HERMAN DALY

There are two dogmas that neoclassical economists must never publicly doubt lest they be defrocked by their professional priesthood: first, that growth in GDP is always good and is the solution to most problems; second, that free international trade is mutually beneficial thanks to the growth-promoting principle of comparative advantage. These two cracked pillars “support” nearly all the policy advice given by mainstream economists to governments.

The conclusion of the 1972 Limits to Growth study by the Club of Rome still stands 40 years later. The environmental and social costs of increased production are growing faster than the benefits, increasing “illth” faster than wealth, thereby making us poorer, not richer.

Wellbeing should be counted in net terms -- that is to say we should consider not only the accumulated stock of wealth but also that of "illth" and not only the annual flow of goods but also that of "bads." The fact that we have to stretch English usage to find words like illth and bads with which to name the negative consequences of production that should be subtracted from the positive consequences, is indicative of our having ignored the realities for which these words are the necessary names.

As is clear from the title, the book argues that modern neoclassical economics is a mask for power and greed, a construct designed to justify the status quo. Its claim to serve the common good is specious, and its claim to scientific status is fraudulent.

If capital is no longer the magic limiting factor whose presence unleashes economic growth, then what is it?

The free flow of solar radiation that powers life on earth should be diminished, suggest some, including American Enterprise Institute’s S. Thernstrom, because it threatens the growth of our candle-making economy that requires filling the atmosphere with heat-trapping gasses.

For some time a small group of ecological economists has been suggesting that we switch the tax base from income (value added to natural resources by labor and capital), and on to natural resources themselves. Value added to resources is something we want more of, so don't tax it (either at each stage of production as in Europe, or at the final stage as income as in the U.S.). The resource throughput, beginning with depletion and ending with pollution (both real costs), is something we want less of in a full world economy, so let's tax it.

If we were to speak of a “transformation function” rather than a production function then we would naturally have to specify what is being transformed, into what, by the agency of what?

Some say it is senseless to advocate a steady state unless we first have attained, or can at least specify, the optimal level at which to remain stationary. On the contrary, it is useless to know the optimum unless we first know how to live in a steady state. Otherwise knowing the optimum level will just allow us to wave goodbye to it as we grow beyond it—or as we "degrow" below it.

What do we economists have to learn from Wendell Berry? Many things, but here I will mention only two. First is a definitional correction regarding the basic nature of our subject matter—exactly what reality matters most to our economic life and why? Second, what mode of thinking does this reality require of us in order to understand it as well as possible, without seducing us into spurious substitutes for honest ignorance?