Daly Fallacies

From Herman Daly.

Aggregate growth is growth in scale of the economy, the size of real GDP, which is a value-based index of aggregate production and consequently of the total resource throughput required by that production.


The addition of value does not require greater resource use. Not unless we\’re going to start arguing that knowledge of how to add value, something entirely immaterial, is a resource.

Real GDP is a value-based index of aggregate quantitative change in real physical production. It is the best index we have of total resource throughput. The unit of measure of real GDP is not dollars, but rather “dollar’s worth.” A dollar’s worth of gasoline is a physical quantity, currently about one-fourth of a gallon. The annual aggregate of all such dollar’s worth amounts of all final commodities is real GDP, and even though not expressible in a simple physical unit, it remains a physical aggregate and subject to physical limits. The price level and nominal GDP might grow forever (inflation), but not real GDP, and the latter is the accepted measure of aggregate growth. Most people can grasp this, and do not conceive of real GDP as trillions of dollar bills, or as ethereal, abstract, psychic, aggregated utility.

Nope. See above. We can increase real GDP by increasing the value of what is produced. Which does not depend upon resource consumption.


Point 3 is entirely true. But it is up to him to calculate that illth is now, at the margin, greater than wealth. Tough one to argue to the Somali farmer on 50 cents a day.

Self-reported happiness increases with per capita GDP up to a level of around $20,000 per year, and then stops rising.

Easterlin Paradox. This is wrong. Sorry, but it is.

5 is correct. Long known problem and why so much attention is being paid to externalities and national capital accounting. So true but out of date.

6: We\’ve reached peak knowledge. After my generation of professors it\’s all downhill from here eh?


7: We can serve the goal of full employment by restricting automation,

Facepalm. Back to the fields you peasants!

Globalization is the engineered integration of many formerly relatively independent national economies into a single tightly bound global economy organized around absolute, not comparative, advantage.

Bollocks. How can a friggin\’ economist get comparative advantage wrong?

More elsewhere later I think….





8 thoughts on “Daly Fallacies”

  1. Whilst I read that, it occurred the total energy required to produce the article, at his end, amounts to what? About enough electricity to make half a pot of coffee. And at mine? To read it? Similar to the amount of energy needed to light the bathroom for a piss. Providing it’s a very small bulb & I’m quick.
    And then. Thinking about the article itself. Well, you can see where he has trouble understanding added value

  2. I think an economist can get it wrong because a lot of us mere mortals don’t get it, but tend to see absolute advantage underlying the classical comparative examples, or rather that today all the stuff about immobility of labour and capital doesn’t really hold – Portugal sending its workers to Britain to make cloth for example, cheaper than British workers. In fact today, if anything, it’s capital that’s most mobile – more mobile than a lot of products. And for certain things (like anything an Indian outsourcer does) there is effectively zero restriction on the movement of labour – an Indian with a computer and a phone can work “in” the west without leaving Bangalore.

  3. I don’t have a problem with accounting for depletion of finite resources in measures of growth. I do have a problem with just about everything else he’s written. The implicit assumptions underpinning this are:

    1. Only “stuff” is useful. Activities that don’t involve making “stuff” – and that therefore use far fewer finite resources – aren’t part of real growth. I guess that would include writing rubbish articles for websites promoting minority economic ideas, then.

    2. People have to have jobs in order to live. So we must ensure that everyone has a job, even if we could produce what they need to live for virtually nothing with full automation. Oh, and behind this is a further assumption – if we could enable people to survive without paid work, because automated production is so cheap, they might get lazy and not want to do boring, repetitive jobs (that could be automated) in order to afford food – and that would be terrible, wouldn’t it? The fact they might use their time more productively instead, doing things that currently aren’t done at all, is overlooked, of course.

    3. Globalisation is bad. Even though there is evidence that globalisation has contributed significantly to the DECLINE in world poverty. http://yaleglobal.yale.edu/content/little-notice-globalization-reduced-poverty

    4. Rich people are no happier than poor ones. Therefore there is no point in trying to make anyone richer.

    5. The world is “full up”, so we can’t grow anymore anyway, so what’s the point in trying.


  4. Tim, where do most of the economists you know stand on Ricardo-s comparitive advantage model these days?

    My feeling – and that of economists I knew – was that it was a brilliantly clear argument, pretty much refutation-proof, captured a deep truth, but….

    ….that there was something fishy about it, which no-one has yet succeeded in stating clearly. Some critics have tried breaking down the Portugal/England wine/wool calculations into time slices as a way into it, is that right?

    What are people-s feelings on this?

  5. A good response to anyone who gets confused between adding value and using more resources: ask them what you can make from 100 g of silicon now, and how valuable it is, now… ten years ago… twenty years ago… hundred years ago. And then consider what we might have in 10 years or 20 years time. The idea we are, or should be, locked into a steady state is utter balls.

  6. Frances Coppola:

    You’ve misinterpreted the intent of their Point No. 5. Those who push this view aren’t trying to persuade that those with “a lot” aren’t going to be happier with the “more” they’re able to add; rather, they’re making a case that those with “a lot” aren’t being made unhappy–or at least not very unhappy–by siphoning off some of that unimportant extra, using it, of course, to make others, with less, substantially more happy.

  7. Gene,

    He never once argued for redistribution of wealth from richer to poorer. I might feel a bit better about him if he did – at least he would be showing some concern for the poor. But he was actually arguing for the poor to, well, enjoy being poor, as the only thing that will make them richer is GDP growth and we can’t have any more of that. As Splinter Sunrise put it in response to Colin Hine’s very similar arguments, “there’s a lot of this stuff going around about how we should help Tanzanians to remain poor subsistence farmers”.

    This sort of stuff from rich privileged rent-seekers like Daly and Hines makes me very angry.

Leave a Reply

Your email address will not be published. Required fields are marked *