Tuesday, May 13, 2008

Herman Daly On Counterproductivity

"Once we have gone beyond the optimum, and marginal costs exceed marginal benefits, growth will make us worse off. Will we then cease growing? On the contrary, our experience of diminished well-being will be blamed on the traditional heavy hand of product scarcity, and the only way the orthodox paradigm knows to deal with increased scarcity is to advocate increased growth - this will make us even less well off and will lead to the advocacy of still more growth! Sometimes I suspect that we are already on this 'other side of the looking glass,' where images are inverted and the faster we run, the 'behinder' we get."
- Herman Daly, Steady State Economics (San Francisco, Freeman, 1977) p. 101.

Over thirty years ago, Daly already suspected that we had reached the point where growth was diminishing our well being. Today, it should be clear that we have reached this point.

(Incidentally, Daly's analysis of counterproductivity is a bit different than my analysis in The End of Economic Growth. Daly points out that, as output increases, marginal utility declines and marginal total cost increases. I say that, as output increases, marginal utility declines and marginal external cost remains roughly the same. Both analyses are valid, but I prefer to talk about marginal external cost, because it lets me focus on the cost of environmental problems, while Daly focuses on the total cost of production plus environmental problems.)


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