Is the world finally ready to listen to Herman Daly, father of ecological economics?

The first mind Herman Daly changed was his own.

When he started studying economics in the 1950s at Rice University, in his hometown of Houston, he was a “growther” — just like pretty much every other economist. The rules were simple: You keep producing more things for people to use, and the market system fairly distributes these things; wealth trickles down and everyone’s life gradually gets better.

And this was great news to Daly because making the world better was what he deeply wanted to do. He was — still is — a man of principle. And economics seemed to be not just a lens to study human well-being but a lever to influence it. Here was a tool to salve the crushing poverty he’d seen in his travels through Mexico and northeastern Brazil. To lift the world’s poorest out of their misery and increase aggregate wellbeing. Open borders, free trade, fast money. You keep growing the pie until there’s enough for everyone — and you just have to be sure the pie is growing faster than the human population.

But a funny thing happened on the way to a Ph.D in economics, and subsequent teaching posts in the US, Brazil and Australia: Daly realized he didn’t believe what he believed.

Neoclassical economics, it had dawned on him, was a bogus construction, a castle built on quicksand and ethically questionable to boot, measuring the wrong things in the wrong way. It’s small-minded in several senses: it doesn’t operate at the level of the planet or the human soul.

In retrospect it’s a good thing that “the scales fell from my eyes gradually,” as he puts it, and not suddenly. Because then the jig would have been up. He never would have gotten his PhD at Vanderbilt and certainly never been granted tenure at Louisiana State University. He was inside the gates before the administration knew what they had on their hands.

Daly was — still is — a different kind of cat. He has an almost Platonic idea of what an economist could and should be — a student not just of markets and supply curves but of philosophy and religion and ethics. He doesn’t even like to call it “economics.” Too bloodless and mechanical. He prefers “political economy,” which implies the swish and swack of real humans working things out. He calls himself an ecological economist, but it took some serious cognitive gymnastics to count himself part of this strange field at all. Especially after he found himself, in 1988, in the institutional belly of the beast.

That year the World Bank had hired him as a senior economist. It was a weird fit. Daly was crossways with a lot of the bank’s policies: full-guns global free trade and open borders and frictionless capital mobility. (Daly’s view is that you ought to double down on domestic production and develop efficient internal markets first — and then start moving the chips to the international table.) But Daly’s job was pretty specific. Lots of countries wanted World Bank funding. Daly was to evaluate them in terms of their environmental sustainability.

One day a draft report came across his desk. There was prominent diagram labeled “the economy.” An arrow entered from the left — “inputs” — and exited on the right — “outputs.”

Simple.

Too simple.

Daly scratched his head. It doesn’t say where the inputs come from, he thought. And it doesn’t say where the outputs go. There was no indication that all this was taking place within a finite Earth. It might have been titled Economics in Space. Or Economics in Fantasyland. In a truer telling, readers would understand that the economy’s more like a hot-dog eating contest. There are physical limits to the stomach. Beyond a certain point not even Joey Chestnut can jam another frank in there without it — and likely a lot more — coming back up.

Daly looked again at the diagram. What would Kenneth Boulding — an alternative economist Daly admired — have made of this? Or Nicholas Georgescu-Roegen, his rock-star thesis advisor at Vanderbilt? Not to mention Garrett Hardin or Paul Ehrlich or Rachel Carson or Daly’s other heroes outside of economics, who maybe had a clearer view of things from their remove. By this point Daly had little doubt of one thing: for the field — let alone humanity itself — to survive, economics would have to re-invent itself.

He took out a pen and drew a circle around the “input/output” arrow, to indicate the finite limits of Planet Earth. Then he sent this comment back to the higher-ups. Then he waited to see second version of the diagram would look like.

When it came back, he saw they’d put a rectangular frame around the diagram, to pretty it up. No circle. Nothing about inputs and outputs.

Daly wrote a long email explaining what he was trying to say.

When the final version came back to him, the whole diagram was gone. It was like he’d been suggesting a geometric dimension that the Flatlanders see.

But if the World Bank was a day late and a dollar short, that’s because it was just amplifying the same messages students were learning in freshman economics. Daly was asking bigger questions, the kind the social sciences should ask but often don’t. What is life all about? It can’t just be procreating enthusiastically and getting good deals at Banana Republic. Is there nothing loftier going on in the minds of people as they navigate the choice points in their day? On what grounds are these so-called “rational actors” making these decisions? Is anyone sitting at the adult table?

