Steady State Economy

Bigger is better. True when it comes to offensive linemen. And wedding cakes. And brass bands. And the size of your, um...belt buckle. It’s also true in economies. Everyone likes economic growth. The faster the growth, the better. More production. Constant expansion.

But there is another option. The steady state economy. An economy with no growth.

Think of the steady state as the economic equivalent to that feeling people say they get from meditation. That zen state that purportedly purges you of all earthly worries. No desires. No wants. Just peaceful days spent in quiet, fulfilling meditation. Ommm. Imagine an economy sitting cross-legged on a mat, humming its mantra. That's the steady state.

The term "steady state economy" refers to an situation where physical wealth and population remain steady. An economy with 0% growth, or at least as close to 0% as it can get. Population doesn't grow. Birth rates run at replacement levels. That is, the birth rate matches the death rate. So the population of your country is 20 million in 2018. It’s 20 million in 2028. It’s still 20 million in 2218. More than just stable population, in a steady state economy, the per capita growth is at zero as well. Per capita growth refers to the amount of growth per person. You divide economic output, usually measured by GDP, by the number of people in the country.

You have a country of 20 million people with annual GDP of 1 trillion dollars. Divide $1 trillion by 20 million per capita GDP of $50,000. So your country has per capita GDP of $50,000 now. In a steady state, if you fast forward ahead 20 years. Per capita GDP is still $50,000. It stays $50,000 a hundred years from now.

In a steady state economy, production is only used to replace stuff that gets worn out. Your Chevy Nova breaks down. So the factory makes another one for you. You get to drive that one until the wheels fall off. There's no additional growth, everything only operates to replace things that have broken down.

There's another connotation to the steady state economy. It has to do with the environment. The steady state is considered more ecologically friendly. Because it doesn't grow, it doesn't burn through as many resources...compared to an economy that chases constant growth. Imagine a civilization in tune with nature. A small village separated from modern conveniences. One surrounded by lush forests and fertile riverbanks. The kind of civilization that uses the last remnants of a moose's entrails to make an organic water filtration system for their camp. Not exploitive of resources...only hunting as much as needed. Replanting every tree or crop they use. Everything done in a way that doesn't deplete the environment. That's a steady state.

In practice, a steady state would be difficult to maintain. It's more of a conceptual benchmark than anything that exists in nature. Like a helpful customer service rep. Or an honest politician. It would be difficult to hold population steady in any society, at least without resorting to authoritarian moves, like China's one child policy. Also, keeping per capita growth at zero would require significant limitations. It would also make the economy susceptible to recession.

It would be easy to slip from 0% growth into, uh...shrinkage. Small, closed societies in relatively isolated areas might be able to maintain a steady state. But it would be difficult for a large, modern economy.

So yeah...we keep coming back to the meditation thing. It's relatively easy to meditate in an isolated monastery on a mountaintop somewhere. Alone. Away from distraction. But try to meditate when you're surrounded by ringing cell phones and traffic noise and the smell of someone brewing coffee in the next room. It’s enough to give someone a Zen-ache.