From Uneconomic Growth to a Steady-State Economy
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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.
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Chapter 4: Towards an environmental macroeconomics

Herman E. Daly


Environmental economics, as it is taught in universities and practiced in government agencies and development banks, is overwhelmingly microeconomics. The theoretical focus is on prices, and the big issue is how to internalize external environmental costs so as to arrive at prices that reflect full social marginal opportunity costs. Once prices are right the environmental problem is ‘solved’ – there is no macroeconomic dimension. There are, of course, very good reasons for environmental economics to be closely tied to microeconomics, and it is not my intention to argue against that connection. Rather I want to ask if there is not a neglected connection between the environment and macroeconomics. A search through the indexes of three leading textbooks in macroeconomics (Barro, 1987; Dornbusch and Fischer, 1987; Hall and Taylor, 1988) reveals no entries under any of the following subjects: environment, natural resources, pollution, depletion. Is it really the case, as prominent textbook writers seem to think, that macroeconomics has nothing to do with the environment? What historically has impeded the development of an environmental macroeconomics? If there is no such thing as environmental macroeconomics, should there be? What might it look like? The reason that environmental macroeconomics is an empty box lies in what Thomas Kuhn calls a ‘paradigm’, and what Joseph Schumpeter more descriptively called a ‘pre-analytic vision’. As Schumpeter emphasized, analysis has to start somewhere – there has to be something to analyse. That something is given by a pre-analytic cognitive act that Schumpeter called ‘vision’.

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