Are there any austrian articles criticizing the concept of steady state economics and the organization, the Center for the Advancement of the Steady State Economy - steadystate.org ? What do you guys feel about it? It seems like the epitome of the centrally planned economy. What are the major economic fallacies of this concept? We're learning about this in my macroecon class and this week we're going to be discussing it. I'd like to make sure the side in favor of steady state isn't the only side being presented and that I present a strong argument against it.
I'd like to make sure ... I present a strong argument against it.
If you don't know what the fallacies are, why do you think it's wrong and want to necessarily show it to be wrong?
Try at least to word this as "Hey, I wanted to know what you guys think" and not "why is this wrong." Because if you approach a problem in the second way you never know whether your preconceived notions are the ones which are wrong.
Just a side note :P
If you don't know what the fallacies are, why do you think it's wrong and want to necessarily show it to be wrong? Try at least to word this as "Hey, I wanted to know what you guys think" and not "why is this wrong." Because if you approach a problem in the second way you never know whether your preconceived notions are the ones which are wrong. Just a side note :P
+1. I used to have this issue too. Take my Charles Lee thread for instance. When I was a new libertarian radical, I probably would have been tempted to say, "why is it wrong that Lee is a traitor?" But I've since learned that this is a terrible way to approach anything, especially anything with two sides. So the proper way to phrase the question and your pursuit of learning -- and the way I did so in my recent topic -- is more like "Is Charles Lee a traitor? Why or why not? What does everyone think?" And, following these questions, it's best to study both sides of the debate. Even if you have strong biases toward one side, this does not give you an excuse to not fairly study the other side. (Generally, I should say).
Alright. Besides that, I think the refutation writes itself. That website is one I would write in parody. Just visit some of their pages:
http://steadystate.org/discover/downsides-of-economic-growth/
http://steadystate.org/discover/definition/
They're complete strawmen of free markets and economics.
If you'd like, I can walk you some of their easy mistakes they make, however as I read, this struck me particularly much:
John Maynard Keynes, the most influential economist of the twentieth century, also considered the day when society could focus on ends (happiness and well-being, for example) rather than means (economic growth and individual pursuit of profit).
A very, very basic understanding of Austrian economics will allow you to explode this notion. It really is very close to the corollaries of the Action Axiom. Humans act to remove uneasiness. They use purposeful means to achieve ends. The above statement attempts to separate the two in a world of pink non-scarcity. It sounds exactly like a socialist utopia. And I don't mean to paint all socialism in a brush - what I mean is that this sounds exactly like what a socialist utopia would be like - we can stop worrying about things and focus on us! What the heck does that mean? The quote by Keynes doesn't make their case any better [my comments are in brackets]:
…that avarice is a vice [wait, you can show this economically?], that the exaction of usury is a misdemeanour [noting what will soon follow, this is definitely a religious reference], and the love of money is detestable [why?]… We shall once more value ends above means [means have no value except to get to ends. All ends need means... so means have value...]and prefer the good to the useful [what is "good" and what is "useful". Perhaps he means that we will value what he believes is good and what he believes is useful?]. and The day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head [totally economic terms] will be occupied or reoccupied, by our real problems [do tell me, what are my "real" problems] – the problems of life [huh?] and of human relations [ah, so our whole existence is building up to us talking to our neighbors?], of creation [ok, what?] and behavior [again, behavior necessarily demonstrates the use of means toward ends. What type of human behavior does he want to study, and how can he guarantee it's important? Seriously, what is "imporant" in his world of no scarcity?] and religion [cue head exploding].
…that avarice is a vice [wait, you can show this economically?], that the exaction of usury is a misdemeanour [noting what will soon follow, this is definitely a religious reference], and the love of money is detestable [why?]… We shall once more value ends above means [means have no value except to get to ends. All ends need means... so means have value...]and prefer the good to the useful [what is "good" and what is "useful". Perhaps he means that we will value what he believes is good and what he believes is useful?].
and
The day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head [totally economic terms] will be occupied or reoccupied, by our real problems [do tell me, what are my "real" problems] – the problems of life [huh?] and of human relations [ah, so our whole existence is building up to us talking to our neighbors?], of creation [ok, what?] and behavior [again, behavior necessarily demonstrates the use of means toward ends. What type of human behavior does he want to study, and how can he guarantee it's important? Seriously, what is "imporant" in his world of no scarcity?] and religion [cue head exploding].
