the chicken/egg spiral

"Reconciling" the Conflict Between Economic Growth and Environmental

Protection with Technological Progress

www.steadystate.org

• Increasing production or efficiency

resulting from invention and innovation

• Types (Wils 2001)

–Explorative

–Extractive

–End-use

• Increase in the production and consumption

of goods and services in the aggregate

• Typically expressed in terms of GDP

• Entails increasing population and/or per

capita consumption

• Solow

• Lucas

• Mankiw

• Romer

Y = (K, L)

Y = (K, L)Czech, B. 2009. The neoclassical production function as a relic of anti-George politics: implications for ecological economics. Ecological Economics 68:2193-2197.

Business Household

• Ecological economics movement

• Laws of thermodynamics

• Principles of ecology

Herman Daly

Heat

NaturalCapital

PollutantsNatural

Capital

• 1956, “A Contribution to the Theory of

Economic Growth”

• Technological progress

• “Manna from heaven”

• Stable capital:labor ratio

• “Steady-state growth”

• Mankiw et al.Robert Solow

• 1990, “Endogenous Technological Change”

• Research and development

• Production of ideas

• Population growth

• Increasing returns

• PatentingPaul Romer

http://en.wikipedia.org/wiki/File:Paul_Romer_in_2005.jpg

Time

GD

P

K

Natural capital allocated to human economy

Natural capital allocated to economy of nature

K

GD

P

Time

...maintain steady state economy sufficiently below K.

To conserve fish and wildlife...

Czech, B. 2008. Prospects for reconciling economic growth and biodiversity conservation with technological progress. Conservation Biology 22(6):1389-1398.

• Increasing production or efficiency

resulting from invention and innovation

• Types (Wils 2001)

–Explorative

–Extractive

–End-use

KTGDP



X natural capital allocable

Time

KU

Capital-free growth zone KT1

KT2

GDP

Time

KU



X natural capital (still) allocable

• Fixed amount of energy,

matter (E = mc2)

• Entropy; i.e. limits to

efficiency in the economic

production process

• Entirely institutionalized (NSF 2007)– Corporations– Government– Colleges and Universities– Non-profits

• Requires surplus production in existing economic sectors

Nation Corporations Government Acad./Other

Australia 47.5% 22.9% 29.5%

China 61.2% 28.7% 10.1%

Germany 69.1% 13.8% 17.1%

Japan 74.4% 9.5% 16.1%

Mexico 30.3% 39.1% 30.6%

Poland 21.4% 44.9% 33.8%

Russia 69.9% 24.5% 5.6%

Sweden 77.6% 2.8% 19.5%

UK 67.0% 8.9% 24.1%

USA 71% 7% 22%(Duga and Stadt 2005)

1. Corporations – profits. But first:– Factors of production paid for.– Shareholder dividends distributed.

2. Governments – income taxes and social security payments. But first, solvency.

• More profits at the corporate level.

• Increasing income at the national level; i.e., economic growth.

• Chartered for primary purpose of generating profits (Bakan 2005).

• U.S. – defense, economic “objectives”

• China – defense, economic growth

• Russia – defense, economic “objectives”

• Japan – economic “objectives”

• Duga and Stadt (2005), AAAS (2002)

Entity Funded Conducted Basic Applied Devel.

Industry 194 (65%) 213 (71%) 8 (15%) 47 (68%) 158 (91%)

College/univ. 8 (3%) 50 (17%) 35 (64%) 11 (16%) 3 (2%)

Fed. gov. 84 (28%) 21 (7%) 4 (7%) 7 (10%) 10 (6%)

Non-profits 10 (3%) 15 (5%) 8 (15%) 4 (6%) 3 (2%)

Other gov. 3 (1%)

Total 299 299 55 69 174

National Research Council (2007)

• “annual growth rate in the global footprint of 2.12% per year…requisite technological improvement needs to exceed 2% per year” (Dietz et al., 2007, Frontiers 5:13-18)

• Productivity gains >2% typified “advanced capitalist economies” during third quarter of 20th century (Madison 1987).

• Gains below 2% have befuddled economists since.• Most economic growth elsewhere from factor inputs

rather than productivity gains (Oguchi 2005).

• Redirected toward other activities that increase production and consumption in the aggregate due to:– profit motive (corporations).– macroeconomic goal of growth

(governments).– service of academia and NGOs.

• “Jevons paradox”

R&D

_______

R&D

Profits

R&D

________________

Profits

R&D

Profits

Economies of scale

• Reductions in average cost of product resulting from increased level of output

• Economies of scale operate:– Internally (e.g., Weyerhauser) – Externally (e.g., timber industry)– Macroeconomically (Denison 1985)

• Increased efficiency but concomitantly with increased production with existing technology

} (Ruttan 2001)

X/2 re-allocatedKT1

KT2

GDP

Time

KU



X/2 natural capital allocable

Bio

dive

rsity

loss

GDP-TP

TP1

TP3

K

TP2

With R&D focused on end-use efficiency, the rate of biodiversity loss due to economic growth may decrease via technological progress and because there is less biodiversity left to lose, but there are diminishing “less-loss” returns to R&D scale as the low-hanging thermodynamic fruits are picked and we approach ultimate ecological carrying capacity for the economy.

• Technological progress is not manna from heaven.• Technological progress and economic growth are

tightly linked.• Both are limited by natural capital stocks.• The solution to environmental problems is not

perpetually growing R&D budgets.• The solution to environmental problems

sustainable scale. • Technological progress in a steady state economy

would occur at a much slower pace.

www.steadystate.org

the chicken/egg spiral

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