Revised 1 March 2025



The formation, maintenance, and replacement of capital stock depends upon the inflows of energy and mass flows and outflows by the way of depreciation and waste, some of which can be recycled. 


Consider the analogy of a bathtub with a tap for inflows and a tap for outflows.


Figure 1: Bathtub analogy



In case (a) the bath tub starts out empty, the inflow tap is fully turned on, and the outflow tap is partially open. The bath tub starts to fill up. Inflows are greater than the outflows as has been during the period of the industrial revolution. Capital stocks increases over time. Eventually the bathtub overflows. The top of the bathtub represents the carrying capacity which has been surpassed. 


In case (b) the bath tub starts out half full, the inflow tap is partially turned on, and the outflow tap plughole is fully open. The inflows are less than the outflows and the level of water in the bathtub starts to sink. Capital stocks decline because depreciation is greater than investment in maintenance and replacement. 


In case (c) the bath tub is half full, the outflow tap is partially open, and the inflow tap is turned on. The level of water in the bathtub is monitored and the inflow tap is adjusted so that the level of water stays the same. Inflows and outflows are equal and capital stocks are sustained over time under conditions of steady state. 


The monitoring of the level of water in the bathtub cannot be absolutely precise, so the level of water in the bathtub is maintained well below the carrying capacity of the bathtub to allow room for fluctuations in the level. The chosen level of the bathtub is based on a safety margin because the carrying capacity of the bathtub cannot be known with precision.  


Steady state is not a stagnant or static state. Instead, steady state is a stable dynamic state of equilibrium where, although the size of a combination of capital stocks remains the same, capital stocks undergo continuous change in the same way that cells in our bodies are replaced over time by different cells. Combinations of capital stocks can undergo continuous changes over time under steady state so long as inflows and outflows of energy and mass are equal. 


Compared to ecosystems which self-regulate under conditions of climax, our current economic systems do not have automatic feedback systems which promote and regulate the same conditions of climax. In order to achieve steady state, we need to adopt economic systems which regulate inflows and outflows of energy and mass to ensure that inflows do not exceed outflows


When the steady state economy is in balance, new capital stock implies the replacement of old capital stock. If old capital stock is found to be deficient in that it uses energy inefficiently, requires high maintenance, and is not competitive, then the materials of the old capital stock are recycled and the old capital stock is replaced by new capital stock. 


A steady state economy allows for replacement of existing capital stock, but  does not allow for large scale capital investments into new projects unless the population is prepared to temporarily forgo their consumption level of life. It is therefore of high priority that we set up the necessary low maintenance capital stock now. This especially applies to renewable energy production. At the moment we consume unnecessary  goods and services, waste energy needlessly, and we invest unwisely in projects based on an assumed continuous growth economy. By re-examining our consumption and investment patterns and by monitoring and controlling inflow and outflow, we can redistribute investments into the type of capital stock that can be more easily sustained in steady state. Some of the investments required may mean allowing some existing capital stock to depreciate. By accepting a lower consumer level of life now, necessary capital stock can be fully established by the time it is energy cost prohibitive to continue relying on a fossil fuel based economy.


Steady state means a constant level of capital stocks with some fluctuations in the form of buildings, transport systems, and machinery etc. which all  depreciate over time due to the laws of entropy. Continued flows of energy and materials are therefore necessary to maintain and replace capital stock. As humankind transitions from fossil fuels to harnessing solar energy, the flow rate of solar energy and the size of the solar “net” or solar energy converters used to capture that solar energy will ultimately set a limit to the possible inflows of energy required to sustain capital stock. 


While maintaining a steady state level of capital stock, control of the outflows of depreciation determines the level of capital stocks as much as does the inflows. It is therefore in our interests to use capital stock which has low depreciation with high durability and high recycling potential. By doing so we are able to maintain a larger total capital stock for the same inflow of energy and materials. Alternatively, we are able to sustain the same level of capital stocks with smaller inflows. By using capital stocks, such as transport systems which are more energy efficient than the systems we currently use, we are also able to sustain a larger total capital stock. Maximising energy use efficiency, recycling, and producing goods of long durability with high recycling efficiency potential will all help to sustain an economic system at a higher consumer level than would be otherwise possible.  


Steady state cannot make more ample than that which is scarce. As Georgescu-Roegen (1971) pointed out, let S represent the stock of low entropy resources on earth, and R the average annual amount of depletion. The theoretical maximum number of years until the non-renewable stock S is depleted is S/R years. The greater R is, the smaller is the time period for humankind to find alternatives. Both the size of our population and our per-capita consumption rate set the pace of depletion of stocks of resource stocks which could be used provide life support systems for future generations. Our current generations have a moral responsibility to attain steady state as soon as possible. The final level of steady state is a moral responsibility for future generations.