Top 15 Policies For Achieving A Steady State Economy

 By Herman Daly CENTER FOR ADVANCEMENT OF THE STEADY STATE ECONOMY (CASSE)


Herman Daly

In a democratic society, the people have a say about the policies enacted. We can all look for opportunities to support policies that will lead to a sustainable economy rather than a growth economy. Ecological economics suggests three foundations to a long-term, healthy economy: (1) sustainable scale, (2) fair distribution, and (3) efficient allocation. CASSE’s top 15 policies for building these three foundations are provided below. In addition, we also provide summaries of policy recommendations from other leading researchers: Tim Jackson, Herman Daly, Gus Speth, David Korten.

1. First and foremost, adopt the right macro-economic policy goal – a steady state economy that features sustainable scale, fair distribution of wealth, and efficient allocation of resources. A prerequisite to adopting this macro-economic policy goal is a cultural shift from the pursuit of lifestyles driven by endless economic expansion and unsustainable consumerism to lifestyles driven by the search for long-term prosperity and sustainable consumption that fulfills people’s needs.
2. Maintain an exemplary network of conservation areas, sufficient in size and diversity to ensure the long-term provision of vital ecosystem services.
3. Stabilize population, and aim for a long-term population size that enables a high standard of living for everyone without undermining ecological systems and the life-support services they provide.
4. Gradually reset existing fiscal, monetary, and trade policy levers from growth toward a steady state. For example, manage the money supply and redevelop the tax code with the new macro-economic policy goal as a guide.
5. Limit the range of inequality in income and wealth, including both a minimum and maximum allowable income. Implement tax reforms to tax “bads” (e.g., pollution and depletion of natural resources) rather than goods (e.g., income from wages).
6. Develop a commons sector to accompany the public and private sectors. Within this commons sector, assign property rights for commonly held resources (e.g., the atmosphere, mineral resources, and forests), and establish public trusts to manage those resources for maximum long-term public benefit.
7. Employ cap-auction-trade systems in the commons sector for allocating basic resources. Set caps based on biophysical limits. Use auctions to distribute rights to extract resources. Equitably redistribute auction payments through public trusts. Implement a trading system for extraction rights to achieve efficient allocation of resources to those uses with the highest demand.
8. Establish a more flexible working day, week, and year to provide more opportunities for people to decide how to use their own time and to alleviate employment pressures.
9. Overhaul banking regulations, starting with gradual elimination of fractional reserve banking, such that the monetary system moves away from a debt structure that requires continuous economic growth.
10. Adjust zoning policies to limit sprawl and promote energy conservation.
11. Continue to monitor GDP, but interpret it as a measure of the size of the economy. Use other indices to measure economic welfare and social progress, such as the Genuine Progress Indicator. Use the Steady State Economy Index (under development by CASSE) to indicate proximity to a sustainable steady state.
12. Prevent unconstrained capital mobility so that financial resources are more directly tied to the real assets they represent.
13. Work toward full internalization of costs in prices (e.g., costs associated with environmental protection and fair labor laws), and adopt compensating tariffs to protect efficient national policies of cost internalization from standards-lowering competition from other countries.
14. Institute policies that move away from globalization and toward localization to conserve energy resources, provide high-quality local jobs, and maintain local decision-making authority.
15. Limit the scope of advertising to prevent unnecessary demand stimulation and wasteful consumption.

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