We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What Is a Steady State Economy?

By Ray Hawk
Updated: May 17, 2024
Views: 13,727
Share

A steady state economy is a system of economic exchange where population and consumption rates are maintained at a relative, sustainable level over the long term. While the phrase is used to describe national and other large economic blocs, it can also include smaller regional economies based in cities or unique geographic regions. The underlying principle behind the idea of a steady state economy is not that zero growth in wealth occurs over time. Instead, it focuses on increasing innovation and efficient use of resources to result in a state where consumption and production rates are balanced overall. While some sectors of the economy may still be growing and others may be in a state of decline in a steady state of economy, the overarching management of the system ideally maintains a gradual level of improvement in lifestyle that is sustainable into perpetuity.

Proponents of economic equilibrium and population dynamics believe that the world economy is gradually evolving towards a level of sustainability that will come about naturally given enough time. Examples of steady state economy systems are often based in the most highly-advanced societies, where population growth rates are small and increasing levels of technological innovation continually raise the standard of living. Developing nations, on the other hand, are seen as rapidly increasing their carrying capacity for consumption and production as the populace is educated and natural resources are more effectively exploited to fuel rapid growth.

Opponents of the steady state economy premise believe in the process of limits to growth on an interconnected, global scale, initially stated by Thomas Malthus who was an English scholar of the early 19th century. The ideas of Malthus were later expounded upon in modern terms in the book The Limits of Growth, written in 1972 by Donella Meadows, Dennis Meadows, Jorgan Randers, and William Behrens. The popular theory basically states that increases in resource availability and technological innovation only occur on a linear line, while population increases and demand for resources occurs on an exponential curve. When population growth and resource consumption rapidly outpace innovation, the corrective factors of war, famine, and disease arise to reduce the resident population back to sustainable levels.

Where the two economic systems overlap is how natural resources are used and recycled, and at what cost. A steady state economy cannot be based on the gross domestic product (GDP) of any one nation, as every nation tends to rely on foreign suppliers for certain key natural resources or labor expertise. As industrialized nations transfer green technology to developing nations, and developing nations move away from dirty methods of rapid industrialization, the idea of a global steady state economy is promoted. Of equal or greater importance is the ability of advanced nations to develop methods of conserving resources and energy use, and putting into place effective recycling programs so that vital materials are not exhausted before they can be replenished.

The idea of the steady state economy is often portrayed negatively in terms of uneconomic growth, zero growth, or an eroding decline in the standard of living as the population increases. Arguments against this focus on technological innovation and international cooperation to prevent such declines. Some of this cooperation occurs naturally through a desire for profits, such as with the example of electronic books slowly supplanting the sale of some paper-bound books in the US economy, reducing resource and energy consumption. Other components of cooperation occur by simple need, such as the transfer of green technology to third-world nations to stave off the prospect of global warming from industrialization based on coal or other highly polluting fuel sources.

An example of a steady state economy would include many pre-industrial island nations where economies were based on gathering local produce and fish as food sources, housing was made from local materials, and the population lived well. This gave the local people much leisure time for socialization and relaxation, and there were no shortages concerning basic needs. By contrast, a consumer-based society such as many in the Western world that encourages the acquiring of excessive wealth, homes, cars, and more that often go unused by the owners is a model of consumption that cannot be sustained on a worldwide level or a national level for the long term.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

Editors' Picks

Discussion Comments
By bear78 — On Nov 30, 2013

A steady state economy is not just about population, it's also about the scarcity of resources. Even if the population remains the same, if the society runs out of resources, the national economy will be negatively influenced and the standards of living will quickly spiral down. This is why many ecologists are in favor of this economic system, including myself.

By serenesurface — On Nov 29, 2013

@fBoyle-- I don't think that steady state economics regulates demand. It doesn't regulate anything, it just aims for a stable population size and the intelligent use of resources for production to limit waste. When these two are in place, the economy stabilizes on its own.

Moreover, a population with slightly changing population is still considered steady. So the number are not rigid as you think. A steady population means that the birth rate and death rate are equal.

By fBoyle — On Nov 29, 2013

Isn't a steady state economy contradictory to a laissez-faire economy or a free economy? In a free economy, consumer consumption (demand) and supply determine prices and regulate the market. If the demand is set by the state, then it will no longer be a free economy. Then, it will be a planned or command economy like the economy encouraged by the socialist system of government. Am I right?

Share
https://www.wisegeek.net/what-is-a-steady-state-economy.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.