There is no economy without environment

(The Conversation is an independent and not-for-profit source of news, analysis and commentary from academic experts.)

Jon D. Erickson, University of Vermont

(THE CONVERSATION) Herman Daly had a knack for stating the obvious. When an economy creates more costs than benefits, he called it “uneconomic growth.” But you won’t find that conclusion in economics textbooks. Even suggesting that economic growth may cost more than it is worth can be considered economic heresy.

The renegade economist, known as the father of ecological economics and a leading architect of sustainable development, died on October 28, 2022 at the age of 84. He has spent his career questioning an economy disconnected from an environmental foundation and moral compass.

In an era of climate chaos and economic crisis, his ideas that inspired a movement to live within our means are increasingly essential.

The seed of an ecological economist

Herman Daly grew up in Beaumont, Texas, ground zero of the early 20th century oil boom. He witnessed the unprecedented growth and prosperity of the “gusher era” against the poverty and deprivation that continued after the Great Depression.

For Daly, as many young men believed then and since, economic growth was the solution to the world’s problems, especially in developing countries. Studying economics at university and exporting the northern model to the global south was seen as a fair path.

But Daly was a voracious reader, a side effect of polio as a boy and misses the Texas football craze. Beyond the confines of assigned textbooks, he found a history of economic thought steeped in rich philosophical debates about the function and purpose of the economy.

Unlike the precision of a market equilibrium sketched on the classroom blackboard, the real world economy was messy and political, designed by those in power to pick winners and losers. He believed that economists should at least ask: Growth for whom, for what purpose and for how long?

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Daly’s greatest realization came from reading marine biologist Rachel Carson’s 1962 book “Silent Spring” and seeing her call to “come to terms with nature … to prove our maturity and our mastery, not of not nature, but of ourselves.” By then he was working on a Ph.D. in Latin American development at Vanderbilt University and was already quite skeptical about the hyper-individualism baked into economic models. In Carson’s writing, the conflict between a growing economy and a fragile environment was blindingly clear.

After a fateful class with Nicholas Georgescu-Roegen, Daly’s conversion was complete. Georgescu-Roegen, a Romanian-born economist, effortlessly sought the free-market fairy tale of a pendulum swinging back and forth toward a natural state of equilibrium. He argued that the economy is more like an hourglass, a one-way process that turns valuable resources into useless waste.

Daly became convinced that economics should no longer prioritize the efficiency of this one-way process, but instead should focus on the “optimal” scale of an economy that can sustain the Earth. Just shy of his 30th birthday in 1968, while working as a visiting professor in the poverty-stricken Ceará region of northeastern Brazil, Daly published “On Economics as a Life Science.”

His sketches and tables of the economy as a metabolic process, entirely dependent on the biosphere as source for nourishment and sink for waste, were the road map for a revolution in economics.

Economy of a crowded world

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Daly spent the rest of his career drawing boxes in circles. In what he called the “pre-analytical vision”, the economy – the box – was seen as the “full subsidiary” of the environment, the circle.

When the economy is small relative to the containing environment, a focus on the efficiency of a growing system has merit. But Daly argued that in a “full world”, with an economy outgrowing its sustainable environment, the system is in danger of collapsing.

While a professor at Louisiana State University in the 1970s, at the height of the American environmental movement, Daly took the box-in-circle framework to its logical conclusion in “Steady-State Economics.” Daly argued that growth and exploitation are prioritized in the competitive, pioneer stage of a young ecosystem. But with age comes a new focus on durability and cooperation. His steady model shifted the goal away from blind expansion of the economy and toward purposeful improvement of the human condition.

The international development community has taken notice. After the United Nations’ 1987 publication of “Our Common Future,” which outlined the goals of a “sustainable” development, Daly saw a window for development policy reform. He left the security of residency at LSU to join a rogue group of environmental scientists at the World Bank.

For the better part of six years, they worked to upend the prevailing economic logic that “treated the Earth as if it were a business in liquidation.” He often butted heads with senior leadership, most notably with Larry Summers, then the bank’s chief economist, who publicly dismissed Daly’s question about whether the size of a growing economy relative to a fixed ecosystem mattered. The future US Treasury Secretary’s answer was short and dismissive: “That’s not the right way to look at it.”

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But by the end of his tenure there, Daly and colleagues had successfully incorporated new environmental impact standards into all development loans and projects. And the international sustainability agenda they helped shape is now baked into the UN’s 193-country Sustainable Development Goals, “a plan of action for people, planet and prosperity.”

In 1994, Daly returned to academia at the University of Maryland, and in subsequent years his life’s work was recognized worldwide, including by Sweden’s Right Livelihood Award, the Netherlands’ Heineken Prize for Environmental Science, Norway’s Sophie Prize, Italy ‘s Medal from the Presidency, Japan’s Blue Planet Prize and even Adbuster’s Person of the Year.

Today, the imprint of his career can be found far and wide, including measures of the Genuine Progress Indicator of an Economics, new Donut Economics framework of social floors within environmental ceilings, global degree programs in ecological economics and a vibrant degrowth movement focused on ‘ a mere transition to a right-sized economy.

I have known Herman Daly for two decades as a fellow writer, mentor and teacher. He always made time for me and my students, and most recently wrote the foreword for my upcoming book, “The Progress Illusion: Reclaiming Our Future from the Fairytale of Economics.” I will be forever grateful for his inspiration and courage to, as he put it, “ask the naive, honest questions” and then not “be satisfied until I get the answers.”

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