The Neoclassical Trojan Horse of Steady-State Economics

Abstract

The vision of a steady-state economy elaborated by Herman Daly describes an economy that uses materials and energy within the regenerative and assimilative limits of the planet's ecosystems. Sustainable scale, just distribution, and efficient allocation are its constitutive theoretical goals. This paper is a critique of the theoretical foundations of steady-state economics. It argues that steady-state economics consists in an attempt to squeeze neoclassical economics into a biophysical and ethical corset. As a result, many fundamental flaws and criticisms of neoclassical economics remain. As a consequence, steady-state economics does not lead to a radical departure from, or improvement upon, neoclassical theory but rather to fundamental internal inconsistencies between the ‘old’ economics paradigm and ‘new’ progressive ecological economic thinking. Contradictions appear at various levels ranging from ontology and methodology to theory and values. As Daly has pioneered the foundations of ecological economics with his thinking, these ambiguities are not only problematic for steady-state economics but ecological economics as a field more generally. The paper concludes that ecological economics has to let go of neoclassical foundations as they contradict its core values and ambitions. A new and consistent theory of political economy of the environment along heterodox lines is needed.