The macroeconomics of a steady state
The central conclusion of this book so far is that environmental problems are fundamentally rooted in macroeconomic phenomena. Nonetheless, surprisingly little has been said by economists about the macroeconomics of modern environmental problems. Although such problems are seen by most economists as fundamentally microeconomic, there are dissenters, as noted in the introduction to this book and in the previous chapter. Herman Daly’s (1991a, 1991b) formulation of a steady-state economy is in response to what he sees as a macroeconomic environmental problem of crisis proportions. The essence of his view is that the scale of the global macroeconomy is dangerously out of sync with the scale of the global environment. While he argues that scale is the essential macroeconomic problem (Daly 1991a), neither he nor others have explored in detail the macroeconomic consequences of a steady state. How does the fundamentally cyclical character of macroeconomic activity square with the notion of a steady state? What are the consequences of a steady state for macroeconomic policy? Is a steady state even consistent with a growth-prone economy based on capitalist forms of business organization? The goal of this chapter is to begin the task of addressing these and other issues related to the macroeconomics of a steady state, taking into account the specific steady-state policies put forth in the last chapter.