Steady State Economy

Steady state economy (SSE) refers to a theoretical economic system in which the world's population and natural resources remain practically constant through time. A steady state economy would be sustainable in that humans would not extract or deplete natural capital faster than the Earth's systems could replenish it.

Ecological economists, led by Herman E. Daly, posit that classical economic theories, which advocate infinite growth, are inconsistent with scientific reality. Businesses following classical economic theory essentially treat the Earth as an unlimited well of resources and sink for waste. SSE theory holds that since the Earth has limited natural resources, a continuous, unlimited growth of the gross domestic product would lead to the ultimate destruction of the natural resources indispensable for human life. Daly's theory of SSE acknowledges that the economy is a subset of the ecosphere, which is a finite, nongrowing, and closed system with respect to matter. Kenneth E. Boulding's concept of “Spaceship Earth” is an apt metaphor; it maintains that humans must regard the Earth as a spaceship containing limited resources and a limited capacity to process human waste. Also relevant is the concept of carrying capacity, understood as the natural ability of an ecosystem to steadily produce the necessary resources for the living species that live in it.

SSE theory acknowledges that negative environmental externalities, as described by economists Cecil Pigou and Ezra Mishan, are not sustainable. When businesses only take into consideration costs that are directly connected with their own activities, costs of a social nature, such as pollution or the depletion of collective assets (e.g., water, soil, and fisheries), accumulate. Arguing that the laws of economics must conform to the laws of science, Daly maintains that it is urgent to progressively diminish the pressure of human activity until the achievement of a steady state economy, intended as an economy subject to development but not to growth.

A steady state economy is characterized by an equitable distribution of the wealth produced by a careful use of natural resources and by a “constancy” of population and capital stocks. The theory does not deny the necessity for economic development, but it radically changes its meaning: the objectives of the steady state economy are not an accelerated growth and mass production, but rather the production of sufficient wealth for the entire world population, equitably distributed and efficiently placed.

Policy implications suggested by SSE theory commonly include population controls, reduction of per capita consumption, maximum limits on individual income and wealth, and heavy taxes on all resource depletion. Critics of SSE theory tend to focus on the political impossibilities of such proffered solutions.

Sustainable or green business offers a more politically palatable pathway toward a steady state economy. SSE theory has greatly influenced thinking around sustainable business practices. [Page 471]Lester Brown's Eco-Economy begins with and builds on the underlying premises of SSE, and continues with suggestions for a hydrogen-based economy powered by renewable energy sources. The concepts of biomimicry and radical resource utilization discussed in Natural Capitalism by Hawken, Lovins, and Lovins also reflect a foundation in SSE theory. The fundamental scientific principles at the heart of SSE theory are the same principles that anchor the strategic framework for sustainability developed by Karl-Henrik Robért and The Natural Step. The work of McDonough and Braungart in cradle-to-cradle design and manufacturing facilitates a move to steady state by keeping resources, such as metals and synthetic substances, in closed technical loops, reducing waste, pollution, and the need for continued resource depletion.

...