Wow. They quote this as economics?
Perhaps the best summary of what is wrong in their methodology (that I can think of) is some type of partial-equilibrium analysis (I might have the name wrong). I recently reposted the message someone sent me on Reddit saying that it's theoretically possible to buy all the water in the world and then deny people access, which disproves capitalism. This defies basic supply-and-demand. As the water on the market is bought up, supply shifts left and price rises. Trying to buy up all the water on Earth would lead to asymptotic prices.
Similarly, the economists over at that website are making the same mistake. They believe that capitalism cannot manage a world of scarcity, where human nature and private property are exactly geared toward managing scarcity - when supply decreases, prices rise. Simple supply and demand. Also, when demand increases, so do prices.
Take this basic knowledge and applying it to a future world with a large population bursting at the seams. The price mechanism would halt such a thing from happening.
I recently reposted the message someone sent me on Reddit saying that it's theoretically possible to buy all the water in the world and then deny people access, which disproves capitalism.
Haha, really? Someone told me this exact same story before...on a GameFAQS forum. It could be a different person, I guess, but this sounds quite similar.
Economically, you've got it right. Morally, of course, it follows that if people voluntarily sell all their water and choose to die of thirst, it is their own fault, rather than the fault of the capitalist who bought all the water. Now, if criminals forced the people to give up all their water, it would be those criminals' fault.
What are the major economic fallacies of this concept?
Here are a few at random:
1. Ignores the law of supply and demand. He thinks that if we use "too much" of resource X, then one day resource X will just disappear forever and that's that, because someone will have bought, say, the last gallon of gasoline in existence at a few dollars a gallon, and will burn it all up. In reality, as the supply goes down drastically, the price will go up drastically, inhibiting consumption.
2. Injects his own arbitrary standard of values into things. Does this a few times.
A. If mankind indeed wants to burn up all the gasoline there is, driving around and partying, who is he to say no?
B. Assumes people have no right to keep the money they earned. The rich worked hard to have their wealth, but he thinks it is "unfair" of them to have worked so hard and been so successful. Therefore he wants to take it away by force and violence.
C. Imposes his criteria of what human existence should be about. We all have to want, not more money, but more of the Higher Things in life, like philosophical ruminating.
D. Assumes he speaks for all of mankind when laying out his agenda, when mankind has already rejected it [by not adopting it voluntarily long ago].
3. Assumes that if his economic system, aka socialism, is introduced into the world, people will work just as hard. Oddly enough, this has been tried over and over and has always led to mass starvation.
4. Assumes that if you just give people a one time lump sum of money to be "fair", then poverty will be eliminated forever. [Unless he thinks that the poor will need constant weekly free money, and assumes such a scheme will work. But of course, once everyone is "equal", where will the money come from to give the drunks and wastrels? Unless you constantly decrease the amount everyone is allowed to have.
5. Assumes a free market makes only the rich richer, when it actually makes everyone richer.
6. Assumes govts are "clever" and will find the magic number that will keep everything steady state.
7. Assumes a free market "has to" grow and to use more and resources that cannot be replenished.
8. Assumes the poverty stricken nations consider the environment as important an issue as the very wealthy nations, [when actually they are more interested in the basics, like food in their bellies], and if they don't he must impose his will on them.
I'm sure a close reading will find many more.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
Fair Distribution Since continuous growth and sustainable scale are incompatible, growth cannot be relied upon to alleviate poverty, as has been done (ineffectively) in the past. If the pie isn’t getting any bigger, we need to cut and distribute the pieces in a fair way. In addition, poor people who have trouble meeting basic needs tend not to care about sustainability, and excessively rich people tend to consume unsustainable quantities of resources. Fair distribution of wealth, therefore, is a critical part of sustainability and the steady state economy. Efficient Allocation The conventional economic thought focuses almost exclusively on efficient allocation of scarce resources. The dominant thinking is that free and competitive markets, along with prices driven by supply and demand, result in efficient allocation of goods and services (in the absence of pesky, omnipresent externalities and market imperfections). Efficient allocation is also important in a steady state economy – ecological economists support many market strategies to accomplish efficient allocation of resources – but only after achieving sustainable scale and fair distribution. Efficient allocation, although a valid criterion for managing and using resources, means very little in an unsustainable or unjust economic system.
