{"id":1478,"date":"2011-04-04T00:00:38","date_gmt":"2011-04-04T04:00:38","guid":{"rendered":"http:\/\/www.synapse9.com\/signals\/?p=1478"},"modified":"2011-04-04T00:00:38","modified_gmt":"2011-04-04T04:00:38","slug":"the-economic-meaning-of-steady-state","status":"publish","type":"post","link":"https:\/\/synapse9.com\/signals\/the-economic-meaning-of-steady-state\/","title":{"rendered":"The economic meaning of \u201csteady state\u201d"},"content":{"rendered":"

Herman Daly offers his view of what a \u201csteady state economy\u201d is and how to use the term in a\u00a0guest blog post on the Capital Institute<\/a> website. I agree that understanding the meaning is more important than exactly what name you use, but there are important types if \u201csteady states\u201d not yet being discussed.<\/em><\/p>\n

My comment, posted there and below, is for helping distinguish between the \u201clively\u201d and \u201clifeless\u201d forms of steady states that are possible for economies in nature. Of course, I raise the curiously overlooked concise meaning that Keynes would have given the type of lively and conflict free stable state of healthy economies too, as he discussed in \u201cThe General Theory\u2026\u201d but was misunderstood.<\/em><\/p>\n

_________<\/p>\n

Finding the Fitting Name<\/p>\n

I\u2019d agree with Daly that ultimately what you call the ideal kind of steady state for an economy matters less than whether what you achieve is something close to an ideal steady state. I study the physics of \u201copen systems\u201d, a.k.a. natural economies, and there are clearly discernible \u201cideal\u201d steady states one might seek to achieve.<\/p>\n

There are the ecosystems that while relatively stable and full of competing populations also display such deep and diverse complementary relationships between populations that the whole system operates with a relatively low level of internal conflict.<\/p>\n

That\u2019s also a bit like the kind of climax for systems that work as a whole, like for the relationships between the cells and organs of most any organism. Our own bodies stop growing with the lungs not being in much conflict at all with the heart they wrap around and with which they had competed for space.<\/p>\n

In either case you\u2019d call the climax economy that these natural systems represent as quite \u201clively\u201d. The term \u201csteady state\u201d is more often used for systems that are not lively at all, and it takes effort to counter that characterization.<\/p>\n

Still \u201csteady state\u201d is a good term in the sense that the popular understanding of the dynamic states possible for our economy is largely limited to either \u201cexponential growth\u201d or \u201cmisery\u201d. So discussing \u201csteady state\u201d economies of any kind enriches the popular vocabulary.<\/p>\n

My concern would be that the discussion of the many different ways growth can come to climax, and result in a non-growing economy, is not addressing the range of various alternative models for halting endless growth. If you think of an economy as a \u201cvehicle\u201d there\u2019s a big difference between the various ways to keep it from attempting to achieve infinite speed.<\/p>\n

You can let it run out of gas, run into a tree or other obstacle or calamity, steer it up an ever steeper mountain trail, slam on the brakes, pour sand in the fuel lines or take your foot off the gas. The latter would result in the fewest complications, from a mechanics of systems view.<\/p>\n

That \u201clow cost option\u201d also seems to be the one that regularly doesn\u2019t get discussed as well. It\u2019s as if a pause in devoting more and more resources to accelerating the economy would bring about the \u201cmisery\u201d result of the \u201cgrowth or misery\u201d equation the traditional discussion starts with.<\/p>\n

That \u201ctaking our foot off the gas\u201d seems like the less stressful solution, but not getting discussed in deference to the old myths we\u2019re trying to overturn, seems confirmed by its also being the subject of Chapter 16 of Keynes\u2019 \u201cThe General Theory\u2026\u201d(1), but which neo-classical economists ridiculed as a \u201cfallacy\u201d. I think the reason for that reaction was that what Keynes proposed would mean responding to stress on the system by relieving the pressure on it to grow, resulting in a low stress type of steady state economy.<\/p>\n

He pointed out that (to paraphrase):<\/p>\n

[If nominal interest rates tend to zero it indicates there is too much financial savings, with little productive to do, and so accumulates growing deflationary pressure on the productive economy instead].<\/p>\n

See 1) the text of Chapter 16<\/a><\/span> for Keynes’ more convoluted way of saying it in The General Theory, \u00a02) my notes on his telling it as a fable of sharing food\u00a0Elijah,\u00a0“The widow’s cruse”<\/a><\/span>. \u00a0 A site\u00a0search gives my other writings on Keynes<\/a><\/span> .<\/p>\n

There is also a longer list of harms caused by having ever growing unproductive investment. \u00a0 We\u2019re all now becoming painfully aware of them. We should try to understand that those are what Keynes was referring to \u201cstandard of life sufficiently miserable to bring savings to zero\u201d[(1) p 218].<\/p>\n

he predicted his own model for stable \u00a0economic growth would completely fail<\/h3>\n

The real issue and point of his discussion is that the use of the earnings from savings to increase savings is the economy\u2019s accelerator of growth, but only when those savings are put into productive investments.<\/p>\n

How savings are directed to investments is the economy\u2019s \u201csteering wheel\u201d, its means of deciding what to change in our uses of the earth. The question Keynes raises then, is how do we choose to limit investment to what will continue to be profitable, to maintain a healthy interest rate.<\/p>\n

We don\u2019t know how to do that, I guess that\u2019s clear, but maintaining the profitability of the economy in the long term also isn\u2019t such a fearful objective in the end. It\u2019s a value that everyone shares, for one. I think what\u2019s most needed is a practical way to discuss the practicalities, more than competing goals.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Herman Daly offers his view of what a \u201csteady state economy\u201d is and how to use the term in a\u00a0guest blog post on the Capital Institute website. I agree that understanding the meaning is more important than exactly what name you use, but there are important types if \u201csteady states\u201d not yet being discussed. My … Continue reading The economic meaning of \u201csteady state\u201d<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","footnotes":""},"categories":[3,6,7,8],"tags":[],"class_list":["post-1478","post","type-post","status-publish","format-standard","hentry","category-among-best-2","category-mail","category-econn","category-theory"],"_links":{"self":[{"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/posts\/1478","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/comments?post=1478"}],"version-history":[{"count":0,"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/posts\/1478\/revisions"}],"wp:attachment":[{"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/media?parent=1478"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/categories?post=1478"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/tags?post=1478"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}