Herman E. Daly: Steady-State Economics

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PLOWBOY: It sounds as if none of your three plans could work alone.

DALY: That's right, the systems fit together. In fact, there's a basic economic principle that says when you have two independent policy goals, you need two independent instruments in order to achieve both aims. For example, people could debate forever about whether to raise or lower the price of energy. The people who favor efficiency would say raise it... those who favor equity would say lower it. But the two goals will never meet. You must serve efficiency by raising the price of energy . . . and then serve equity by redistributing income resulting from the increased price.

PLOWBOY: What about enforcing a pollution tax instead of a depletion quota? That would cause resource prices to rise, as well.

DALY: True, but you have to remember that the environment doesn't care about prices, it cares about quantity . . . and pollution taxes wouldn't necessarily limit the amount of resources consumed. Such taxation would also operate at the end of the throughput process. Entropy is higher at a system's output than at the input end, so—inevitably—we'd always have many more smokestacks and drain pipes than mines and wells.

Besides all that, trying to influence the marketplace with a pollution tax is a little like letting a two-year-old child loose in a living room full of irreplaceable antiques, and then slapping the tot's hands every time he or she breaks an invaluable vase or lamp . . . instead of simply building the largest possible playpen in the room, and leaving the youngster free to play within the limits set by the enclosure.

When left to itself, the market system does not make long-term value decisions. The costs of such choices are usually either delayed or not obvious ... or they don't fall mainly on the decision-maker. Instead, the market operates—and very effectively, in its own way—on the basis of short-run competition.

Take the difference between solar energy and fossil fuels: It's estimated that the sun will shine for about another four billion years. On the other hand, if we burned all the world's fossil fuels as rapidly as we could, we'd get the energy equivalent of only about two weeks of sunlight. That's two weeks versus four billion years! Yet we currently allow the price of our scarce, short-term oil resources to determine the extent to which we introduce solar energy. If solar energy can't compete with fossil fuel that's made inexpensive by rapid extraction, then we say solar energy is uneconomical to use.

That's backwards! We ought to recognize the sun's power—our "permanent" resource—as the standard, figure out how much it costs to produce a Btu of usable energy by solar means, and let that cost determine the price and corresponding rate of depletion of fossil fuels.

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