Brian Czech, Center for the Advancement of the Steady State Economy A Critical Role for Physicists In Steady State Economics.

Brian Czech,

Center for the Advancement of the

Steady State Economy

A Critical Role for Physicists In Steady State Economics

www.steadystate.org

• Increase in the production and

consumption of goods and services in

the aggregate

• Typically expressed in terms of GDP

• Entails increasing population and/or

per capita consumption

Economic Growth

• Increase in the production and

consumption of goods and services in

the aggregate.

Economic Growth

Economy as 800-Pound Gorilla

Coming out of the Corner and Growing

Not Economic Growth

Economic Growth

Speaking of Wildlife…

Urbanization

Agriculture

Water diversions (e.g., reservoirs)

Recreation, tourism development

Pollution

Domestic livestock, ranching

247

205

160

148

143

136

Czech et al. 2000. Bioscience 50(7):593-601.

Causes of Endangerment

Mineral, gas, oil extraction

Non-native species

Harvest

Modified fire regimes

Road construction/maintenance

Industrial development

134

115

101

83

83

81

Causes of Endangerment (cont.)

Czech et al. 2000. Bioscience 50(7):593-601.

Quick Note About Energy Abundance

Economy of Nature

Producers (i.e., plants)

Consumers

Super-Carnivores

Serv

iceProviders

Human Economy

Producers (i.e., ag/ext.)

HeavyManufacturing

Light Manufacturing

Serv

iceProviders

Human-Inclusive Economy of Nature

Plants

Animals

Humans

Serv

iceProviders

With Economic Growth

Plants

Animals

Human EconomySe

rvic

eProviders

Time

GD

PK

Natural capital allocated to human economy

Natural capital allocated to economy of nature

Macro-Allocation

Czech 2000. Wildlife Society Bulletin 28(1):4-14.

K

GD

P

...maintain steady state economy sufficiently below K.

To conserve biodiversity...

Therefore

Czech 2000. Wildlife Society Bulletin 28(1):4-14.

Time

What might you say in response to this?

“But what about technological progress?”

Czech, B. 2008. Prospects for reconciling the conflict

between economic growth and biodiversity

conservation. Conservation Biology 22(6):1389-

1398.

Also see…

Supply Shock: Economic Growth at the Crossroads

(Chapter 7)

• Solow model

• Lucas model

• Romer model

Y = (K, L)

Economic Growth Theory

• 1956, “A Contribution to the Theory of

Economic Growth”

• Technological progress

• “Manna from heaven”

Robert Solow

Solow Model

• 1990, “Endogenous Technological Change”

• Research and development

• Patenting

Paul Romer

Romer Model

http://www.stanford.edu/~promer/

KT

GDP



X natural capital allocable

Time

KU

Macro-Allocation Revisited

Capital-free growth zone KT1

KT2

GDP

Time

KU



X natural capital (still) allocable

Reconciliation Hypothesis

1. Fixed amount of energy, matter (E = mc2)

2. Entropy; i.e. limits to efficiency in the

economic production process

Thermodynamics

• Help dispel myth of perpetual growth with

implications from thermodynamics.

• Expand academic niche.

– Economics

– Ecology

– “Sustainability Science”

• Popularize findings and “don’t be such a

scientist.”

Critical Role for Physicists

• R&D

Source of Technological Progress

R&D

_______

Sources of Technological Progress

R&D

Profits


Profits

R&D

Competitive Advantage

R&D

Profits


R&D

????????????????

Profits


R&D

Profits

Economies of scale


________________????????????????

• Increased efficiency but necessarily with increased production using existing technology

• Applicable at all levels in the economy (micro to macro and local to global)

Economies of Scale

Economies of Scale

• Economic growth requires technological progress.

• Technological progress requires economic growth.

• No reconciling the trade-off between economic growth and biodiversity.

So, “What about technological progress?”

Capital-free growth zone KT1

KT2

GDP

Time

KU



X natural capital (still) allocable

Reconciliation Hypothesis

X/2 re-allocated KT2

GDP

Time

KU



X/2 natural capital allocable

Hypothesis Refuted

KT1

Why Must We Have Physics – and Physicists –

for Steady State Economics?

Neoclassical vs.Ecological Economics

Business Household

Neoclassical Economy

Business Household

With Economic Growth

“Natural resources originate from the mind, not the ground, and therefore are not depletable.”

Robert L. Bradley, Jr., 2002 Julian Simon Award Acceptance Speech

How did this happen?

History and political economy…

• Henry George

• Progress and Poverty, 1879• George vs. land barons

• Incipient tax code at stake

• Establishment of American economics

• Y = (K, L)

(Mason Gaffney, 1994)

The Corruption of Economics

“relic of anti-George”

Czech, B. 2009. Ecological Economics 68:2193-2197.

Or see chapter 4 of Supply Shock.

For more on this, google:

• Ecological economics movement

• Laws of thermodynamics

• Principles of ecology

Herman Daly

Ecological Economics

Daly CostanzaMartinez-Alier

Scale Distribution

Allocation(Sustainability) (Justice) (Efficiency)

Themes and Leaders

Heat

NaturalCapital

PollutantsNatural

Capital

Heat

NaturalCapital

PollutantsNatural

Capital

• What is the optimum scale, all things considered?• Is GDP a reliable measure of scale?• Could ecological microeconomics lead to optimal

scale?

