural capital applies to a forest that gives a sustainable yield of cut timber, or a fish population that yields a sustainable catch. This use of the term “natural capital” is based on the relations of physical stocks and flows, and is independent of prices and monetary valuation. Its main use has been to call attention to and oppose the unsustainable drawdown of natural capital that is falsely counted as income.

Big problems certainly arise when we consider natural capital as expressible as a sum of money (financial capital), and then take money in the bank growing at the interest rate as the standard by which to judge whether the value of natural capital is growing fast enough, and then, following the rules of present value maximization, liquidate populations growing slower than the interest rate and replace them with faster growing ones. This is not how the ecosystem works. Money is fungible, natural stocks are not; money has no physical dimension, natural populations do. Exchanges of matter and energy among parts of the ecosystem have an objective ecological basis. They are not governed by prices based on subjective human preferences in the market.

Furthermore, money in the bank is a stock that yields a flow of new money (interest) all by itself without diminishing itself, and without the aid of other flows. Can a herd of cattle yield a flow of additional cattle all by itself, and without diminishing itself? Certainly not. The existing stock of cattle transforms a resource flow of grass and water into new cattle faster than old cattle die. And the grass requires sunlight, soil, air, and more water. Like cattle, capital transforms resource flows into products and wastes, obeying the laws of thermodynamics. Capital is not a magic substance that grows by creating something out of nothing.

While the environmentalist’s objections to monetary valuation of natural capital are sound and important, it is also true that physical stock-flow (capital-income) relations are important in both ecology and economics. Parallel concepts in economics and ecology aid the understanding and proper integration of the two realities–if their similarities are not pushed too far!

The biggest mistake in integrating economics and ecology is confusion about which is the Part and which is the Whole. Consider the following official statement, also cited by Monbiot:

As the White Paper rightly emphasized, the environment is part of the economy and needs to be properly integrated into it so that growth opportunities will not be missed.

—Dieter Helm, Chairman of the Natural Capital Committee, The State of Natural Capital: Restoring our Natural Assets, Second report to the Economic Affairs Committee, UK, 2014.

If the Chairman of the UK Natural Capital Committee gets it exactly backwards, then probably others do too. The environment, the finite ecosphere, is the Whole and the economic subsystem is a Part–a completely dependent part. It is the economy that needs to be properly integrated into the ecosphere so that its limits on the growth of the subsystem will not be missed. Given this fundamental misconception, it is not hard to understand how other errors follow, and how some economists, imagining that the ecosphere is part of the economy, get confused about valuation of natural capital.

Natural Capital, James Wheeler

How can we correctly price natural capital in a full world? Photo Credit: James Wheeler

In the empty world, natural capital was a free good, correctly priced at zero. In the full world, natural capital is scarce. How do we take account of that scarcity without prices? This question is what understandably leads economists to price natural capital, and then leads to the monetary valuation problems just discussed. But is there not another way to recognize scarcity, besides pricing? Yes, one could impose quotas–quantitative limits on the resource flows at ecologically sustainable levels that do not further deplete natural capital. We could recognize scarcity by living sustainably off of natural income rather than living unsustainably from the depletion of natural capital.

In economics, “income” is by definition the maximum amount that can be consumed this year without reducing the capacity to produce the same amount next year. In other words, income is by definition sustainable, and the whole reason for income accounting is to avoid impoverishment by inadvertent consumption of capital. This prudential rule, although a big improvement over present practice, is still anthropocentric in that it considers nature in terms only of its instrumental value to humans. Without denying the obvious instrumental value of nature to humans, many of us consider nature to also have intrinsic value, based partly on the enjoyment by other species of their own sentient lives. Even if the sentient experience of other species is quite reasonably considered less intrinsically valuable than that of humans, it is not zero. Therefore we have a reason to keep the scale of human takeover even below that indicated by maximization of instrumental value to humans. On the basis of intrinsic value alone, one may argue that the more humans the better–as long as we are not all alive at the same time! Maximizing cumulative lives ever to be lived with sufficient wealth for a good (not luxurious) life is very different from, and inconsistent with, maximizing simultaneous lives.