Daly and his friend and colleague, the theologian John Cobb, had just published a deeply ethics-based book called For the Common Good ...Redirecting the Economy toward Community, the Environment and a Sustainable Future.

As the two clarified each other’s vision of the ethical life, they realized it absolutely collided with economics as it was being taught. Neoliberal economics, Daly reasoned, was at once too materialistic and not materialistic enough. But that wasn’t the biggest problem.

The biggest problem was that obsession with growth.

According to the dogma, “enough” is not enough. Humans are naturally insatiable. We want more and more, so we are continually dissatisfied. (Wait, if that’s true, there would be no need for advertising to convince us that there is no such thing as enough, to keep the dissatisfaction refreshed, Daly mused.) Growth is economists’ get-out-of-jail-free card. It’s a cover for never having to face the messy facts of inequity and the conflict it creates — because as long as everything keeps growing, per the theory, everyone will have enough so inequity won’t be an issue.

Actually, Daly said, enough is enough. And he set out to prove it.

The old measuring stick

Western economists boldly quant out progress and prosperity the old-school way. The metric is GDP: gross domestic product. That’s basically the sum total of goods and services a nation is producing. Problem is, there’s plenty that doesn’t show up in the accounting, like things that impact the environment, local communities and quality of human life just generally. And a lot of what does show up in the “goods” column are actually “bads.” Daly remembered a line of Ken Boulding’s. “He said that Gross National Product oughtta be called Gross National Cost because so much of it is a cost.” As a measure of “prosperity,” GDP — was as flawed as a bank balance that only shows the cheques you got, not the cheques you wrote.

(A favorite analogy of Daly’s is the difference between a snowball rolling down a hill and an embryo maturing in utero. One’s merely getting bigger, while the other is getting bigger and also developing. That difference is everything. And it’s a difference GDP can’t see.)

In a perfect world, Daly reckoned, this would be law: rich countries don’t get to grow their GDP anymore. Poor countries get a little more slack. But nobody is allowed to take their eye off the ball of planetary limits.

“The world cannot stand another decade of economists who act as if nothing were sacred but economic growth,” Daly pronounced at one point.

To be clear, this man is no firebrand. He’s a mild-mannered, straight-shooting academic, pretty much without guile. He’ll make bold unpopular claims without considering the feathers that might ruffle. Hey, nothing personal, it’s just the truth.

But of course, to the establishment, them’s fighting words.

When you’re hired to be the magician’s assistant, you don’t start blabbing at dinner parties about the rabbit up the guy’s sleeve. Ronald Reagan himself spun the yankee narrative that “There’s no such things as limits to growth, because there are no limits on the human capacity for intelligence, imagination, and wonder.” Daly was slaughtering sacred cows faster than a McDonald’s in New Delhi. No wonder he pissed so many people off.

From the moment he began teaching, Daly faced furious pushback. Even tenure (at Louisiana State University) didn’t protect him. Many of his colleagues turned on him. He eventually had to stop taking on grad students because their association with him was hurting their chances of getting jobs. He was pretty much excommunicated. When he was away at conferences, his wife Marcia sometimes received threatening calls. Once she was so spooked she packed the kids in the car and fled town.

During his tenure at the World Bank, a private email from Larry Summers, then chief economist and vice-president, was leaked. In it, Summers made the case that the dirtiest industries should move to the poorest countries. Because they were “underpolluted.”

Summers the rock star eventually became Chief Economist of the World Bank and then President of Harvard University. And Herman the apostate quietly moved on.

The new measuring stick

So, if the textbook Western economic paradigm doesn’t work, what’s the alternative?

By Daly’s lights, only one model works in a so-called “full world” such as ours, where there are no longer any unexploited resources, and someone has made a claim on every square inch. And that is a steady-state economy.

Here’s what that means. There are two ways to contain the physical scale of the economy, and both involve holding something constant. The first way is to hold constant “throughput” — the amount of stuff passing through the system, the sum total of new shit we humans generate. Basically, keep consumption at a level consistent with ecological sustainability.

The other way is to hold steady what Daly calls “the stocks of people of artifacts.” In other words, limit the number of machines generating all that shit: us.

