100 S C I E N T I F I C A M E R I C A N
S E P T E M B E R 2 0 0 5
ECONOMICS IN A
FULL WORLD
BY HERMAN E. DALY
The global economy is now so large that society can no longer safely pretend it operates
within a limitless ecosystem. Developing an economy that can be sustained within
the finite biosphere requires new ways of thinking
ECONOMICS
Growth is widely thought to be the
panacea for all the major economic ills of
the modern world. Poverty? Just grow the
economy (that is, increase the production
of goods and services and spur consumer
spending) and watch wealth trickle down.
Don’t try to redistribute wealth from rich
to poor, because that slows growth. Un-
employment? Increase demand for goods
and services by lowering interest rates on
loans and stimulating investment, which
leads to more jobs as well as growth.
Overpopulation? Just push economic
growth and rely on the resulting demo-
graphic transition to reduce birth rates,
as it did in the industrial nations during
the 20th century. Environmental degra-
dation? Trust in the environmental
Kuznets curve, an empirical relation pur-
porting to show that with ongoing growth
in gross domestic product (GDP), pollu-
tion at first increases but then reaches a
maximum and declines.
Relying on growth in this way might
be fine if the global economy existed in a
void, but it does not. Rather the economy
is a subsystem of the finite biosphere that
supports it. When the economy’s expan-
sion encroaches too much on its sur-
rounding ecosystem, we will begin to sac-
rifice natural capital (such as fish, miner-
als and fossil fuels) that is worth more
than the man-made capital (such as roads,
factories and appliances) added by the
growth. We will then have what I call un-
economic growth, producing “bads”
faster than goods—making us poorer, not
richer [see box on page 103]. Once we
pass the optimal scale, growth becomes
stupid in the short run and impossible to
maintain in the long run. Evidence sug-
gests that the U.S. may already hav