In addition, speaking for myself, and I expect many others, there is a deeper consideration. I cannot reasonably conceive (pace neo-Darwinist materialists) that our marvelous world is merely the random product of multiplying infinitesimal probabilities by infinitely many trials. That is like claiming that Hamlet was written by infinitely many monkeys, banging away at infinitely many typewriters. A world embodying mathematical order, a system of evolutionary adaptation, conscious rational thought capable of perceiving this order, and the moral ability to distinguish good from bad, would seem to be more like a creation than a happenstance. As creature-in-charge, whether by designation or default, we humans have the unfulfilled obligation to preserve and respect the capacity of Creation to support life in full. This is a value judgment, a duty based both historically and logically on a traditional theistic worldview. Although nowadays explicitly rejected by materialists, and by some theists who confuse dominion with vandalism, this worldview fortunately still survives as more than a vestigial cultural inheritance.

Whatever one thinks about these deeper issues, the point is that determination of the scale of resource throughput cannot reasonably be based on pseudo prices. But scale does have real consequences for prices. Fixing the scale of the human niche is a price-determining macro decision based on ethical and religious criteria. It is not a price-determined micro decision based on market expression of individual preferences weighted by ability to pay.

However the scale of the macro-limited resource flow is determined, we next face the question of how to ration that amount among competing micro claimants? By prices. So we are back to pricing, but in a very different sense. Prices now are tools for rationing a fixed predetermined flow of resources, and no longer determine the volume of resources taken from nature, nor the physical scale of the economic subsystem. Market prices (modified by taxes or cap-auction-trade) ration resources as an alternative to direct quantitative allocation by central planning. The physical scale of the economy has been limited, and the resulting scarcity rents are captured for the public treasury, permitting elimination of many regressive taxes. Dollars become ration tickets; no longer votes that determine how big the scale of the economy will be relative to the ecosystem. The market no longer conveys the message “we can grow as much as we want as long as we pay the price.” Rather the new message is, “there is only so much to go around, and dollars are your ration ticket for a part of the fixed quota, not a vote that can be cast for growth.” Equitable distribution of dollar incomes (ration tickets) will then be seen as the serious matter that it is, to be solved by sharing, not evaded by growth, especially not by uneconomic growth.

Unfortunately, the more common approach in economics has been to try somehow to calculate that price that internalizes sustainability and impose it via taxes. The right price, given the demand curve, will result in the corresponding right quantity. However, there is a two-fold problem: first, methods of calculating the “right” price are usually specious (e.g. contingent valuation); and second, we don’t really know where the shifting demand curve is, except on the blackboard. In fixing prices, errors in demand estimation result in variations in quantity. In fixing quantity, errors result in variations in price. The ecosystem is sensitive to quantity, not price. It is ecologically safer to let errors in estimation of demand result in price changes rather than quantity changes. This is one advantage of the cap-auction-trade system relative to carbon taxes. Although a great improvement over the present, carbon taxes attempt to ration carbon fuels without having really limited their supply. Nor are the “dollar ration tickets” limited, given the fractional reserve banks’ ability to create money, and the Fed’s policy of issuing more money whenever growth slows down.

A monetary reform to 100% reserve requirements on demand deposits would be a good policy for many reasons, to which we can add, as a necessary supplement to a carbon tax. It would not be necessary as a supplement to cap-auction-trade, but should be adopted for independent reasons. A good symbol should not be allowed to do things that the reality it symbolizes cannot do. One hundred percent reserves would require the symbol of money to behave more like real wealth, at least in some important ways. But this is another story.

Do U.S. Election Financing Laws Force Politicians to Ignore Limits to Growth?

by Brent Blackwelder

BlackwelderThis fall, huge election campaign spending to influence the outcome of U.S. Congressional races, gubernatorial races, and state legislative races exceeded $3 billion.

Money in politics has stopped progress toward real economic reform and slowed efforts to move to a true-cost, sustainable, steady state economy. It will continue to do so unless people seeking to end today’s cheater economics, with its global casino-style economy, join in the ongoing efforts to change the election financing laws.

