The Steady State Economy Conference – the economics of misanthropy
12 January 2011
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Imagine Jean-Jacques Rousseau, Thomas Malthus, Karl Marx and Saddam Hussein were meeting somewhere in the afterlife, deciding to write a joint policy paper. Difficult to imagine? Not at all. The result would probably look a lot like ‘Enough is enough’, the report which came out of the latest Steady State Economy Conference.
The Steady State Economy Conference is an occasion where well-to-do professionals get together to talk about why prosperity is not good for other people. Popular prosperity, it is argued, turns people into mindless, self-obsessed, neurotic shopaholics. People may not realise it, but they are deeply unhappy, desperately in need of wise experts to take them by their hands and lead them out of their mental misery by restricting their material consumption. This is, at the same time, the only way to stop people from stripping bare the planet. Among the attendants are luminaries from the Optimum Population Trust, the New Economics Foundation and the Equality Trust.
Humanity’s mortal sin, in this worldview, is economic growth. Growth upsets the fragile balance of nature and traditional communities. It needs to be eradicated root and branch, by creating a totally different type of economy – you guessed it: the Steady State Economy.
The combination of social pessimism and a fixation on alleged natural limits is hardly new, and its predictive record has thus far been rock bottom. In the late 18th century, Thomas Malthus predicted overpopulation and starvation. Yet at the onset of World War I, the population of Western Europe was twice as large and three times as rich (in per capita terms) as a century earlier. In the late 1960s, Paul Ehrlich stepped into Malthus’s footsteps, prophesying decades of mass starvation in the Third World. Yet the following decades witnessed the rise of the Asian Tigers. In the 1970s, the Club of Rome predicted the world would run out of most vital resources by 2000. When that date arrived, most resources were cheaper in real terms than ever.
For doomsayers, the world’s stubborn refusal to perish has never posed a problem. Whenever the apocalypse fails to happen, they simply push the expiry date a bit further into the future and repeat their litany of sin and chastisement. As Daniel Ben-Ami explains in ‘Ferraris for all’, ‘one of the characteristic features of environmentalism is that it is remarkably impervious to factual refutation’ (p. 123).
The reason why doomsday environmentalism consistently gets its predictions wrong is its false view of human nature. The proponents of Steady State Economics think of people as of a swarm of locusts: left to themselves, they will blindly devour their own livestock. But this interpretation is misleading. Locusts cannot generate scarcity signals. We can: they’re called market prices. Locusts cannot increase their ‘efficiency’ in the use of resources. We can, and we do it all the time. Locusts cannot deliberately search for substitutes, let alone create one. We can, and we even shape what counts as a ‘resource’ in the first place. In pre-industrial times, oil was not a resource, but merely a black liquid.
Bjørn Lomborg once likened the logic of resource depletion to somebody who looks into a fridge and then concludes: there is only food for three days in it, so after that, the fridge owner will starve. There are no natural limits to growth. There are people who do not like growth because they do not approve of the way we choose to spend our money.
The Steady State Economy Conference is an occasion where well-to-do professionals get together to talk about why prosperity is not good for other people. Popular prosperity, it is argued, turns people into mindless, self-obsessed, neurotic shopaholics. People may not realise it, but they are deeply unhappy, desperately in need of wise experts to take them by their hands and lead them out of their mental misery by restricting their material consumption. This is, at the same time, the only way to stop people from stripping bare the planet. Among the attendants are luminaries from the Optimum Population Trust, the New Economics Foundation and the Equality Trust.
Humanity’s mortal sin, in this worldview, is economic growth. Growth upsets the fragile balance of nature and traditional communities. It needs to be eradicated root and branch, by creating a totally different type of economy – you guessed it: the Steady State Economy.
The combination of social pessimism and a fixation on alleged natural limits is hardly new, and its predictive record has thus far been rock bottom. In the late 18th century, Thomas Malthus predicted overpopulation and starvation. Yet at the onset of World War I, the population of Western Europe was twice as large and three times as rich (in per capita terms) as a century earlier. In the late 1960s, Paul Ehrlich stepped into Malthus’s footsteps, prophesying decades of mass starvation in the Third World. Yet the following decades witnessed the rise of the Asian Tigers. In the 1970s, the Club of Rome predicted the world would run out of most vital resources by 2000. When that date arrived, most resources were cheaper in real terms than ever.
