Steady-state economy

A steady-state economy is an economy made up of a constant stock of physical wealth (capital) and a constant population size. The term typically refers to the national economy of a particular country, but it is also applicable to the economic system of a city, a region, or the entire world. In the history of economic thought, classical economist Adam Smith of the 18th century was the first economist to theorise on the concept of a stationary state of an economy. Smith conjectured that any national economy in the world would sooner or later settle in a final state of stationarity.

Since the 1970s, the concept of a steady-state economy has been associated mainly with the work of leading ecological economist Herman Daly. As Daly's concept of a steady-state includes the ecological analysis of natural resource flows through the economy, his concept differs from the original classical concept of a stationary state. One other difference is that Daly recommends immediate political action to establish the steady-state economy by imposing permanent government restrictions on all resource use, whereas Adam Smith and the other economists of the original classical period of theorising believed that the final stationary state of any economy would settle by itself without any government intervention.

The world's mounting ecological problems have brought about a widening interest in the concept of a steady-state economy. Critics of the steady-state economy object to it by arguing that resource decoupling, technological development, and the unrestrained operation of market mechanisms are fully capable of overcoming any resource scarcity, any rampant pollution or any overpopulation ever to be encountered on Earth. Proponents of the steady-state economy, on the other hand, rebut that these objections remain insubstantial and mistaken — and that the case for a steady-state economy is gaining leverage every day.

Herman Daly defines his concept of a steady-state economy as an economic system made up of a constant stock of physical wealth (capital) and a constant stock of people (population), both stocks to be maintained by a flow of natural resources through the system. The first component, the constant stocks, is similar to the concept of the stationary state, originally used in classical economics; the second component, the flow of natural resources, is a new ecological feature, presently also used in the academic discipline of ecological economics. The durability of both of the constant stocks is to be maximized: The more durable the stock of capital is, the smaller the flow of natural resources is needed to maintain the stock; likewise, a 'durable' population means a population enjoying a high life expectancy — something desirable by itself — maintained by a low birth rate and an equally low death rate. Taken together, higher durability translates into better ecology in the system as a whole.

...
Wikipedia