Recent decisions by the Supreme Court have made a bad situation much worse. In Citizens United v. FEC, (2010) the Court ruled that it was unconstitutional (a violation of First Amendment-protected free speech) for the government to restrict political spending by corporations. While there are limits on what individuals and corporations may give directly to candidates, there is no limit on corporate contributions to independent political spending to benefit or to smear candidates. The massive floodgates of electoral spending have been opened wide for industries, and today’s electoral spending in the United States amounts to a system of legalized bribery.

Billionaire brothers David and Charles Koch assembled a secretive network of wealthy political donors set to spend about $300 million in the Congressional races in 2014, which is approximately the total spent by Bush and Kerry in the 2004 presidential race. By early September, a full two months before Election Day, Koch-funded groups already had paid for about 44,000 ads in U.S. Senate battleground races. That means approximately one out of every ten TV ads aired in those states had Koch fingerprints.

But fortunately, several dozen organizations are fighting back. For example, Common Cause, United Steelworkers, Sierra Club, United Autoworkers, and other national groups have already had success with a big effort to reverse the Supreme Court’s decisions in Citizens United v. FEC, (2010) and McCutcheon v. FEC (2014). These efforts involve supporting a constitutional amendment permitting Congress and the states to set reasonable limits on political spending. Leadership of these groups has been instrumental in the passage of ballot measures and legislative resolutions in 16 states and about 500 localities, calling on Congress to pass a Constitutional amendment and send it to the states for ratification. These jurisdictions are home to more than 120 million Americans, which is more than one-third of the U.S. population.

Why would cleaner elections matter for achieving a true-cost, steady state economy? The large volume of money that Wall Street puts into elections effectively stymies efforts to reform the U.S. Tax Code. Tax codes around the world tend to subsidize pollution, tolerate externalization of costs, and penalize recycling while rewarding extraction of natural resources and exempting poisons from sales taxes. The United States is not alone among nations providing generous subsidies to polluters: globally, $1.5 billion is provided by governments to fossil fuel industries.

There are many other ways in which corporate money in elections can subvert democracy and block paths to a true-cost economy. Having lobbied Congress for over 40 years, I have seen how the huge amounts of fossil fuel money for politicians have made a lot of Members “climate deniers.”

Chevron & Ecuador, Caroline Bennett-Rainforest Action Network

Hundreds of Chevron’s abandoned open toxic pits remain in Ecuador. Photo Credit: Caroline Bennett-Rainforest Action Network

But it happens in category after category. For instance, as early as the 1990s, I saw the huge influence of corporate money enabling the passage of so-called free trade agreements. Many trade agreements contain a dispute settlement mechanism that allows corporations to sue a government. Such a challenge is not heard in the normal court system of a nation but rather in a secret, three-person tribunal. Currently, a Canadian mining company is suing the government of Costa Rica for $1 billion for denying a permit to mine copper and gold in a tropical rainforest. Costa Rica wants to conserve its rainforests because eco-tourism is a key part of their economy. Chevron has used the secret tribunal process to avoid payment of damages for persistent, serious oil spills in Ecuador.

Another example can be seen in ballot measures such as Proposition 92 in Oregon, which would require labeling of genetically engineered foods. This measure was opposed by major transnational corporations such as DuPont, Coke, and Monsanto, and their war chest was estimated at $25 million. When people use ballot measures to deal with legislatures that refuse to act on issues of public health and environmental protection, industries pour out millions in propaganda to defeat such measures.

In poll after poll, voters say that they care about clean air, clean water, and the environment, but the reality is that it is harder today than at any time in the last 40 years to pass significant legislation to safeguard air, land, and water. The problem has grown much worse since the 1970s, when 30 major environmental laws were passed, and a big part of the problem is the cost of elections.

Twenty-five years ago, I was one of about a dozen environmental leaders called to a U.S. Senator’s office to hear a sobering message about what the staggering costs of elections were doing to Members who were not independently wealthy. He said to us:

To be reelected, this means my having to raise $10,000 every day on average until election day. For you it means two things: 1) I have little time to study issues and legislation and 2) while I may vote with you from time to time, I cannot champion any legislation that would prevent me from getting campaign contributions from major industrial interests.

As recording setting amounts have just been set in the 2014 elections, the need for election financing reform is paramount if we are to prevent these major industrial interests from keeping us on the path of cheater economics.

