We have three economic problems to consider: allocation, distribution and scale.
Allocation refers to the apportioning of resources among alternative product uses—food, bicycles, cars, medical care. An allocation is efficient if it corresponds to effective demand, that is, the relative preferences of the citizens as weighted by their relative incomes, both taken as given. An inefficient allocation will use resources to produce a number of things that people will not buy, and will fail to produce other things that people would buy if only they could find them. It would be characterized by shortages of the latter and surpluses of the former.
Distribution refers to the apportioning of goods produced (and the resources they embody) among different people (as opposed to different commodities). Distributions are just or unjust; allocations are efficient or inefficient. There is an efficient allocation for each distribution of income.
Scale refers to the physical size of the economy relative to the ecosystem. The economy is viewed, in its physical dimensions, as a subsystem of the larger ecosystem. Scale is measured as population times per capita resource use—in other words total resource use—the volume of the matter/energy throughput (metabolic flow) by which the ecosystem sustains the economic subsystem. Scale may be sustainable or unsustainable. An efficient allocation does not imply a just distribution. Neither an efficient allocation or a just distribution, nor both, implies a sustainable scale.
The three concepts are quite distinct, although relations among them exist, as noted above.
(I had planned to write on this topic, but instead put a gift card towards this purchase—a lucky choice, in hindsight. Usually I am happier to read on new topics than to share my clumsy initial thoughts. Experience is starting to show this is a good habit.)
Daly points out that economics and the problem of scale cannot escape elementary thermodynamics. Human economic activity takes low-entropy matter & energy as input and produces high-entropy wastes. The ecosystem has a limited ability to convert the latter to the former. He also hints that the scale of the economy is unsustainable, or will soon be at current rates of growth. There are also a number of elegantly simple diagrams I will surely reproduce and reuse.
The very clear explanations lend weight to a number of incubating personal beliefs:
- "Ethical-" or "green consumerism" cannot solve problems of scale. The much-touted power of individuals making smart product choices is limited to adjusting effective demand, and in turn allocation. Really the only choice which can help us (well-off North Americans) solve the scale problem is to not consume.
- Posturing about "equal treatment" of rich and poor nations in (for example) carbon-limiting agreements is misguided. If there is an optimal scale for the global economy, the corresponding per capita resource use is certainly lower than the current level in the richest nations, or higher than that in the poorest. The necessary adjustments differ greatly depending on which is the case.
- As a corollary to the above, poor nations (Daly says bluntly "the South") cannot follow the same historical trajectory of development as the North. China and India, for example, err badly in aiming for the North American level of consumption. North America, unconscious of the image it presents, errs badly in encouraging such aims. We cannot all live this way; the only "fair" thing is that no one try either to achieve or maintain it.
- Population control is an inescapable necessity. Either our current 6.8-billion must live in general poverty, or some lower number may live comfortably. It is better to accomplish this peacefully than violently.
- In order to muster the political courage to control population, we must first prove to ourselves that we can solve other problems associated with reaching optimal scale.
These considerations motivate major changes, but of course they don't mean that we must choose to be unhealthy, uncomfortable, hungry or unhappy.
More (hopefully) soon.