For doomsayers, the world’s stubborn refusal to perish has never posed a problem. Whenever the apocalypse fails to happen, they simply push the expiry date a bit further into the future and repeat their litany of sin and chastisement. As Daniel Ben-Ami explains in ‘Ferraris for all’, ‘one of the characteristic features of environmentalism is that it is remarkably impervious to factual refutation’ (p. 123).
The reason why doomsday environmentalism consistently gets its predictions wrong is its false view of human nature. The proponents of Steady State Economics think of people as of a swarm of locusts: left to themselves, they will blindly devour their own livestock. But this interpretation is misleading. Locusts cannot generate scarcity signals. We can: they’re called market prices. Locusts cannot increase their ‘efficiency’ in the use of resources. We can, and we do it all the time. Locusts cannot deliberately search for substitutes, let alone create one. We can, and we even shape what counts as a ‘resource’ in the first place. In pre-industrial times, oil was not a resource, but merely a black liquid.
Bjørn Lomborg once likened the logic of resource depletion to somebody who looks into a fridge and then concludes: there is only food for three days in it, so after that, the fridge owner will starve. There are no natural limits to growth. There are people who do not like growth because they do not approve of the way we choose to spend our money.
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Dear Kris,
In the interests of factual refutations, the Club of Rome did not say anything about resources running out by 2000.
Limits are natural part of nature. This article does not produce any new facts but it does regurgitate old tired cynical attack language. One assertion the author makes that is convincing is that locusts cannot generate scarcity signals.
The author then states that somehow the market will generate appropriate signals. To date the market has not generated appropriate signals. Markets are manipulated and thus we have debt unlimited, flash crashes, bubbles bursting and shortages of food and fuel. These are signals but they are not appropriate signals. And what if the market can produce signals but no one is listening? What if the planetary crash signals are full featured and everyone is still listening to the consumption propaganda? The rich will continue to have the resources and the billions of poor will continue to perish. Is this an appropriate market signal?
“There are no natural limits to growth.”
Do you really expect such general, unfounded and anachronistic statements to be taken seriously. Normally I would not have bothered to respond to such a shallow and patently false argument but allow me to remind you of what Kenneth Boulding, a great economist, once said: “Only mad men and economists believe in infinite growth in a finite world”.
Can an attack on sound reasoning and common sense have other than political motivations? An intelligent person must stop to wonder about the consequences of ill-considered choices in a market that is defined as driven by scarcity. Bad things happen. That’s why we have insurance. And speaking of which, Lloyd’s is saying that companies that do not respond to issues of energy and resource depletion and climate change are a very poor risk.
This would be laughable were it not such a dangerous line of thinking that is still widespread. Woe to the author when it is discovered that fossilf fuels, not people, were the ultimate resource. Once we burn through that, we won’t be able to innovate food onto the table for 7 billion or more. Let’s hope he gets plenty of time to pursue happiness and fulfillment at Wal-Mart before then.
The fact that fossil fuels, especially oil, allowed us to push out the day of reckoning, should not be confused to mean we can outsmart mother nature and make food or fresh water or atmosphere out of Euros or the steam emanating from growth profiteer think tanks. Let’s put the author of this delusional piece under a dome with one acre of fertile soil, no “endless” supply of oil for fertilizer, no deliveries of fertile soil to replace what he starts with, and no other nations to plunder, and tell him to “innovate this.”
Sorry to be a bit unforgiving, but this kind of mindless claptrap is tiring, selfish, myopic, closed-minded, immature and intellectually vacuous.
Dave Gardner
Directing the documentary
GrowthBusters: Hooked on Growth
I’m sorry, but this doesn’t really count as a substantive attack on steady state economics. Mr. Niemietz’s brief commentary is made up of childish ad hominem remarks (a joint policy paper written by “…Karl Marx and Saddam Hussein”…); logical errors in the form of statements presented as false but that are actually true and that contradict the writer’s argument (“…growth upsets the fragile balance of nature and traditional communities…”); and straw-man arguments unrelated to the actual philosophy of steady state economics (“…environmentalism [has a] false view of human nature.”) Mr. Niemetz makes only one serious positive assertion – without evidence – and this one is incorrect: “There are no natural limits to growth”. Mr. Niemietz’s CV shows that he has only recently completed his graduate studies in conventional economics and has very little real world work experience. I hope we can look forward to more thoughtful arguments in the future, from this and other sources!
