There is no economy without environment

(The Conversation is an independent and nonprofit source of news, analysis and commentary from academic experts.)

John D. Erickson, University of Vermont

(conversation) Herman Daly had a flair for the obvious. When the economy creates more costs than benefits, he called it “economic growth.” But you won’t find that conclusion in an economics textbook. Even suggesting that economic growth may cost more than it costs can be seen as economic heresy.

The rebel economist, known as the father of ecological economics and a key architect of sustainable development, died on October 28, 2022 at the age of 84. He spent his career questioning economics as disconnected from its environmental foundations and moral compass.

In an era of climate chaos and economic crisis, his ideas that inspired the Movement to Live in Our Means are increasingly essential.

The seeds 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” set against the post-Great Depression poverty and deprivation.

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

But Daly was a voracious reader, a side effect of having polio as a boy and getting lost in the Texas football craze. Outside the scope of prescribed textbooks, he found the history of broader economic thought in the rich philosophical debates on the function and purpose of the economy.

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In contrast to the precision of market equilibrium sketched on classroom blackboards, the real-world economy was messy and political, designed by those in power to pick winners and losers. He argued that economists should at least ask this question: Growth for whom, for what purpose and for how long?

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 nature but of ourselves.” By then he was a Ph.D. At Vanderbilt University he was already very skeptical of the hyper-individualism baked into Latin American development and economic models. In Carson’s article, the conflict between a growing economy and a fragile environment was stark.

After a fateful class with Nicolas Georgescu-Roegen, Daly’s transformation was complete. Romanian-born economist Georgescu-Rogen dismissed the free-market fairy tale of the pendulum in search of natural equilibrium. He argued that the economy was like an hourglass, a one-way process of converting valuable resources into useless waste.

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

Sketches and tables of the economy as a metabolic process, wholly dependent as a source of subsistence and a sink for waste, were the blueprint for a revolution in economics.

Economics of the Whole World

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Daly spent the rest of his career drawing boxes in circles. In what he called a “pre-analytical vision,” the economy—the box—was seen as a “fully owned subsidiary” of the environment, Circle.

When the economy is small relative to the environment involved, a focus on the efficiency of a growing system merits. But Daly argued that in a “perfect world,” an economy that maximizes 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, Daley took the box-in-circle framing to its logical conclusion in “steady-state economics.” Daly argued that growth and exploitation are prioritized in the competitive, pioneering phase of the youth ecosystem. But with age comes a new focus on stability and support. His steady-state model shifted the goal away from the blind expansion of the economy and toward the purposeful improvement of the human condition.

The international development community took notice. After the United Nations’ 1987 publication of “Our Common Future,” which created the “sustainable” development goals, Daley saw a window for reforming development policy. He left the security of tenure at LSU to join a rogue group of environmental scientists at the World Bank.

For the better part of six years, they worked to support the ruling economic logic of treating “the earth like a liquidation business.” He often butted heads with senior leadership, most famously with Larry Summers, then the bank’s chief economist, who publicly rejected the Daily’s question about whether the size of a growing economy relative to a given ecosystem mattered. The future US Treasury Secretary’s answer was short and dismissive: “Not the right way to look at it.”

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But by the end of his tenure there, Daley 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 193 countries’ UN Sustainable Development Goals, the “Plan of Action for People, Planet and Prosperity.”

In 1994, Daly returned to academia at the University of Maryland, and in later years his life’s work was recognized around the world, including Sweden’s Wright Livelihood Award, the Netherlands’ Heineken Prize for Environmental Science, Norway’s Sophie Prize, Italy’s medal. Also the Presidency, Japan’s Blue Planet Prize and Adbusters Person of the Year.

Today, the imprint of his career can be found far and wide, focusing on real progress indicator measures of the economy, the new donut economics framing of social floors on the ecological roof, global degree programs in ecological economics and a vibrant decline movement. Just transition to the right-sized economy.

I had known Herman Daly for two decades as a co-author, mentor, and teacher. He always made time for me and my students, most recently writing the foreword to my upcoming book, “The Progress Illusion: Reclaiming Our Future from the Fairy Tale of Economics.” I will always be grateful for his inspiration and courage, as he said, “Tomorrow, ask the honest questions” and then “not be satisfied until you get the answers.”

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