Herman E. Daly

The Economics of Sustainable Development
Boston: Beacon Press, 1996; 253 pp.


John Wish

Comments to John Wish

We wish to thank John Wish and Robert Nason, editor of the Journal of Macromarketing for permission to reprint this review.

Most of us are growth addicts. We believe that increases in revenue and increases in production and consumption are good.

Herman Daly believes continued economic growth is bad. It is bad because our economic activity is a very large subsystem within planet earth. This planet is "finite, non-growing and materially closed" (page 1). His critique of the irrationality of our present path is carefully reasoned and empirically based. Daly makes substantial arguments about our economic subsystem which have caused me to rethink my previous world views.

For several years, Daly has been challenging the mainstream of economic thought, elaborating and clarifying his views with each new publication. His first comprehensive statement on growth was For the Common Good, published in 1989 and revised in 1994. That earlier book presented some of the same arguments in a less accessible format. Beyond Growth presents his position much more elegantly and adds considerable new material. He provides a major service by distinguishing between "growth", a change in monetary or physical quantity and "development", which he views as change in quality.

The well reasoned arguments in this book include the following insights: For all healthy living species, growth ends but development continues. Only cancer cells continue growth and eventually they kill the host. We can disagree, as Brown (1995) and Simon (1994) have, about how large the human population can become before we kill life as we know it. We can disagree about whether, long term, there will be enough food &/or water for a world population of 6, or 10, or 25 billion persons consuming at the level of the USA. However, by the time we know the earth's true carrying capacity, it may be too late to do anything about it.

"Probably the best index of scale of human economy as a part of the biosphere is the percentage of human appropriation of the total world product of photosynthesis. Net primary production (NPP) is the amount of solar energy captured by primary producers, less energy used in their own growth and reproduction. NPP is thus the basic food resource for everything on earth not capable of photosynthesis. Vitousek et al (1986) calculate that... 25% of NPP is now appropriated by human is apparent that two more doublings of the human scale will give 100%.". (page 57)
90 Traditional economic measures distort our perceptions of well being. For instance, GNP fails to distinguish between consumption and development. GNP is a measure of throughput of the money value of final production. GNP does not distinguish between missiles and food. GNP does not count important family and community services, such as parenting, unless they are performed for money. GNP does not properly count the depletion of natural resources nor the cost of waste dumped and left for others. GNP does not reveal whether we are living beyond our means.
"GNP is an index of throughput, not welfare. Throughput is positively correlated with welfare in a world of infinite sources and sinks, but in a finite world with fully employed carrying capacity, throughput is a cost. To design national policies to maximize GNP is just not smart." (page 41)
The traditional closed circular flow of economic activity is misleading. Individuals, firms and economies often are described as existing in isolation. They are presented as making decisions, with no input or output to the world. It is like presenting anatomical studies with only circulation of blood showing. "Unlike this imaginary circular flow animal, real animals have digestive tracts that connect them to their environment at both ends. They continuously take in low-entropy matter/energy and give back high-entropy matter/energy. An organism cannot recycle its own waste products." (page 193)

Good business is more than efficient allocation of resources. There are three dimensions that ought to be considered in making business or economic decisions: efficient allocation; just distribution and a scale of activity which will allow sustainable development. Since these three dimensions are independent of one another efficient allocation of resources alone is unlikely to lead to "sustainable development".

"Optimal scale, like distributive justice, full employment, or price level stability, is a macroeconomic goal. And it is a goal that is likely to conflict..." (page 51)
Free trade and globalization of the economy is bad. It is bad theory because it depends upon the immobility of both capital and labor. It is bad practice because it will make many worse off and take control from the community. In contrast, both the capitalists and laborers of Ricardo's day were part of a community within a nation state.
"The logic of free trade, once it is erroneously extended to free capital mobility is by consistency also extended to free labor mobility, that is, free immigration...It is certainly not what Ricardo or Smith had in mind when speaking of free trade...It does not serve national community, it destroys it. And it does not create international community either." (page 156)
In short Daly envisions a very different paradigm leading to a better world.
"The technical and economic problems involved in achieving sustainability are not that difficult. The hard problem is overcoming our addiction to growth as the favored way to assert our creative power and the idolatrous belief...that our derived creative power is autonomous and unlimited." (page 224)
Read Daly. You may see the world and your role differently.


Brown, Lester R. (1995). Who Will Feed China: A Wake-up Call for a Small Planet. New York and London. W.W. Norton & Co.

Daly, Herman E. and Cobb, John B. Jr.(1994 rev.). For the Common Good. Boston, MA. Beacon Press.

Kane, Joe. (1995). Savages. New York. Knopf

Quinn, Daniel (1992). Ishmael. New York. Bantam.

Simon, Julian L. (1995). The State of Humanity. Cambridge, MA: Blackwell.