Since continuous growth and sustainable scale are incompatible, growth cannot be relied upon to alleviate poverty, as has been done (ineffectively) in the past. If the pie isn’t getting any bigger, we need to cut and distribute the pieces in a fair way. In addition, poor people who have trouble meeting basic needs tend not to care about sustainability, and excessively rich people tend to consume unsustainable quantities of resources. Fair distribution of wealth, therefore, is a critical part of sustainability and the steady state economy.
Efficient Allocation
The conventional economic thought focuses almost exclusively on efficient allocation of scarce resources. The dominant thinking is that free and competitive markets, along with prices driven by supply and demand, result in efficient allocation of goods and services (in the absence of pesky, omnipresent externalities and market imperfections). Efficient allocation is also important in a steady state economy – ecological economists support many market strategies to accomplish efficient allocation of resources – but only after achieving sustainable scale and fair distribution. Efficient allocation, although a valid criterion for managing and using resources, means very little in an unsustainable or unjust economic system.
Based on a brief scanning of the site, the above quote seems to me to be the central thesis. Mainstream economics often talks about 'efficient allocation of resources' which is actually a horribly misleading phrase as it appears to imply that some individual or telic entity (organization) is performing this allocation in a free market. What is meant is that when you have voluntary exchange instead of central planning, goods within an existing pool of resources will tend to move to where they are most valued (people will exchange things they value less for things they value more). This is true with or without economic growth.
So, this organization (really, it's just a school of economic thought) is arguing the same, tired line that we need "fair distribution" instead of "efficient allocation" with a bonus fallacy that free market philosophy has managed to "hide" its "mistake" due to the last couple centuries of "unsustainable growth."
I think that the conception of the human economy as a physical machine - an idea credited on their website to Georgescu-Roegen - is perfectly valid and a wonderfully useful concept because it allows us to come to certain conclusions about the inevitability of pollution, and so on. Unfortunately - as indicated by the very name of the organization - they falsely imagine that the human economy is like a really big steam engine. It is not. Not only is it a physical machine, it's a physical machine filled with billions of autonomous computation devices called "human brains" that independently process highly localized information and come up with their own solutions to their own problems. So, while we can know extremely high level facts about the human economy (such as that pollution is inevitable because entropy is the inevitable by-product of a heat-engine performing physical work), we cannot know anything more detailed about the economy from the simple fact that it is physical.
It is a common strawman of free market philosophy to imply that growth is a necessary precondition to capitalism. It is not. All that is needed is profit opportunities (something less than an absolutely perfect distribution of resources whereby no one's lot in life can be improved by a volutnary exchange with anyone else) and you have capitalism. Since human beings are not omniscient, there will always be profit opportunities, even if there are no new "growth" industries.
If these folks are truly interested in fairness, then they need to think hard about the elimination of privilege from our legal systems. Privilege builds in an ineradicable unfairness into all human interactions. The alternative to a privilege-based legal system is called a private law society. This is the answer to the systemic injustices and unfairness that the members of CASSE have correctly perceived to exist in the present social order.
Clayton -
Sorry for the late response. I had sent one but I guess it didn't go through. Anyways, thanks a lot for the responses. I guess I could have presented the question a little less biased. It was mentioned in class and I wasn't familiar but had my concerns over the assumptions the concept was making at first glance. I scanned over the site right after and I wanted some input from the Austrian perspective (you guys), so I shot a quick post. I guess I naturally assumed it would be opposed but that's not a very good way to approach an analysis, huh?
What gets me is how would they even begin to implement this without it becoming authoritarian. It even refers to stabilizing the population. How would they figure out what the steady state is? And their answers to some of the myths are not very substantive.
Marcos