What Is a Steady State Economy?

Ray Hawk

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.

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.
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.

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.

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Discussion Comments


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.


@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.


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?

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