This is controversial. There’s no way to say it without sounding racist (since it’s the poorest countries that are populating above replacement) and Daly has backed away from talking about it (though not from thinking about it).

The truth is that actually confronting the crises, containing the human pressure on the biosphere, may require going to the dark places in the human psyche no one wants to go to. The pressure on the planet is a combination of the number of people and the amount of energy used per person. You simply can’t have an environmentalism without reducing those things. (And preferably both of them; in the poorer countries, the first one’s most important, and in the rich countries the second one is.) Moreover, a working steady-state economy wouldn’t just cap expansion — it would cap inequity. By, say, limiting corporate profits to some multiple of the average workers’ wage.

You could say, stretching only a little, that Daly’s commitment to the steady-state model came out of something that happened to him in his youth.

As a young child, he contracted polio. Nerve damage in his left arm shriveled it to a stump, which was amputated the summer he turned 15. That changed him physically. But Daly himself has speculated about how it may have changed his mindset. When you’re suddenly down an arm, you start thinking about making a life within the bounds of what is physically possible. That’s a very un-American idea when you think about it. Isn’t anything supposed to be possible if you work hard enough?

When you’re facing the flat-out impossibility of something. What’s the best thing to do? You don’t deny it; you face it. You stop sinking energy into making pigs fly, and instead switch your energy into the things that are still possible. And many things still are. The closing down of one avenue nudges you to explore other possibilities that may, in fact, be the actual way out. Especially if you are a man of faith.

Daly is a Christian, and though he doesn’t talk about it all that much (and is angered by the “Christian Right”), the tenets of his faith have underwritten everything he’s ever done, from his pushing for desegregation in Nashville in the early Sixties … to his collaboration with the World Council of Churches program for a Just and Sustainable Society in the 1970s, and his insistence that ethics must be baked into any social enterprise — including economics.

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At this point you may be wondering: Can a steady-state economy even work within capitalism?

Daly’s view is that it can.

Despite the way his old neoclassical colleagues may have painted him, Daly is not an outright Communist.

As a boy Herman worked for many years stocking shelves in his father’s hardware store. Later, those thousands of fiddly little nuts and bolts and screws became a stand-in for goods in the economy. How do you know what and how many to stock? Demand will tell you — better than any central planner ever could. Daly never lost the idea that the market has a role to play. The problem is that the market no longer functions properly in a full world. It goes wonky, like a compass near the North Pole. It isn’t allocating resources equitably — and it won’t until caps on growth are in place and working.

But getting rid of markets altogether is not the solution, in Daly’s view. “If you try to get rid of markets, you’re really creating a problem,” he has said. “Markets can be good servants, as well as bad masters.”

Capitalism doesn’t have to go, in Daly’s view. But it does have to change. Specifically, you have to defang its two most destructive elements. “If you take away from the capitalist system the ability to damage the environment and to concentrate wealth beyond all reason,” he says, “then I think you will have made a big step forward.”

But the other part of the contract falls on us hairless apes. We can’t just be trying to tech-tweak our way out of this mess. We still have to rein in our ravenous consumer impulses. So the big efficiency gains in, say, solar panels aren’t enough in themselves. You can add a talented new forward to the team who nets you a goal more a game, but if your goalie sucks and lets in five goals more per game, you lose.

Okay, Debbie Downer, Daly hears. This steady-state model of yours. Aren’t you basically consigning us all to a bland fate of morbid self-restraint and eternal unfun?

The answer is No. Because not growing in size doesn’t mean not growing.

And this is key to understanding where Daly is coming from. Zero growth does not mean a prison of stasis, where misery is torqued up until violence brews. On the contrary. In a steady-state economy there can still be growth. In fact, there must be growth. It’s just that it’s a different kind of growth. It’s closer to the kind of growth a therapist speaks of. It’s growth of the sort many of us glimpsed during the depths of the pandemic — where people pulled back from the consumer economy and went to ground with those they loved, exploring new passions, letting the crud settle to the bottom and the water clear.