Are We Hard-Wired to Think We Can Grow Forever?

by James Magnus-Johnston


Humanity is an irrational lot, prone to denial and short-termism. If rational arguments were primary catalysts for social change, perhaps a steady state economy would already be a reality. Research in behavioural economics and cognitive psychology is beginning to help us understand why human beings don’t always make decisions that are in their best interests. Can we overcome our irrational, maladapted mental hard-wiring to thrive in a post-growth future?

Trailblazing behavioural economists like Daniel Kahneman have discovered that human beings are highly irrational creatures prone to delusion, cynicism, and short-termism. In ecological economics, Bill Rees has argued that our mental genetic presets have hard-wired us for overconsumption and ecological doom. And now, according to a new theory by Ajit Varki and Danny Brower, perhaps it all stems from an overarching psychological predisposition to denial.

In ecological terms, denial might be characterized as the failure to accept the deleterious consequences of economic growth in favour of accepting comfortable fictions that reinforce the status quo. Head-scratching environmentalists often use the word “denial” to reference the irrational “climate change deniers,” who accept the science of familiar things like internal combustion engines, modern appliances, or GDP growth, yet are dismissive of climate science and planetary boundaries. Why are human beings so good at denial?

Ecological economist Bill Rees argues that our ancient “triune” brain is hard-wired for short-term rewards, and those rewards have been amplified by the abundance of our fossil fuel driven economy. Our brain, which runs on an outdated OS, has leveraged its propensity for denial to construct a myth of perpetual growth wherein we can grow the economy and achieve short-term rewards forever.

Elephants - Hadi Zaher

Is it our ability to deny reality that separates us from other highly intelligent animals? Photo Credit: Hadi Zaher

In Denial: Self-Deception, False Beliefs, and the Origins of the Human Mind, Varki and Brower take it one step further. They argue that while our intelligence and use of tools set human beings apart from the rest of the animal kingdom, our capacity for denial may be the greatest differentiating factor. The late Danny Brower asked Varki, a biologist, why other smart, self-aware animals such as elephants, apes, dolphins, whales, or magpies, had not achieved levels of intelligence seen in human beings. Many of these animals can recognize themselves, communicate with one another, and mourn relatives or companions. They have all had more time on Earth to evolve.

The theoretical, though as yet unverifiable, answer put forward by Varki and Brower revolves around two things: (1) that human beings are aware of the thoughts of others, and (2) that they have ability to deny reality. According to them, denial is the essence of what it means to be human! They argue that as human beings became aware of their mortality, some fell into depression while others were able to carry on without becoming crippled by this realization. Mind-over-reality became our defining characteristic, enabling us to maintain sanity in the face of danger. Those who suffer from depression are often more aware of reality, they note, which in turn can cause crippling anxieties. On a society-wide basis, such anxiety can cause an avoidance of procreation, which would be an evolutionary dead-end.

But in the Anthropocene, have the tables turned? Now, reality-accepting behaviour may be an evolutionary boon. Rather than leading to a dead-end, accepting the reality of overconsumption and overpopulation may result in actions that increase the likelihood of human survival. Could it be that those who accept reality have suddenly become cultural (r)evolutionaries better adapted for long-term human survival? Can the shift happen quickly enough to improve our survival prospects?

Perhaps the very evolutionary mechanism which led to our propensity for denial may also temper our unfortunate inclinations. At the point when human beings theoretically developed a capacity for denial, we would have changed the cultural software on our mental hardware, which demonstrates that change is possible. We are capable of changing the way we interact with reality.

Although if one does not accept the premise that we can change our cultural software quickly enough, Varki and Brower point out that reality-denial also leads to optimism, confidence, and courage in the face of long odds–a “can do” attitude. If we can’t accept reality, maybe we can focus instead on denying the current economic “reality” of growth!

Dr. Varki calls for us to temper our denial in order to avoid climate destabilization. Most types of denial, he says–about high national debt loads, eating too much red meat, smoking cigarettes, or refusing to wear seatbelts–aren’t fatal to the entire species. Climate destabilization, like a nuclear holocaust, is a different matter. A shift towards reality-accepting behaviour would help us see the validity of policy prescriptions like reducing the debt load and living within planetary constraints.

