Herman E. Daly: A Steady-State Economy

Following Mill we might define a SSE as an economy with constant population and constant stock of capital, maintained by a low rate of throughput that is within the regenerative and assimilative capacities of the ecosystem. This means low birth equal to low death rates, and low production equal to low depreciation rates. Low throughput means high life expectancy for people and high durability for goods. Alternatively, and more operationally, we might define the SSE in terms of a constant flow of throughput at a sustainable (low) level, with population and capital stock free to adjust to whatever size can be maintained by the constant throughput beginning with depletion and ending with pollution.

How could we limit throughput, and thus indirectly limit stocks of capital and people in a SSE? Since depletion is spatially more concentrated than pollution the main controls should be at the depletion
or input end. Raising resource prices at the depletion end will indirectly limit pollution, and force greater efficiency at all upstream stages of production. A cap-auction-trade system for depletion of basic resources, especially fossil fuels, could accomplish a lot, as could ecological tax reform, about which more later.

If we must stop aggregate growth because it is uneconomic, then how do we deal with poverty in the SSE? The simple answer is by redistribution—by limits to the range of permissible inequality, by a
minimum income and a maximum income. What is the proper range of inequality—one that rewards real differences and contributions rather than just multiplying privilege? Plato thought it was a factor of four.