Steady State Economy: A Constrained View of the World

On Friday, the fourteen of us each presented a topic related to sustainable development to discuss and share views with the whole class. I picked the topic of the steady state economy because I’m interested economic principles and how effective they are in the current world and could be in the future. I see the steady state economy as a strong model of sustainable development because it is scientifically sound and logically infallible. However, I don’t view it as a preferable solution in the current world because it is highly idealistic and realistically unattainable.

My understanding of the steady state economy leans more towards the biophysical limits of economic growth than the ethnosocial limits. I do think that social influence plays a role in economy. However, taking into account that nature can exist without human while human cannot survive without nature, I believe that nature is the fundamental rule that everything has to follow.

I structured my presentation by deviding the topic into three parts. Please refer to my PowerPoint for more details of my presentation: Enough is Enough

Would you ever be able to see grass this green, sky this blue in a world of pollution and unlimited extraction of natural resources?-Castelgrande

1. Glancing through the history of the theory of SSE, which helps us understand from where and how do we get to this model.Developing from the everlasting growing cycle of production and consumption which sees the world as a infinite vault of resources, to the I=PAT formula which fails to consider the interrelation between the variables, to Solow’s substitutability model which is considered the weak sustainable position, Czech and Daly’s steady state economy model took shape in a constrained view of the natural resources lining up with the fundamental economic approach to the world.

http://www.storyofstuff.org/movies-all/story-of-stuff/

Here is an interesting video called Story of Stuff addressing the fallacy of the everlasting growing cycle of consumption and production and sharing the standpoint of steady state economy model.

Is it possible to turn this inconquerable fortress back into cliff rock without consuming new energy?-Picture taken at the Catselgrande at Bellinzona, Ticino

2. Understanding SSE through the fundamental rules of thermodynamics, which tells us why there is limitation to economic growth, what is the limitation, and how does it affect the economy.

Since neither matter or energy can be created or destroyed, the nature of the earth as a closed system sets the ecological boundary of the economic growth. The spontaneous dissipation of energy stored in any product tells us the moving direction from product to waste can never be reversed. Therefore it is neccesary and pressing to keep the throughput of raw materials and waste at levels within the regenerative and assimilative capacity of the ecosystem.

Will u approve it if the policy maker raises the price of this small kiwi gelato to 100 CHF according to the SSE model? Even if it is truly flavorful and yummy

3. Proposing possible solutions building upon SSE, and discuss the possibility of their implementation.

Putting our current economy into context of the SSE model, we should stop growing at the point where production function meets steady-state capital-output ratio, which means one more unit of production will not be efficient and productive therefore is not worth producing. The solution based on this result we want to achieve varys from population control, raising prices of the products to reflect their real worth, and abandon globalization. However, these solutions will induce more problems in our real world. For instance, the strategy of raising prices falls into the category of internalizing economic externalities, which most likely leads to major inflation that might be out of control.

My interpretation of the difficulty of applying the SSE model to real life is that it requires a fundamental change in the mindset of economics, consumers, and government from a unconstrained view of the world to a constrained one. Basically everybody needs to follow the model to make it work. If there is one exception, the whole system is going to collapse due to the dominos effect.

Reflecting on my presentation of SSE, I think I did a good job in explaining the concept of SSE model in a simple and clear fashion by using analogy between physics principles and economic theories. On the other hand, integrating my personal beleif of the almighty nature into the presentation, I introduced the topic in a very subjective way instead of objectively stating the fact. While touching the topic through a particular angle, in this case looking at the SSE model from a biophysical standpoint, does help make the presentation clear and vivid, it also conveys my bias on the topic to my audience. As a result, my audience was not able to get the whole picture of the topic from my presentation. If I were to do this presentation again, I would include more of the ethnosocial aspect of the problem when describing the model in order to lay a solid foundation for further discussion. And I would move my own thoughts to the end of the presentation as a little teaser that might lead to more thoughts on the topic from the audience. Overall, I think it was a successful presentation and prefect timing.

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