How, Economically, We’re Fucked

Economists believe the equivalent of the sun going around the Earth, with far worse consequences

When Dr. Herman Daly was working at the World Bank, his assistants brought him this diagram, showing the standard firms/households model of the economy. Resources go in, products come out, GDP goes up, whoopty-doo. As Dr. Tom Murphy tells the story:

Dr. Daly said: “great, now draw a box around this and label it: The Environment.” The obvious point is that all economic activity takes place inside the environment. The next draft came back sporting a box drawn around the figure, but no label. Dr. Daly’s response: “It looks nice, but unless the box is labeled The Environment, it’s only a decorative frame.” The next draft eliminated the figure altogether.

This is the stubbornness of modern (re: classical) economists. They have a belief as rigid as thinking the sun revolves around the Earth. They are so caught up in their model of the world that they miss the environment their model operates within. As Daly says in his book Beyond Growth:

In microeconomics every enterprise has an optimal scale beyond which it should not grow. But when we aggregate all microeconomic units into the macroeconomy, the notion of an optimal scale, beyond which further growth becomes…