A Few Words About Optimum Scale

GD

PK

Unsustainable

Unsustainable

Sustainable

GD

PK

Unsustainable

Unsustainable

Optimal?

GD

PK

Unsustainable

Unsustainable

Anthropocentric Optimum

Biocentric Optimum

GD

PK

Unsustainable

Unsustainable

Optimum

Democratic

Anthropocentric Optimum

Biocentric Optimum

Hum

an W

elfa

re

GDP

Optimum

All Things Considered

Optimum

UneconomicGrowth

All Things ConsideredH

uman

Wel

fare

GDP

MU

GDP

MD

UOptimal Scale

GDPOpt

Modified from Daly and Farley 2010, Figure 2.2.

0

MU = MDU

MDU = ∞

MU = 0

MU

GDP

MD

UEconomic Growth

0Uneconomic

Growth

GDPOpt

Some Useful Metrics• GDP (as indicator of scale, not welfare)• “Greened” (less-gray) GDPs • Ecological Footprint • Genuine Savings• Living Planet Index• Millennium Assessment Accounts• Measure of Economic Welfare • Human Development Index • Index of Sustainable Economic Welfare • Genuine Progress Indicator• Gross National Happiness

Spheres of Sustainability

Ecological

SocialEconomic

Bigger Picture = Integration

Ecological

Economic Social

Ecological Economics

Ecosystem

Economy

Society

Emphases of Indices

LPI

MEA

MEW HDI

ISEW

GPIGSGGDP

GDP

EF

GNH

Emphases of Indices

LPI

MEA

MEW HDI

ISEW

GPIGSGGDP

GDP

EF

GNH

US

40

90

140

1940 1960 1980 2000

UK

40

90

140

1940 1960 1980 2000

Germany

40

90

140

1940 1960 1980 2000

Austria

40

90

140

1940 1960 1980 2000

Netherlands

40

90

140

1940 1960 1980 2000

Sweden

40

90

140

1940 1960 1980 2000

Chile

40

90

140

190

240

1940 1960 1980 2000

Indices of ISEW (Index of SustainableEconomic Welfare) and GDP (1970 = 100)

Compliments of R. Costanza, Gund Institute for Ecological Economics

Psychic Welfare

GDP/capita

Hap

pine

ss/S

atis

fact

ion

Inglehart and Klingemann (2000)

What About Valuing Ecosystem Services?

• Carbon sequestration

• Water purification

• Hurricane buffering

• Pollination

• Etc.

Ecological Microeconomics

“One of the most rapidly growing markets related to ecosystem services is the carbon market… It is speculated that this market may grow to some $44 billion by 2010.”

2005 Millennium Ecosystem Assessment

Ecosystem Services

S

P

Supply

Ecosystem Services

D

S

P

Supply and Demand

Ecosystem Services

S

P

Supply

Trophic Theory of Money

Producers (i.e., ag/ext.)

HeavyManufacturing

Light Manufacturing

Serv

ice

Providers

Czech 2000. Shoveling Fuel for a Runaway Train.

Limits to Real Money

Plants

Animals

Human EconomySe

rvic

eProviders

Natural capital

D

S1S2

P1

Trophic Conundrum

P2

More is needed, less is had.

So how do we pay increasing amounts for ecosystem services?

• By liquidating increasing amounts of natural capital to generate the money.

• That is, by liquidating the funds of ecosystem services we are “investing” in.

Ecological Micro and Macro

• Micro alone leads to the trophic conundrum.

• Macro alone is tough political sledding.

• Micro and macro: two tracks for the sustainable train.

Implications for International Diplomacy

Steady Statesmanshipv. “Lebensraum”

United Nations: A Starting Point for Steady Statesmanship?

UNEP World Conservation Monitoring Centre; Global Footprint Network. 2004.

Use Steady State Economics and the Ecological Footprint

“Rich Nations Gobbling Resources at an Unsustainable Rate”

OAKLAND, California, March 30, 2004 (ENS) – Excessive consumption by the world’s richest nations is making life even more difficult for the world’s least fortunate, according to a new report by Redefining Progress… the wealthiest nations are depleting global resources at an unprecedented rate…

“Backtracking”

What else can a physicist do?

• Sign the position on economic growth.

• Write a piece for the Daly News.

• Draft a briefing statement.

– Physical limits to growth

– Implications of thermodynamics

– ???

• Join the Speakers Network.

• Start a Princeton chapter.

• Be CASSE’s Physics Liaison.

• Please join CASSE as regular or student member.

Collaboration with CASSE

•Wendell Berry•Herman Daly•Jane Goodall•Buzz Holling•Richard Lamm•Chris Matthews

•David Orr•Jonathon Porritt•Vandana Shiva•Gus Speth•David Suzuki•E.O. Wilson

Some CASSE Signatories

(Needed: Physics Dignatory)

• Establish or engage steady state economics sections or

working groups in the xyxy.

• Organize conferences and symposia.

• Write articles and books.

• Get xyxy to adopt a position on economic growth.

• Give academic and public talks and interviews; lectures,

seminars, Rotary functions, brown-bags, radio

interviews, etc…

• Support efforts occurring in other professional societies.

Within the Physics Profession

Scientific Societies

NGOs, Agencies

Publics

Polities

“Small-Money Model” of Political Economy

In conclusion…

www.steadystate.org

Thank…You!

Acknowledgments: Lockheed Martin

GDP and Energy

Brian Czech, Center for the Advancement of the Steady State Economy A Critical Role for Physicists In Steady State Economics.

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