Population, Resources, and Energy in the Global Economy: A Vindication of Herman Daly's Vision

Herman Daly pioneered the concept of environmental macroeconomics. He famously argued that we have moved from an “empty world†of resource abundance to a “full world†of energy and resource limits. His insights, however, have generally been rejected or ignored by most mainstream economic analysts, who argue that resource shortages are remediable through market flexibility and substitution, posing no threat to long-term exponential economic growth. In the absence of immediate crisis, standard economics has been able to maintain this “optimistic†stance, dismissing population, resource, and energy limits. But developments during the first decade of the twenty-first century indicate that it will be Daly’s view, rather than that of the mainstream, that will be most important in shaping economic development in the coming century. As Daly foresaw, an energy economy based on high efficiency and renewable fuels cannot pursue the exponential growth path characteristic of the fossil-fuel dependent economy of the twentieth century. The issues involved go well beyond the energy sector of the economy. Population growth and food supply also become critical. There are many interactions between the agricultural and energy systems; in addition to energy intensification in agriculture, demands for biofuels put pressure on the limited supply of agricultural land. Recent price spikes in food, fuels, and minerals indicate the tremendous stresses placed on the global ecosystem by the combination of population and economic growth in China, India, and elsewhere. They also raise major issues of equity, as high prices for energy and food impact the poor disproportionately. Similar problems affect ecological systems such as forests and fisheries on a global scale. It will not be possible to adjust to such stresses simply through market flexibility. It is already evident that large-scale government intervention will be needed to respond to climate change. In this context, an activist environmental macroeconomics will be required to balance the requirements of equity and ecosystem sustainability. Either through planned adjustment or through crisis, it will be necessary to shift away from a macroeconomics of indefinite growth towards stabilization of population and reduction of resource throughput, as Daly has long advocated.