Describe Herman Daly's concepts of sustainable development and the "circular flow model."
What will be an ideal response?
Economist Herman Daly has been among the leading thinkers who have advocated an innovative approach to economic theory based on the concept of sustainable development. Daly makes a convincing case for an understanding of economic development that transcends the more common standard of economic growth. Unless we make significant changes in our understanding of economic activity, unless quite literally we change the way we do business, we will fail to meet some very basic ethical and environmental obligations. According to Daly, we need a major paradigm shift in how we understand economic activity.
We can begin with the standard understanding of economic activity and economic growth found in almost every economics textbook. What is sometimes called the "circular flow model" explains the nature of economic transactions in terms of a flow of resources from businesses to households and back again.
Two aspects of this circular flow model are worth noting. First, it does not differentiate natural resources from the other factors of production. This model does not explain the origin of resources. They are simply owned by households from which they, like labor, capital, and entrepreneurial skill, can be sold to business. Services can be provided in many ways and by substituting different factors of production. In Simon's terms, resources can therefore be treated as "infinite."
A second observation is that this model treats economic growth as both the solution to all social ills and also as boundless. To keep up with population growth, the economy must grow. To provide for a higher standard of living, the economy must grow. To alleviate poverty, hunger, and disease, the economy must grow. The possibility that the economy cannot grow indefinitely is simply not part of this model.
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Answer the following statement true (T) or false (F)