More often than not, post-growth thinkers are using rational arguments among a very irrational lot. While rational arguments are certainly necessary, we also need to work on how to ‘nudge’ individuals and communities towards a steady state economy with a pitch that leverages or mutes our irrational operating system. In the meantime, let’s harness our optimism, confidence, and courage in the face of long odds.

Paul Krugman on Limits to Growth: Beware the Bathwater

by Brian Czech

BrianCzechCongratulations to Paul Krugman, whose New York Times opinion on “Slow Steaming and the Supposed Limits to Growth” hit the bulls-eye of at least one balloon. Landing at Washington-National the very day his opinion column appeared was like crashing back into the growth fetish of the American Fourth Estate. Out came the fresh air of an Australian balloon; back to the polluted, cynical rhetoric that “there is no conflict between growing the economy and protecting the environment.”

Why the drama with Krugman’s column? Partly due to uncanny timing; partly due to the stark juxtaposition of opinions. Having delivered the keynote address–on limits to growth no less–at the Australian Academy of Science’s annual conference on environmental science, it struck me that decades of careful research could be undermined by the presumptuous pen of a well-placed economist. Something is wrong with that picture.

But only for so long, because those of us who recognize limits to growth have sound science, common sense, and burgeoning evidence on our side. The same cannot be said for Krugman’s opinion.

Krugman got off to a shaky start with the very title of his column. No matter what he could say about “slow steaming,” this was bound to be an article wrong-headed in using one sector (shipping) for drawing broad conclusions about a macroeconomic issue (economic growth). To extend a conclusion from the part to the whole is to commit the fallacy of composition. In this case, it’s a bit like Krugman saying, “Your fingernails keep growing; why not the rest of you too?”

The mistake is common and destructive. When this mistake is made by a highly acclaimed economist in a widely-read opinion, the potential for destruction is multiplied. Politicians hide behind such Pollyannaish opinions to pull out all the stops–fiscal and monetary–for economic growth. The casualties include not only environmental protection but the future economy and ultimately national security.

Next, in Krugman’s lead-in paragraph he laments the “unholy alliance on behalf of the proposition that reducing greenhouse gas emissions is incompatible with growing real GDP.” Already we have two more problems. First, the argument alluded to in the title–that is, refuting limits to growth–is reduced to refuting just one negative impact of growth (that is, climate change). What about all the other impacts and limitations of economic growth: liquidation of natural resources, pollution at large, habitat loss, biodiversity decline, and social side effects such as noise, congestion, and stress?

Second, in a maxed-out, over-stimulated, 90% fossil-fueled economy, Krugman wants us to believe we can grow the economy even more while reducing greenhouse gas emissions. No need to worry about little trends such as tar-sands mining in Canada, coal mining in China, and fracking in the USA. Slower steaming will save the day on climate change, and presumably for the rest of the planetary ecosystem.

Let’s not let Krugman delude us. “Growing real GDP” isn’t about an efficiency gain here and there. It means increasing production and consumption of goods and services in the aggregate. It entails a growing human population and/or per capita consumption. It means growing the whole, integrated economy: agriculture, extraction, manufacturing, services, and infrastructure. From the tailpipe of all this activity comes pollution.

Krugman seems to have fallen for the pixie dust of “dematerializing” and “green growth” in the “Information Economy.” He may want to revisit Chapter 4 of The Wealth of Nations, where Adam Smith pointed out that agricultural surplus is what frees the hands for the division of labor. In Smith’s day that included the likes of candle-making and pin manufacturing. Today it includes everything from auto-making to information processing, but the fundamentals haven’t changed. No agricultural surplus, no economic growth. And agriculture is hardly a low-energy sector.

Adam Smith was among the great, classical economists who readily recognized limits to growth, all the way until at least John Stuart Mill. After that and throughout the 20th century, things got murky for economists as they turned increasingly to microeconomics, losing the forest for the trees. Mr. Krugman appears to be yet another victim of the “neoclassical” evolution of economics. Look to him for insightful opinions on banking regulations, fiscal politics, and other such topics that fit naturally under the rubric of an economics columnist. These are his babies, but beware the bathwater. Take his opinion on limits to growth at your peril, and that of your grandkids.

