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Bookmark and ShareAndy Wimbush is nef‘s Communications Assistant and blogmaster.

Herman Daly, professor of economics at the University of Maryland, is one of the very few voices within the economics profession who has the audacity to question the pursuit of economic growth at all costs. Of course, it wasn’t always that way: John Stuart Mill and John Maynard Keynes both thought that after a period of growth, economies would eventually reach a point of dynamic equilibrium. Professor Daly has just made his first excursion into the blogosphere with the brilliantly titled Daly News from CASSE, the Centre for the Advancement of a Steady-State Economy.

The term “economic growth” has two distinct meanings. Sometimes it refers to the growth of that thing we call the economy (the physical subsystem of our world made up of the stocks of population and wealth; and the flows of production and consumption). When the economy gets physically bigger we call that “economic growth”. This is normal English usage. But the term has a second, very different meaning – if the growth of some thing or some activity causes benefits to increase faster than costs, we also call that “economic growth” – that is to say, growth that is economic in the sense that it yields a net benefit or a profit. That too is accepted English usage.

Now, does “economic growth” in the first sense imply “economic growth” in the second sense? No, absolutely not! Economic growth in the first sense (an economy that gets physically bigger) is logically quite consistent with uneconomic growth in the second sense, namely growth that increases costs faster than benefits, thereby making us poorer. Nevertheless, we assume that a bigger economy must always make us richer. This is pure confusion.

That economists should contribute to this confusion is puzzling because all of microeconomics is devoted to finding the optimal scale of a given activity – the point beyond which marginal costs exceed marginal benefits and further growth would be uneconomic. Marginal Revenue = Marginal Cost is even called the “when to stop rule” for growth of a firm. Why does this simple logic of optimization disappear in macroeconomics? Why is the growth of the macroeconomy not subject to an analogous “when to stop rule”?

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Professor Daly has contributed to nef‘s Other Worlds are Possible and wrote the foreword to National Accounts of Well-being. Read nef‘s own critique of economic growth in Growth Isn’t Possible and Growth isn’t Working.

Hat tip to Jeremy Williams for spotting this.

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Bookmark and ShareProfessor Herman E. Daly is Ecological Economist at the School of Public Policy, University of Maryland and Author of Steady-State Economics

Climate change, important as it is, is nevertheless a symptom of a deeper malady, namely our fixation on unlimited growth of the economy as the solution to nearly all problems. Apply an anodyne to climate and, if growth continues, something else will soon burst through limits of past adaptation and finitude, thereby becoming the new crisis on which to focus our worries.

The fact that the contributors to Other Worlds are Possible realise this makes this report a serious study. The fact that they seek qualitative development that is not dependent on quantitative growth makes it a hopeful study. It is a valuable collection of the specific and the general, of the grass roots details and the macroeconomic big picture regarding climate change and economic development.

The reader is told up front that, ‘This report represents the work and views of a range of individuals and civil society groups. It is a contribution to debate on what other worlds are possible. Not all the views and policies discussed are necessarily held by all the groups and individuals’. Although I did not find any contradictions among the various contributions, they differ greatly in approach and perspective—mainly between top-down and bottom-up modes of thought. Some people like to start with a big picture. They are impatient with concrete details until they can fit them into or deduce them from a framework of meaning consistent with first principles. Others are impatient with a big picture unless they first have a lot of concrete details and examples that inductively suggest a larger pattern. I confess that I belong to the first type, but that is more of a bias than a virtue. Both approaches are necessary, and are present in this collection, but the bottom-up predominates, at least in number of pages.

My advice to the top-down types is to first read Manfred Max-Neef’s fine big-picture essay. Then fit in the inspiring examples of Kenya’s Green Belt Movement, Thailand’s self sufficiency, Bhutan’s Gross National Happiness, the Happy Earthworm Project, the Happy Planet Index, etc. More inductive types should save Max-Neef for last. I do not mean to characterize Max-Neef as a top-down thinker since he has spent much of his life doing grass roots, ‘barefoot’ economics. But in this volume’s division of labour his is the big-picture essay.

To have packed so much information, inspiration, and analysis into less than 100 pages of clear prose leaves the reader grateful to the authors, the Working Group on Climate Change and Development, and nef.

This is the foreward to Other Worlds are Possible, a new report on climate change and development published today, which features contributions from a range of developing world economists and activists, including R.K. Pachauri, Wangari Maathai and Manfred Max-Neef.

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nef employees blog in their personal capacity. The opinions expressed here do not necessarily reflect those of the new economics foundation.
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