RC Passage 3 Explanation
Paragraph Summaries
- Steady-state economics challenges the neoclassical view that the economy is a closed system that depends on growth.
- Steady-State economists say the economy is dependent on natural resources from outside the system. Neoclassical economists think that natural resources are part of the system.
- Some steady-state economists think the economy has already grown too large. We can shrink the economy and satisfy people’s needs by becoming more efficient with our resources.
Analysis
This passage describes the views of two schools of economic thought. The neoclassical school is the traditional school.
The neoclassical view can be summarized as: we can grow forever, and there are no limits. We must grow!
Resources don’t matter. If we run out, we’ll invent new ones.
The neoclassical school thinks natural resources are part of the economy, and not separate from it.
The steady-state school is the new school. They think the economy depends on natural resources, which are not part of the economy.
If we grow the economy too large, we’ll run through natural resources too quickly. We’ll harm the environment more than we help ourselves.
(lines 22-26)
So the steady-state economists say we should stop growing or even shrink the economy. This is an unfamiliar view. If we have no growth, how can we satisfy our needs?
The steady state economists have an answer, in the third paragraph. If we use resources more efficiently, we can satisfy our wants and shrink the economy.
The author is not making an argument. He never chooses sides. Though it’s implied that he favors the steady-state argument. The neoclassical argument is made to sound a bit ridiculous, and most of the passage is spent discussing steady-state views.
Note that not all steady state economists necessarily think the economy is already too large. Only some steady state economists believe this (lines 37-44).
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