Suspicious use of the name Saddam Hussein, who’s war and weapons economy was materialistic and growth oriented. Killing ones enemies to maintain power is not a steady-state principle, it’s a principle of the marketplace.
Nothing worthwhile reading in this article folks, move along now. Just a bit of a mad rant – leave him be he’ll be fine in a few years. Too much Economic Kool-Aid, he’ll be fine – maybe.
You know how it is, @Rooperstar, we can’t resist rubbernecking at a trainwreck.
@ ghassan karam – the author is accurate in stating ‘there are no natural limits to growth’. While technically the laws of physics suggest eventual limits, these lie so far in the future that they are irrelevant to economic discussion. As long as humans are free to innovate and trade within a market system based on private property, there is no reason why improvements in productivity cannot continue in the very long term.
@ Dave Gardner – while fossil fuels clearly play a pivotal economic role today, there is no reason why they can’t be substituted if they become scarce and no reason any resulting rises in input costs couldn’t be compensated by productivity growth, which is immense in the long-term in unhampered market economies.
Productivity, efficiency and such things have an upper limit — they cannot theoretically be increased beyond 100 % and as it approaches 100 % it requires expenditure of more effort for diminishing returns, this I would think is basic economics. Most growthists miss the fact that they are only postponing the inevitable and postponement makes the inevitable more and more catastrophic because of the increasingly larger dependency on diminishing resources, causing needless suffering when hitting the diminishing limits (in the extreme case extinction of all species). Earth is round, not flat but perhaps classical economists think it is flat, I bet they will not be able to convince their children unless they restrain them from learning basic scientific facts. When adults talk about growing indefinitely, they acknowledge they haven’t matured into adults, they are still infants. It is time for them to go through a ritual that initiates them into adulthood. In nature, when something tries to grow out of bounds, it is called cancer and we know the end result — neither the cancerous cells nor the host survives.
Guys,
you’re probably aware of the fact that the Netherlands is one of the world’s largest agricultural exporters. Is that because they’re so resource-rich? No. It’s a tiny country with a very high population density (> than in the UK), little arable land and a cool climate.
On the other hand, there are countries which are rich in land and other resources, but unable to provide enough food. Difference: The Dutch got their institutional setup basically right. That’s what enables them to be super-productive, and make a lot out of minimal resources.
If the rest of the world could raise their agricultural productivity to Dutch levels, we could easily feed a dozen humanities. Lesson: Institutions matter, resources don’t.
Unless, of course, one has a totally different agenda in mind. Maybe some of us just cannot stand the sight of our neighbour going on a shopping binge, buying all sorts of stuff we consider useless trash, and want to stop him. But since we cannot say that openly – we’re supposed to be tolerant! – we have to look for some pseudo-economic rationalisation of our authoritarian instincts. In that case, Steady State Economics is a heaven-sent opportunity.
Kris:
I am not sure that this is the proper venue for a detailed discussion but your Netherlands example is very flawed. The issue is not the gross production of the Netherlands but it is the net i.e the Netherlands is very dependent on imported inputs and so a large portion of its output would not materialize had it not been for these imports. Translation: The Netherlands, Japan,and the like are not sustainable models to be emulated since they attain their standard of living only by using somebody elses’ resources. Doesn’t that sound similar, actually identical, to mercantilism? So if mercantilism is wrong, as we all know, then why is a model similar to that of the Netherlands and Japan accepted and even glorified.?
I wasn’t talking about the Netherlands as an economic model, but only about Dutch agriculture. It shows that it is possible to produce massive amounts of good quality food with minimal resources. So if other places go hungry, the problem is not a lack of resources, let alone ‘overconsumption’ elsewhere, but bad institutions.
