A steady-state economy is an economy made up of a constant stock of physical wealth (capital) and a constant population size. In effect, such an economy does not grow in the course of time. The term usually refers to the national economy of a particular country, but it is also applicable to the economic system of a city, a region, or the entire world. Early in the history of economic thought, classical economist Adam Smith of the 18th century developed the concept of a stationary state of an economy: Smith believed that any national economy in the world would sooner or later settle in a final state of stationarity.

Historical background

For centuries, economists and other scholars have considered matters of natural resource scarcity and limits to growth, from the early classical economists in the 18th and 19th centuries down to the ecological concerns that emerged in the second half of the 20th century and developed into the formation of ecological economics as an independent academic subdiscipline in economics.

Concept of the stationary state in classical economics

From Adam Smith and onwards, economists in the classical period of economic theorising described the general development of society in terms of a contrast between the scarcity of arable agricultural land on the one hand, and the growth of population and capital on the other hand. The incomes from gross production were distributed as rents, profits and wages among landowners, capitalists and labourers respectively, and these three classes were incessantly engaged in the struggle for increasing their own share. The accumulation of capital (net investments) would sooner or later come to an end as the rate of profit fell to a minimum or to nil. At that point, the economy would settle in a final stationary state with a constant population size and a constant stock of capital.

Degrowth

In his article on Economic de-growth vs. steady-state economy, Christian Kerschner has integrated the strategy of declining-state, or degrowth, with Herman Daly's concept of the steady-state economy to the effect that degrowth should be considered a path taken by the rich industrialized countries leading towards a globally equitable steady-state economy. This ultra-egalitarian path will then make ecological room for poorer countries to catch up and combine into a final world steady-state, maintained at some internationally agreed upon intermediate and 'optimum' level of activity for some period of time — although not forever. Kerschner admits that this goal of a world steady-state may remain unattainable in the foreseeable future, but such seemingly unattainable goals could stimulate visions about how to better approach them. This book is the basis for the theory of overdevelopment: the idea that the global north -- the "rich" countries -- are too developed, which increases humanity's ecological impact and creates problems in both overdeveloped and underdeveloped countries.

Conceptual and ideological disagreements

Several conceptual and ideological disagreements presently exist concerning the steady-state economy in particular and the dilemma of growth in general. The following issues are considered below: The role of technology; resource decoupling and the rebound effect; a declining-state economy; the possibility of having capitalism without growth; and the possibility of pushing some of the terrestrial limits into outer space.

In 2019 a research, presenting an overview of the attempts to achieve constant economic growth without environmental destruction and their results, was published. It shows that by the year 2019 the attempts were not successful. It does not give a clear answer about future attempts.

Herman Daly's approach to these issues are presented throughout the text.

Role of technology

Technology is usually defined as the application of scientific method in the production of goods or in other social achievements. Historically, technology has mostly been developed and implemented in order to improve labour productivity and increase living standards. In economics, disagreement presently exists regarding

the role of technology when considering its dependency on natural resources:

  • In neoclassical economics, on the one hand, the role of 'technology' is usually represented as yet another factor of production contributing to economic growth, like land, labour and capital contribute. However, in neoclassical production functions, where the output of produced goods are related to the inputs provided by the factors of production, no mention is made of the contribution of natural resources to the production process. Hence, 'technology' is reified as a separate, self-contained device, capable of contributing to production without receiving any natural resource inputs beforehand. This representation of 'technology' also prevails in standard mainstream economics textbooks on the subject. Naudé refers to the analysis by Thomas Piketty (2014), arguing that low growth leads to very substantial inequality in the distribution of wealth over the long run. According to Naudé economic stagnation makes societies less innovative and less resilient, which hinders the timely development of the technological and organizational innovations needed to prevent ecological overshoot and tackle climate change.

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  • CASSE, Center for the Advancement of the Steady State Economy.
  • ISEE, The International Society for Ecological Economics.
  • Steady State Revolution. Fighting for a Sustainable World with a Steady State Economy.
  • Post Growth Institute. Creating global prosperity without economic growth.