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 F.: Monetary reform

Herman E. Daly

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Historically money has evolved through three phases: (1) commodity money (for example, gold); (2) token money (certificates tied to gold); and (3) fiat money (certificates not tied to gold). 1. Gold has a real cost of mining and value as a commodity in addition to its exchange value as money. Gold’s money value and commodity value tend to equality. If gold as commodity is worth more than gold as money then coins are melted into bullion and sold as commodity until the commodity price falls to equality with the monetary value again. The money supply is thus determined by geology and mining technology, not by government policy or the lending and borrowing by private banks. This keeps irresponsible politicians’ and bankers’ hands off the money supply, but at the cost of a lot of real resources and environmental destruction necessary to mine gold, and of tying the money supply not to economic conditions, but to extraneous facts of geology and mining technology. Historically, the gold standard also had the advantage of providing an international money. Trade deficits were settled by paying gold; surpluses by receiving gold. But since gold was also national money, the money supply in the deficit country went down, and in the surplus country went up. Consequently the price level and employment declined in the deficit country (stimulating exports and discouraging imports) and rose in the surplus country (discouraging exports and stimulating imports), tending to restore balanced trade.

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