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 H.: Tax policy

Herman E. Daly

Extract

For some time a small group of ecological economists has been suggesting that we switch the tax base from income (value added to natural resources by labor and capital), and on to natural resources themselves. Value added to resources is something we want more of, so do not tax it (either at each stage of production as in Europe, or at the final stage as income as in the United States). The resource throughput, beginning with depletion and ending with pollution (both real costs), is something we want less of in a full-world economy, so let us tax it. Even though resources in the ground and waste absorption services are free gifts of nature in the cost of production sense, they are nevertheless increasingly scarce in a full world. They need a price to be efficiently allocated and not overused. So let us give them the needed price by taxing them, and use the revenue from the tax (or equivalent cap–auction–trade system) to substitute for the revenue lost from no longer taxing value added. The resource tax should be levied at the point of extraction (severance) so that the higher price will stimulate increased efficiency of use at all upstream stages of production, as well as in the final stages of consumption and recycling. Also depletion is spatially more concentrated than pollution, so in most cases a depletion tax is easier to monitor than a pollution tax. In addition to this economic argument there is a political one.

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