In panel discussions or similar debate formats, it is usually a huge advantage to be thoroughly informed about the opponent’s weltanschauung, since this enables one to anticipate the other side’s arguments. But there are exceptions to this rule.

My recent blog pieces on neo-Malthusian economics, or ‘steady-state economics’ (SSE), have triggered a number of responses. These have ranged from the rather thoughtful to the outright hysterical, with most contributions closer to the latter. But one cannot escape the impression that what boosts the SSE community’s verve and confidence is precisely the fact that they don’t know what free-market economics is, and refuse to acknowledge it.

Let me clarify two repeatedly made misrepresentations. Firstly, there is the SSE community’s insistence that pro-market economists are unaware of the finite nature of the planet’s resources. This is blatantly absurd because economics, free-market or otherwise, is about little else than scarcity. This is the very reason why economists have such a reputation for being party-spoilers. As Thomas Sowell put it: ‘The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.’

The real disagreement between proponents of the free economy and of SSE, then, is in how we should deal with the immutable fact of scarcity – through the political process, or through the market process? Framing the debate in those terms, however, would be much more painstaking. SSE adherents can, of course, stick to their view that most of us are short-sighted and narrow-minded, squandering away the world’s resources as if there were no tomorrow. But then, what they should explain is why they believe that we act more holistically and prudently in our roles as participants of the political process. Let’s suppose, for example, that I had a habit of spending all my earnings immediately after payday, and then reverting to the pawnbroker’s. Why would I then vote for a foresightful fiscal policy, or join a pressure group like the ‘Rally against Debt’?

Secondly, there is the SSE community’s constant rallying against an imaginary figure which exists nowhere except in their own minds. It is the hypothetical ultra-materialistic free-market economist, who believes that happiness is a function of the size of the shopping bag. This mirage is hugely flattering for SSE-adherents. It feels good, I suppose, to think of oneself as a high-minded, refined thinker, standing up against an establishment of boorish philistines.

But the fact remains that free-market economists have precious little to say on lifestyle issues. There is no publication anywhere on this website advising people to spend more time in the shopping centre and less time hiking in forests. Most market-minded economists would be opposed to government restrictions on the sale of bratwurst and wheat beer, but this does not make them ‘advocates’ of bratwurst and wheat beer consumption. You can make the conventional anti-consumerist case that people need government help to get off the ‘consumer treadmill’ and accuse the pro-market economist of being unwilling to provide it, but that would be a very different debate.

And maybe here is the explanation for the hysteria displayed by some in the SSE camp. Dealing with what your intellectual opponent is actually saying, not with what you imagine he might be saying, could raise a few very uncomfortable questions.

Dr Kristian Niemietz joined the IEA in 2008 as Poverty Research Fellow, becoming its Senior Research Fellow in 2013 and Head of Health and Welfare in 2015. Kristian is also a Fellow of the Age Endeavour Fellowship. He studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). In 2013, he completed a PhD in Political Economy at King’s College London. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and at King's College London, where he taught Economics throughout his postgraduate studies. He is a regular contributor to various journals in the UK, Germany and Switzerland.

5 thoughts on “Free-market economics vs. steady-state economics: how to frame the debate”

  1. Posted 21/04/2011 at 21:25 | Permalink

    Well then, Kristian, why don’t you take me up on my long-standing offer of a debate, recorded live and posted online as a podcast on both our websites? It’ll be hard to get your ideas wrong if you’re sitting in front of me. You know where to find me. Let’s do it.

  2. Posted 22/04/2011 at 22:27 | Permalink

    Comparing the writing of Herman Daly (an SSE proponent) and the writing of Julian Simon (an SSE opponent) I think it’s more accurate to frame the debate as “steady state” vs. “infinite growth”. The badness or goodness of the market is more secondary in both Daly’s “Beyond Growth” book and Simon’s “The Ultimate Resource.” If memory serves, Daly in his book relied upon market forces to run a hypothetical steady state economy, once there are items on the cost side of the ledger to accurately reflect relative scarcity of waste sinks and depletion of various resource alternatives.

  3. Posted 05/05/2011 at 22:07 | Permalink

    This is highly unresponsive to SSE. The basic principle of SSE is that the pursuit of endless economic growth is both undesirable and unsustainable. Yes, many SSE advocates may be anti-free market, but nothing you’ve said has refuted the theory of SSE itself. In fact, in this article: it is specifically explained how the transition to SSE could and is occurring without government action. Your article is too narrow in that focuses solely on 2 actors – the government and the markets – ignoring the citizens/consumers. As highlighted in that article, recessions do force “us” to make steps towards SSE, independent of both the government and markets. Beyond all of that, you never really explain how or why the markets tend towards the conservation of resources. Decoupling (the idea that economic growth can increase while resource use decreases, including change of technology) has been almost entirely disproven empirically, which suggests that the current market structure won’t tend towards resource conservation. Blind faith in technology, when the entire structure of civilization rests on a few rapidly depleting resources, is not a justification for the endless pursuit of economic growth without a clear, well-developed mechanism for changing market action and justification for economic growth itself. THAT is “how to frame the debate”.

  4. Posted 08/05/2011 at 17:39 | Permalink

    It’s about population,stupid. Growth is not the problem

  5. Posted 16/05/2011 at 08:57 | Permalink

    “its about the population stupid” and ” Your article is too narrow in that focuses solely on 2 actors – the government and the markets – ignoring the citizens/consumers” about sum up steady staters and their drivel. take the second quote, WE ARE THE MARKETS DUMMY!!!!!! therefore, there basically is 2 actors, politicians and us/ the markets. as for population growth, here we go again. malthusian tripe. malthus was a [email protected] biologist and [email protected] mathematician. he has been proven wrong again and again. take india’ many of its people starve, but not because of population growth. over 50% of their foodstuffs rot by the roadside because of their corrupt socialist-feudal system. there is no evidence that population growth will cause the end of the world but it sounds great to some leftie [email protected] looking for something to swim to when AGW finally implodes. population growth is one of the few things that will increase wealth in the third world but that’s far too complex an argument for the adolecent emotional masturbators of the left to grasp.

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