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The Steady-State Economy

‘An economy with constant stocks of people and artefacts, maintained at some desired, sufficient levels by low rates of maintenance ‘throughput’, that is, by the lowest feasible flows of matter and energy from the first stage of production (depletion of low entropy materials from the environment) to the last stage of consumption (pollution of the environment with high entropy wastes and exotic materials)’.

This is how Herman Daly (Daly 1992, p. 16) described an optimal sustainable state of the human economy. It is an economy that does neither grow nor shrink physically in the long run.

Daly based his concept of a steady state economy (SSE), on what classical economists described as the ‘stationary state’. This term was already mentioned by Adam Smith, in his ‘The Wealth of Nations’.

The vision of a steady state economy perceives the economy as a stock of people and artefacts, which requires maintenance via throughput of a flow of physical matter and energy. Service is the ultimate benefit and should be maximised while throughput is the ultimate cost of this service and should be minimised.

Daly is convinced that it would be of great benefit to the human society to establish a steady state economy before it is too late. For this purpose he offered three institutions: (1) aggregate physical depletion quotas for stabilizing stock of physical artefacts and to keep throughput below ecological limits. (2) distributionist institutions for limiting degree of inequality in the distribution of the constant stocks and (3) some form of population control e.g.: transferable birth licenses. For Daly the stabilisation of the economy inevitably requires the stabilisation of the number of humans. The planets carrying capacity of our specie is defined by the maximum sustainable impact (I) of our society. Impact (I) in turn is given by the often cited equation I=PAT which describes I as a product of the factors population size (P), affluence (or consumption) (A), and the environmental damage (T) caused by the technologies used to supply each unit of consumption (Daily and Ehrlich 1992).

The concept gained some criticism e.g. based on the perspective of thermodynamics. According to these critics a standstill or steady state is an entropic impossibility, at least in theoretical terms. Daly later emphasised that the steady state is “… neither static nor eternal – it is a system in dynamic equilibrium within its containing, sustaining, and entropic biosphere” (Daly 2007, p. 117).

Daly also admitted that the idea of the steady state economy is utopian. It not an idea that people would voluntarily vote for, unless there was, what Daly calls, ‘moral growth’. Such an advancement of the ethical properties of our society may occur in the presence of a radical external shock or crises such as that expected to be provoked by Peak Oil (the maximum level of worldwide petroleum production) or another economic crisis, which is not unrelated to the former (Kerschner 2012). If unanticipated and without plans for adaptation however, the exact opposite i.e. moral de-growth and a return to authoritarian regimes could be the case (Leder and Shapiro 2008). However even to those who might be willing to push for a radical change towards a different economy, would probably not be enthused by the imposition of Daly’s institutions, which have an air of authoritarian top-down decision making (Kerschner 2010).

Recently the SEE has gained new impetus with the increasing interest in alternatives to the growth economy. In the course of these developments Daly’s dynamic equilibrium – quasi SSE has been redefined as the (unattainable but approachable) goal of economic degrowth. Leading towards such a goal, there are a multitude of different degrowth- paths, consisting of top-down and bottom up approaches in differing proportions for every particular geographic, social and historical context (Kerschner 2010).



Daily, G. C., Ehrlich P. R. (1992) Population, Sustainability, and Earth’s Carrying Capacity. BioScience 42(10): 761-771.

Daly, H. E. (2007) Ecological Economics and Sustainable Development: Selected Essays of Herman Daly. Cheltenham, Edward Elgar Publishing.

Kerschner, C. (2010) Economic de-growth vs. steady-state economy. Journal of Cleaner Production 18(6): 544-551.

Kerschner, C. (2012). A multimethod analysis of the phenomenon of Peak-Oil, economic degrowth and attitudes towards technology. Institut de Ciència i Tecnologia Ambientals. Barcelona, Universidad Autonoma de Barcelona. PhD Thesis: 450.

Leder, F., Shapiro J. N. (2008) This time it’s different: An inevitable decline in world petroleum production will keep oil product prices high, causing military conflicts and shifting wealth and power from democracies to authoritarian regimes. Energy Policy 36(8): 2850-2852.


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This glossary entry is based on a contribution by Christian Kerschner.

EJOLT glossary editors: Hali Healy, Sylvia Lorek and Beatriz Rodríguez-Labajos.

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