The New Economy versus Today’s Flat Earthers

Editor’s Note: This article is presented as part of New Economy Week, five days of conversation around building an economy that works for everyone. 

by Eric Zencey

Eric Zencey

Only madmen and economists, Kenneth Boulding once said, believe exponential growth can go on forever.

Beyond all reason and evidence, standard economics remains dedicated to the idea of perpetual increase in our species’ stock of wealth, income, and material wellbeing. Their infinite planet thinking has a long pedigree: from John Locke toward the end of the 17th century to Adam Smith in in the middle of the 18th, the planet was obviously capable of supporting expansion of the human estate for untold generations to come. In their world, vast reaches of the globe had yet to be mapped by Europeans. Humans everywhere were relatively scarce, their powers not yet global in scale, not yet amplified by the extraordinary energies of coal and oil.

But the seven billion of us who are alive today live on a substantially different planet. It doesn’t have supposedly infinite tracts of untramelled, virgin land, ripe for being ravished by swaggering, overconfident exploiters. We need a new, steady state economy suited to the planet we have, not the one that economists thought we had two hundred years ago. We need a post-infinite-growth economy (and new breed of economist) respectful of the notion that there are ecological limits to economic activity. Absent that, our civilization is set to destroy its root in nature.

But the New Economy Movement is about more than ecological sanity. It seeks other practical and desirable solutions, like:

  • a living wage for workers;
  • a more equitable distribution of the fruits of production;
  • sharp limits to the political influence of corporations and the exceedingly rich; and
  • a relocalization and reduction in the scale of economic activity that will bring production into better relation with workers, customers, neighbors, and the planet.

We seek, in a word, economic justice.

That can seem a very different goal than sustainability, but it isn’t. Ironically enough, mainstream economists recognize the two goals are related. The remedy they offer for the injustice of poverty is the same remedy they offer for environmental problems: more economic growth. Only if we are wealthier, their argument goes, will we be able to afford environmental quality or solve the problem of poverty.

The New Economy Movement must show–must insist–that this is mistaken. It must show that the attempt to solve our ecological and social crises through economic growth is a fool’s task, because both crises have a common cause: an infinite-planet, perpetual-growth economy has met the limits of a finite planet.

When a financial system designed for infinite growth hits a local or planetary limit, it becomes a pump that sucks money from those who have less and gives it to those who have more. On a finite planet, a perpetual-growth economy eventually encounters the source-and-sink limits of ecosystems, either transgressing them and causing species loss, climate change, and ecosystem failure, or crashing because the limit can’t physically be broken.

As absurd as this looks, it is no less absurd than an economic system designed for an infinite planet. Photo Credit: A Siegel

As absurd as this looks, it is no less absurd than an economic system designed for an infinite planet. Photo Credit: A Siegel

In the Infinite Planet Thinking of mainstream economics, human population growth is always a good thing: humans are “The Ultimate Resource,” capable of infinite imagination, infinite invention. But in the world as it is, human invention is limited by physical law: you’ll never have a car that you can push backwards and fill the gas tank. Ultimately, on a finite planet with a human economy operating at its ecological limit, any further growth in human population or the human economy degrades our quality of life, further increases our ecological footprint, and leads to the loss of democracy as we yield to technocracy–rule by environmental experts–or ignore ecological constraints and thereby condemn our civilization to collapse. Meanwhile, population growth produces an oversupply of labor that drives down wages, diminishing the middle class and dividing us into rich and poor, captains and serfs.

Economic growth and human population growth proceed as if the planet were infinite–and those who express concern are challenged with being anti-human, pessimistic, or “neo-Malthusian.” It’s time to change the discourse. With repeated and creative messaging, the phrase “Infinite Planet Thinker” will come to sound as outmoded and ridiculous as “Flat Earth Theorist.” And when that happens, the principles and programs that CASSE and the New Economy Movement seek to advance will be on their way to general acceptance. I think that when they see it framed this way, most people will choose the new, steady state economy. Imagining the possible, and working to make it real, is more realistic than continuing to assume the planet is impossibly infinite.