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Article Review

Jaime Fritsch Local Economy Network 1/23/08

Review of “Economics in a Full World” by Herman Daley

Herman Daley points out in his article “Economics in a Full World” that growth as an economic strategy, though successful in the past, cannot continue without detrimental environmental consequences. The biosphere has limits. It is finite. The economy is a subsystem of that biosphere and thus cannot function on infinite growth. Our current economy is based on the conversion of natural capital to man-made capital at ever increasing rates. This unrestricted growth has drained our world of natural resources to the point that growth is now limited by the scarcity of resources. It is important to remember that growth and development are quite different. We need not stop developing, or improving qualitatively. The qualitative increase of material goods is the danger that may have already placed the United States and other countries in uneconomic growth. Uneconomic growth occurs when the population’s level of well-being decreases rather than improving with the production of goods. This imbalance of disutility occurs when the sacrifices that must be made for production, such as dealing with pollution and loss of resources out weigh the benefits gained by production. The economic strategy for this age should be sustainability, this can still mean a strong economy though.

Transitions and adjustments will need to be made to make the change. These adjustments are not impossible but they do need some attention. One difference will be the durability of goods. Currently products are made to deteriorate very quickly, then the product must be replaced. This is an excellent strategy for the producers and retailers as new products must be continually purchased, however this placed undue strain on our resources. Longer lived products use less resources yet require more efficient maintenance which requires more skilled repairmen. Thought patterns need to evolve too. Qualitative development should be prized more highly over quantitative. Economists will still be happy because GDP will still be growing. Adjustments will need to be made in the financial sector as well. The sector is huge, employing many people and dealing with many extremely large transactions. In the new economy, however, low growth rates and low investment rates will change the dynamics.

Also, today’s politicians focus on free trade, reducing trade barriers in order to get products to their constituents as cheap as possible. The cheap monetary price tag hides the true price of the item which is born in part be the individuals whose landscape is raped of natural resources and those forced to deal with the pollution and waste from the products. In a sustainable economy there would be regulations that compensate for these differences.

Products manufactured in an environmentally hazardous manner will be taxed to reflect the actual cost. Countries currently tax that which is good, such as income, while ignoring what is not wanted, such as pollution. Many states already have a severance tax, which would add a tax at the point when resources are taken from the biosphere, this encourages more efficient use of resources. On the matter of employment, will a sustainable economy be able to provide for the employment of the population. Our current system cannot do this, so it is unreasonable to demand it in another system. The truth, however is that employment rates may improve as different types of skills will be needed and more people with these skills, verses masses of unskilled laborers.

In addition, perhaps the way in which people earn money can be modified, such as higher participation in ownership of businesses. The most positive change that may come out of this transition will be happiness. Marketing has convinced people that stuff and buying more stuff will make them happy, meanwhile people have been losing community and personal relationships and simultaneously becoming less happy. The threshold at which income raises happiness is relatively low. Studies have shown that the United States has been declining in happiness since the 1950s. We are likely well past the futility limit by now; the limit where furthere growth will not improve happiness. Why then do we continue to strive for growth above all else? It is time to revert to a world full of natural resources and full of happiness, by making the change to full world economics, the sustainable economic plan of Herman E. Daley.