Kris, I am sorry to say that even if one is to look only at the agricultural sector in the Netherlands the results are no where as good as you suggest. The Netherlands imports 74% of all its cereal consumption every year. Its relatively high yields are achieved through tremendous dependence on fertilizers; 501 Kg/ha compared to European average of 77 Kg/ha and a world average of 94 Kg/ha.
And why is that a problem?
You are not going to tell me that there is no connection between the extensive use of fertilizers and water pollution are you? And as you well know imports of cereal is one very important measure of food insecurity.
It is also important to note that the EPI rankings by Yale University and Columbia University show that the Netherlands is not among the top 30 countries of the world.
Ghassan,
you’re trying really hard to find a catch to Dutch agriculture, aren’t you? What I was saying was: The Netherlands produce a huge agricultural output with very few resources. I did not say that they are a net exporter of every single agricultural commodity in the world. Apparently cereals is not where their comparative advantage lies.
Do fertilizers pollute the water? I don’t know. I’m an economist, not a chemist. But water can be purified again, and sea water can be desalinated. I suppose you’re now going to say: The Dutch may not have a problem with water pollution just yet, but it’s on its way. Their water demand rises by x% per year, and their supply by y%, with x>y. And you know what? I can’t tell you exactly how they will solve it. Just like I cannot tell you what a computer will look like in 10 years, or a mobile phone, or an i-Pod. That’s the nature of markets. We do not know what kind of innovative solutions creative entrepreneurs will come up with.
But rest assured: If there is a genuine problem, then in the right institutional setup, coming up with a solution will constitute a huge profit opportunity. If there is a huge enough profit opportunity, a lot of smart, greedy people will try their best to grab it. If a lot of smart greedy people try their best, chances are very high that at least one of them will come up with a workable solution.
At least a much more workable solution than bureaucrats and self-styled hypermoralists curtailing our consumption and regulating our lifestyles.
Kris – I am with the steady staters, In fact I believe our species will experience a significant contraction this century. The only question is how; and by how much? Specifically on energy: there are lots of reasons why there are no substitutes, especially for oil. Maybe you should park your Economics 101 nonsense and learn about the laws of thermodynamics, especially the first and second laws. These are immutable, unlike the “laws” of Economics.
Institute of Economic Aberration renounce your foolish dreams of forever.
@Richard Wellings “while fossil fuels clearly play a pivotal economic role today, there is no reason why they can’t be substituted if they become scarce”
I think you fail to anticipate the rate of depletion of oil, past peak, and the effect this will have on a global transport fleet which would be hopelessly ill-prepared even if the realities of peak oil were understood by policymakers.
Kris – I think you are conveniently overlooking the role of oil in food production although I can understand your basic point about the efficiency of the system you describe.
…Industrial agriculture being the process of converting oil into food, at ratios of the order of 10 calories of oil to make 1 calorie of food. If you want to implement precious efficiency savings into that toxic brew then we had better all start cutting down our meat & dairy consumption to start with. Any wonder that the index of global food price hits a record as we start our merry slide along the downside of Hubbert’s peak?
@ Nick Watts – if there are shortages of oil then the price will rise and it will become profitable to exploit alternative sources. We may already be seeing this as the huge reserves of gas and oil from the the oil shales and tar sands start to come on tap. These sources cost more to extract but the extra costs can be absorbed in a dynamic market economy with rapid productivity gains elsewhere. Eventually more renewable sources of energy may become economic (remember that total human energy consumption is absolutely tiny compared with the amount of solar energy reaching Earth.)
While you’re correct about the large fossil fuel input to agriculture, the price mechanism will also work here to substitute alternatives. Only a small fraction of the Earth’s land area is cultivated and this could be increased dramatically, and (you mention meat and dairy) price signals could encourage farmers to plough up pastureland to increase overall calorific output. However, there is a problem – the high level of state control over agriculture (e.g. the CAP) which would hamper such an adjustment process.
It’s possible that record food prices have more to do with central banks printing money than concerns over energy supplies.
@Richard Wellings – shales and tar sands – this is where the laws of thermodynamics come into play. Their energy contribution is too little. More broadly, economics has never acknowledged the fact that like labour and capital energy is a key input. Moreover it has failed to grasp that the price mechanism and substitution does not work in the case of oil. Otherwise chart production and price over the last ten years and explain that to us all. I am sure we would all be fascinated by your reply.
