Steady State Economy
Categories: Econ
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.
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Econ: What are Steady State, Steady Stat...2 Views
And finance Allah shmoop What are steady state steady state
growth and steady state per capita growth Bigger is better
True when it comes to offensive lineman and wedding cakes
and brass bands and the size of your uh you
know belt buckle Well it's also true in economies Everyone
likes economic growth The faster the growth the better More
production constant expansion But there's another option The city state
economy an economy with no growth Think of the steady
state as the economic equivalent to that feeling People say
Yeah 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 Now imagine
an economy sitting cross legged on a mat humming it's
mantra That's the steady state The term steady state economy
refers to a situation where physical wealth and population remain
steady An economy with zero percent growth or at least
as close to zero percent is it Khun Get population
doesn't grow birth rates run it replacement levels that is
the birth rate matches the death rate So the population
of your country is in twenty million people in two
thousand eighteen It's twenty million In two thousand twenty eight
it's still twenty million in twenty two eighteen more than
just stable population in a steady state economy The per
capita growth is also at zero as well Per capita
growth refers to the amount of growth per capita or
person You divide economic output usually measured by GDP by
the number of people in the country You have a
country with twenty million people with annual GDP of a
trillion dollars Divide one trillion buy twenty million and that
gets you per capita GDP of fifty grand So your
country has per capita GDP of fifty thousand dollars Now
in a steady state economy a few fast forward twenty
years per capita GDP is what Yes still fifty grand
It's days fifty thousand dollars One hundred years from now
we'LL in a steady state economy Production is on Ly
used to replace stuff that gets worn out where Chevy
Nova breaks down so the factory makes another one for
you You get to drive that one until well you
know the wheels fall off There's no additional growth Everything
on ly operates to replace things that have broken down
there's another connotation to the steady state economy it has
to do with the environment Will the steady state is
considered more ecologically friendly because it doesn't grow It doesn't
burn through a CZ Many resource is compared to an
economy that chases constant growth Imagine a civilisation in tune
with nature a small village separated from modern conveniences one
surrounded by lush forests and fertile river banks the kind
of civilization that uses the last remnants of moose and
trails to make organic water filtration systems for their camp
Not exploitive of resource is on ly hunting as much
as is needed Replanting every tree your crop They used
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 right It's more of a conceptual
benchmark than anything that exists in real life or nature
you know like a helpful customer service rap or an
honest politician It would be difficult to hold population steady
in any society at least without resorting to authoritarian move
like the one China did with their 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 zero percent growth
into Ah you know 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
to live that way 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
cellphones and traffic noise and the smell of someone brewing
coffee in the next room Yeah it's enough to give
someone a cynic You have been there done that going