From Uneconomic Growth to a Steady-State Economy

From Uneconomic Growth to a Steady-State Economy

Advances in Ecological Economics series

Herman E. Daly

In this important book, Herman E. Daly lays bare the weaknesses of growth economics and explains why, in contrast, a steady-state economy is both necessary and desirable. Through the course of the book, Daly develops the basic concept and theory of a steady-state economy from the 1970s limits to growth debates. In doing so, he draws on work from the classical economists, through both conflicts and agreements with neo-classical and Keynesian economists, as well as recent debates on uneconomic growth.

Chapter A.: Meaning of growth

Herman E. Daly

Subjects: development studies, agricultural economics, development economics, economics and finance, development economics, environmental economics, environment, ecological economics


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.

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