Richard says: “Only a small fraction of the Earth’s land area is cultivated and this could be increased dramatically,”
Richard, I can only hope that the above is not an accurate reflection of your thought on this matter. Ricardo dispensed with this argument 200 years ago. Yes there are many acres that can be brought in but their marginal productivity would have toi be expected to be abysmal. Try again.
Mr.Niemietz views are as amateurish as they are misinformed. The arguments and superficial attacks on the Steady-Staters guised under the garb of “individual freedom” and “happiness” are not new. The author’s “intellectual” belief in neoclassical economics -acknowledged in some circles as the “science of convenience” is disturbing, if not laughable. As information is deliberately withheld from the public-at-large, the choices made are misinformed. Ask consumers in US if they would like to see a label if the meat they are buying is from a cloned animal. In fact most are not given a choice, much less informed of the potential harm; a perfect free market setup according to some. Or how about the fact that variants of corn syrup used in most processed food and candies (for children) leaves the consumers artificially hungry for more, making them obese and giving rise to cardiac problems. Good for growth!
Choices made under misinformation are not sustainable. Once informed that their grandchildren have, say 20% chance of having the same quantum of consumption as of today, people may choose differently. Should they prioritize themselves at the cost their grandchildren, such a choice could be valid as it is made under sufficient information.
Part of the problem is due to practice of indiscriminate growth of division of labour in the complex society which has given rise to information asymmetry. Hayek’s claim of use of all the knowledge of market not given to any one in particular is hardly relevant to non-market/non-excludable necessities. Smith’s ideas -stripped of their moral foundations by those who most benefit from the act -have transformed the “invisible hand” into a “visible-foot”.
Acknowledging the complexities of real life, the extent of the unknown and uncertainties, the degree of superficiality in mainstream economics is glaring. The author has conveniently failed to mention the effects of natural capital liquidation in isolated economies; that which was noticed with the Rapa Nui, and the Mayans. Earth, in the vastness of space, is not too different from the Easter Island -only more forgiving, so far. Perhaps mainstream economists should remember that progress of the past does not underwrite that of the future; and that time is a continuum where every successive day may not be different from the day before, but the start and end points of a civilization perhaps bear no similarities.
Kristian Niemietz has responded to criticisms of this original post in a new blog piece on steady state economics: http://www.iea.org.uk/blog/malthus-is-dead-get-over-it
Come on, Abhi, you can’t be serious. Are you really repeating that pathetic old excuse that nasty corporations are ‘misleading’ people to consume? That people don’t actually want to buy anything, that they’re just being fooled, these poor innocent sheep?
I would have a shred of respect for you SSE folks if you were at least honest. Why don’t you just say loud and clear that you can’t stand the lifestyle choices people are making, that it appals you to, that you find it vulgar and obscene, and that you want to force your concept of a good life upon them? You know just as well as I do that there will be no apocalypse, and that there is no corporate conspiracy either. So stop reverting to your usual excuses and just say what you want.
@Kris: I think you have put your finger right on the problem: you are just an econonomist. Obviously, “trained” in a the traditional brainwashing neoclassical economics department (“Do fertilizers pollute the water? I don’t know. I’m an economist, not a chemist.”) You also seem to have no interest whatsoever in finding out what real sciences have to say about the topic on which you have taken it upon yourself to write. Personally, I prefer to read stuff by folks who know what they are talking about, and have taken the trouble to study the issue in some detail. Particularly if they are going to attack their betters.
I know I should have resisted commenting on this drivel, but somehow I couldn´t stop myself. I know I will regret it. Though not if I don’t check back on this page again…
Now even the wrath of the Thundergod is upon me! Ragnarök is nigh!
“Thor”, why don’t you rewrite the Edda in a politically correct SSE version? Replace Surtur with overconsumption, the Fenriswolf with resource depletion, and the Midgard Serpent with a refuse crisis. And how about the price of petrol taking on the role of the ship Nagelfar?
Kris, I have little doubt that you aren’t serious in believing what you are saying. In fact, I admire your unwavering belief in the current trajectory of “progress”, irrespective of the questionable premise it is based on. Of course, if you took some time to learn and engage in fundamental thinking about economics, perhaps you would understand better.