Growth, in other words, measured differently: not in quarterly earnings and output and GDP, but rather in the ways that actually count. Growth in craftsmanship, longevity, harmony, wisdom. Growth not in quarterly earnings but in ecological health and free time and, as John Stuart Mill put it, “the art of living.” Growth, even in “spiritual improvement,” if that kind of language comes off your tongue. An economy can work — and improve — even if it’s not growing, and the formula is simple: you share more, build better and buy less. You consciously value leisure and fun, and you put an actual cost on destruction in the pursuit of profit. Aesthetics start to matter more than just about everything. That doesn’t mean the color of the drapes — he means intense experiences over dull ones. Truth, justice, beauty. When those things grow, the world doesn’t strain at its seams. The opposite happens. A little more room actually opens up.

For much of his life, not many people were buying what Herman Daly was selling. But now that he is 85 years old, the world is coming around to him. A new generation is beginning to accept the idea that the world used to be empty, and then a kind of tipping-point happened, and now it’s full. So we have to think of economics differently.

“The work of most economists, and of social thinkers more generally, becomes less relevant as time passes,” says the progressive Canadian economist Peter Victor, who has just released a deliciously readable book about Daly’s work and life. “But this work becomes more relevant.”

New ways to measure progress are gaining traction, alternatives to GDP that measure not prosperity but something closer to “well-being.” Like Daly and Cobb’s Index of Sustainable Economic Welfare (redubbed the GPI, or Genuine Progress Indicator). Or John Halliwell’s “Happiness Index.” Even the World Bank, that old dinosaur, pays much more attention to green issues now, looking at alternative metrics to how we’re doing. (Better decades late than never.)

Daly has a tremendously fertile and felicitous mind. But he is the first to acknowledge that he greedily absorbed big ideas from the greats. From Nicholas Georgescu-Roegen he learned that economics actually had a roomie and it was physics — any closed system becomes increasingly random, and degrades. From Ken Boulding, he learned that economics is a small story embedded in a big story, that human concerns make no sense outside the context of Spaceship Earth. From Garrett Hardin he learned that rules to keep us from running selfishly amok in the sandbox work, so long as they’re mutually agreed on (that’s how we avert the Tragedy of the Commons). From E.F. Schumacher he learned, per the Buddhists, that people are more important than goods, and the kind of work we do matters, not just how much.

Now Daly himself has become a solid perch for a new generation of thinkers to stand on, to peer over the curve of the memescape, and devise ways to get us out of this mess. Without Daly, it’s hard to conceive of ideas like Tim Jackson’s “preventative environmental management,” or John Fullerton’s “regenerative capitalism,” or Kate Raworth’s “doughnut economics” (where, between the shortfall inside where people go hungry, and the overshoot outside, where systems collapse, is the band in the middle — the doughnut itself — where humanity progresses sustainably). Daly’s life’s work is a kind of existence proof for the wobbly, right-brain leap of faith that the human project is going to require — putting faith in the wisdom of living systems.

Daly thinks the first developed nation to take a shot at a steady-state economy could be Japan.

“Japan is halfway to becoming a steady-state economy already, whether they call it that or not,” Daly told the writer Ben Kunkel not long ago. The elements are there. A stable — even slightly declining — population. Natural limits on resource extraction (as a small island nation) so there’s “a long history of having to live within limits.” And Japan’s already doing things to rein in inequity (like imposing limits on the earnings multiples of executives to employees).

There’s a line of the climate ecologist Gernot Wagner likes to use: “It’s too late to be pessimistic.” Daly shares that view too, to a point. The sad irony is that it took the five-alarm fire of the climate emergency for the skeptics to weaken their resolve against him. “Big changes usually require a big crisis to make them politically possible,” Daly says. “Maybe things have finally become sufficiently dire.

“After the present system crashes in failure there will be not only an interest, but an immediate need to rebuild something more sustainable and just.”

To economics students shuffling into their econ 101 seats and cracking their copy of Principles of Economics, by Mankiw (9th edition), Daly has this charge: Think about how crazy it is that you’re being asked to consider economic growth without planetary constraints. “One might as well ask engineering students to fathom how far a car can run on its own exhaust, or biology students to accept that an organism can metabolize its own excrement.”

Daly’s “living system” metaphor for the economy may ultimately be viewed as profound and important as Lovelock’s Gaia Hypothesis.

And it will probably follow the same trajectory, too. At first dismissed. Then ridiculed.

And then finally — after it’s proven right — accepted as self-evident

all along.