A steady state economy is an economy which is stable and is at the equilibrium between various factors such as demand, supply, and factors of production. It finds the equilibrium between population and production growth. A nation’s economy can reach a steady state after experiencing a period of growth or de-growth (Jhinghan, 2016).
The natural resources are used efficiently with minimized wastage at the steady state level leading to wealth creation. Wealth and funds should be distributed equally among people in the country. A steady state is sustainable in the long run when it does not exceed ecological limits and has stable Gross Domestic Product (National Income).
Steady state economy deals with economic growth, environmental protection and economic sustainability. Economic growth is the increase in real output of a country. Production of goods and services within the countries industries adds to the value of real Gross Domestic Product. The economic growth of a country is faced with two factors namely- growth and recession. During growth the economy performs extraordinarily in every sector of the economy hence increasing the GDP of the country. Recession involves reduced economic performance and reduction in factors affecting economic growth such as investments, consumption and government expenditures. Neither economic growth nor recession is sustainable hence a steady state level is required for every economy in the world to grow (Kerschner, 2010). This can be shown with the help of a graph:
According to the graph, the country starts at maximum growth. At this level the GDP is high which means the country is performing. All factors of production are maximum utilized. The de-growth stage involves recession. There is a fall in the Gross Domestic Product of the country and reduced utilization of factors of production. The steady state level is where the economy is balanced and is at the equilibrium level.
Environmental protection involves using natural resources efficiently and effectively with minimized wastage and misuse of the resources. The extractions of natural resources are to be done in a manner that does not destroy the landscape and natural ecosystem of the biodiversity. Through implementation of policies and regulations that protect the environment there would be reduced forms of environmental pollution such as air, land and water pollution and contamination. Policies such as green tax, carbon emission limits etc. can help protect and save the environment from getting polluted. A conducive environment enables economic activities and operations to be carried out since it’s a source of raw materials. It also enables growth as well as development of the country’s economy to reach the stable state.
Economic sustainability leads to improved living standards and quality of life. The availability of money supply within the economy will enable more consumption and production within different sectors of the economy. According to Lianos (2018), more production leads to more employment opportunities which will lead to an increase in the GDP. The government expenditure is used to fund investment opportunities in the economy and foreign countries. Foreign exchange is earned from investment opportunities by the country.
Jhinghan, M. L. 2016. Micro economic Theory, New Delhi: Vrinda Publications.
Kerschner, C. 2010. Economic de-growth vs. steady-state economy. Journal of cleaner production, 18(6), 544-551.
Lianos, T. P. 2018. Steady state economy and population. South-Eastern Europe Journal of Economics, 16(1), 66-78.
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