I hoped not to engage on such a rudimentary level, but it seems appropriate here. It is evident that you have skimmed over the teachings (or preachings) of Bentham, Walrus, Solow, Hayek, Samuelson, Von Mises, Friedman -obviously Milton, not Benjamin, and other free-market proponents during classes. However, the perspective is incomplete. Maybe there was a carnival outside and the professors in the class missed discussing the findings of Friedrich List, Veblen, Keynes, John Galbraith, Knight, Irving Fisher, Sen –which would have been useful. If you had taken a minute to read (and reflect on) Walrasian economics you would see the oversimplifications and shortsightedness in “bundling” resources with other factors for enabling the application of rudimentary mathematics pervasive in his theories. Soddy, and more recently, Ayres have worked to highlight these glaring errors to mainstream economists; ostensibly because the full-time economists were not smart enough to figure it out themselves? Or perhaps because they came from backgrounds of respectable fields of Chemistry and Physics, where, unlike in economics, inconsistencies are seldom tolerated, not to mention it would call into question the intellectual proficiency of the person in question. However much, as Walrus and others hoped, use of mathematics on oversimplified and often incomplete variables does not transform a social science into a deterministic science; perhaps you should get to know the difference.
And it is not I who said that without vigilant regulation corporations would ‘mislead’ and exploit consumers -John Galbraith did. I hope the name is familiar to you. More recently, many, including Stiglitz, Roubini, Volcker, and Greenspan (imagine that!) have called for breaking-up giant banks claiming free markets lead “other problems”. But all this is happening in the real-world anyway.
And come on, Kris, you sound like a novice among freshmen. Again, it is not I who is saying that I cannot stand others’ lifestyle choices, it is the governments of the world -they have turned socialist and interfering in others choices. If you kept yourself apprised of the happenings of the world, you would know that governments are going to great lengths to pedal billions to corporations. Corporations are after all same as people (Citizens United v. FEC), and if they wanted to go bankrupt by making enormous “bets” in the market, shouldn’t the governments have let them? May be you should enlighten the governments with your ideology.
With respect to people being sheep, it is better to ask –or find out what–Lippmann or Bernays, who advocated free market ideas, thought about it. Considering that people with higher academic degrees mindlessly align with the likes Lomborg, it is unexpectedly difficult to rule out herd mentality. Your segue to SSE folk passing value judgment on “vulgar and obscene” choices could not be further from the truth. Such generalized inference(s), I regret to say, makes it look like you are not only woefully uninformed about mainstream economics, but lack of contemplation has colored the views on SSE ideas as well. Perhaps Keynes’ conclusive remarks on economic development can provide a perspective.
Locusts also don’t consume stuff 700,000 times faster than it was formed.
The entire basis for concern over resources (both sources – e.g. fossil fuels and sinks – e.g. the atmosphere) stems from the fact that humans do everything at warp speed compared with all other life and natural processes.
I find the IEA attacks on steady-state economics supporters as misanthropic to be quite offensive considering the IEA article posted April 13 about putting a price on visas, which claims that people with paper (who are “economically active”) to buy a visa are the “best” candidates.
Wow! I thought I was going to have to wade through Kristian’s article noting just how many blatant throwaway, blinkered, erroneous attacks he would make, and then it turned it out he had only written an introduction. Any pretense at being a thinker certainly isn’t in evidence here. Most grating = Rise of Asian Tigers, therefore there was / is no starvation in the Third World. (Who compares people to locusts? It’s the people who think markets can prevent starvation, eg Milton Friedman, not people who are fearful for the basic human rights of all peoples). Wrong Kristian! Massive UN aid, charities, state aid, other aid, still flows constantly to Third World areas, has done since the creation of the UN actually, a long time before Starvation in Cambodia in the 70s and the African famines of the 80s for example, which EVERYONE knows about. Maybe not you. Huge planeloads of grain are shipped all over the place. Often to sort out problems caused by your markets. Find out how the world works, and work harder, sock puppet!
It would be good to have a moderated even-tempered debate on issues, then visitors might learn something. As far as I can see this is all heat and no light.