Herman E. Daly: A Steady-State Economy

Knowledge, unlike throughput, is not divided in the sharing, but multiplied. Once knowledge exists, the opportunity cost of sharing it is zero and itsallocative price should be zero. International development aid should more and more take the form of freely and actively shared knowledge, along with small grants, and less and less the form of large interest-bearing loans. Sharing knowledge costs little, does not create unrepayable debts, and it increases the productivity of the truly rival and scarce factors of production. Existing knowledge is the most important input to the production of new knowledge, and keeping it artificially scarce and expensive is perverse. Patent monopolies (aka “intellectual property rights”) should be given for fewer “inventions”, and for fewer years.

What would happen to the interest rate in a SSE? Would it not fall to zero without growth? Not likely, because capital would still be scarce, there would still be a positive time preference, and the value of total production may still increase without growth in physical throughput—as a result of qualitative development. Investment in qualitative improvement may yield a value increase out of which interest could be paid. However, the productivity of capital would surely be less without throughput growth, so one would expect low interest rates in a SSE, though not a zero rate.

Would it be possible to have qualitative improvement (e.g. increasing efficiency) forever, resulting in GDP growth forever? GDP would become ever less material-intensive. Environmentalists would be happy because throughput is not growing; economists would be happy because GDP is growing. I think this should be pushed as far as it will go, but how far that is likely to be? Consider that sectors of the economy generally thought to be more qualitative, such as information technology, turn out
on closer inspection to have a substantial physical base, including a number of toxic metals.