distribution. why does distribution matter? ethical and practical question follows from...
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DistributionDistribution
Why Does Distribution Matter?Why Does Distribution Matter?
Ethical and practical question Follows from sustainable scale: How can we care
about the well being of future generations and not care about the well being of people alive today?
If we can’t have growth, we can’t grow our way out of poverty.
How can we ask people who don’t have enough today to sacrifice for the future?
Ethical and practical question Follows from sustainable scale: How can we care
about the well being of future generations and not care about the well being of people alive today?
If we can’t have growth, we can’t grow our way out of poverty.
How can we ask people who don’t have enough today to sacrifice for the future?
Distribution and ScaleDistribution and Scale
The poorest do not care about the future The richest consume the bulk of the world’s
resources
The poorest do not care about the future The richest consume the bulk of the world’s
resources
Distribution and EfficiencyDistribution and Efficiency Demand = preferences weighted by income First and 2nd theorems of welfare economics Desirable distribution is pre-req for desirable
allocation Diminishing marginal utility and interpersonal
comparisons Negative externalities
Positional wealth Health The laws of thermodynamics and the destruction of
public goods
Demand = preferences weighted by income First and 2nd theorems of welfare economics Desirable distribution is pre-req for desirable
allocation Diminishing marginal utility and interpersonal
comparisons Negative externalities
Positional wealth Health The laws of thermodynamics and the destruction of
public goods
Distribution and DemocracyDistribution and Democracy
Is our country plutocratic or democratic? Wealth, power and rent-seeking behavior "We can have a democratic society, or we
can have the concentration of great wealth in the hands of the few. We cannot have both." Supreme Court Justice Louis Brandeis
Is our country plutocratic or democratic? Wealth, power and rent-seeking behavior "We can have a democratic society, or we
can have the concentration of great wealth in the hands of the few. We cannot have both." Supreme Court Justice Louis Brandeis
What’s the Existing Distribution of Wealth?
What’s the Existing Distribution of Wealth?
Trends in wealth distribution
15
25
35
45
1983 1988 1993 1998
Top 1% Next19% Bottom80%
What’s the distribution of income?
What’s the distribution of income?
The L-curve of Income Distribution
The L-curve of Income Distribution
http://www.youtube.com/watch?v=woIkIph5xcU
http://www.youtube.com/watch?v=woIkIph5xcU
Great Compression, Great Divergence
Great Compression, Great Divergence
Diminishing Marginal Utility?Diminishing Marginal Utility?
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Income Distribution and Taxation
Income Distribution and Taxation
International DistributionInternational Distribution
Far worse than within US Word Bank data 15 poorest countries suffered 3.2% decline in real
income from 1989-1999 15 richest countries experienced 15.5%growth 1% of GNP of US would double income of of 24
poorest countries
Far worse than within US Word Bank data 15 poorest countries suffered 3.2% decline in real
income from 1989-1999 15 richest countries experienced 15.5%growth 1% of GNP of US would double income of of 24
poorest countries
Distribution by factors of production (USA)
Distribution by factors of production (USA)
Wages-70% Profit- 20% Interest- 8% Rent-2% Do natural resources contribute only 2% to
production?
Wages-70% Profit- 20% Interest- 8% Rent-2% Do natural resources contribute only 2% to
production?
Inter-temporal DistributionInter-temporal Distribution
Discounting the future Should we do it? Why? What it means
Discounting the future Should we do it? Why? What it means
How Should we Discount?How Should we Discount?
Discounting built capital vs. natural and human capital
Discounting, scale and sustainability Discount rates for a business vs. an economy Discount rates for a cell vs. a planet
How do we discount? Hyperbolic vs. exponential discounting
Discounting built capital vs. natural and human capital
Discounting, scale and sustainability Discount rates for a business vs. an economy Discount rates for a cell vs. a planet
How do we discount? Hyperbolic vs. exponential discounting
Intertemporal Distribution: The EE perspective
Intertemporal Distribution: The EE perspective
Sustainable scale is essential--we cannot discount the future value of basic life support functions
Inalienable rights--future generations have rights to basic life support functions: soil, water, climate stability, ecosystem resilience, etc.
Sustainable scale is essential--we cannot discount the future value of basic life support functions
Inalienable rights--future generations have rights to basic life support functions: soil, water, climate stability, ecosystem resilience, etc.
Why is redistribution to be avoided?
Conventional view
Why is redistribution to be avoided?
Conventional view People are entitle to keep what they have
earned with the sweat of their brows Destroys incentives, reduces well being of
worst off Most taxes are distorting, and lead to
inefficient outcomes
People are entitle to keep what they have earned with the sweat of their brows
Destroys incentives, reduces well being of worst off
Most taxes are distorting, and lead to inefficient outcomes
Current Trends in RedistributionCurrent Trends in Redistribution
Current trends in redistribution: enclosure of the commons
Current trends in redistribution: enclosure of the commons
What is the commonwealth? Values produced by nature
Non-renewables: minerals and energy Renewables: Goods and Services Air waves, orbits etc.
Values produced by society Private property Land Knowledge and information Money and seignorage
The enclosure trend
What is the commonwealth? Values produced by nature
Non-renewables: minerals and energy Renewables: Goods and Services Air waves, orbits etc.
Values produced by society Private property Land Knowledge and information Money and seignorage
The enclosure trend
Policies towards a sustainable, just and efficient distribution
of resources
Policies towards a sustainable, just and efficient distribution
of resources
Your viewsYour views
Should we have a guaranteed minimum income? Roosevelt’s 4 freedoms A right to health care? A right to food and shelter? A right to other basic
needs?
Should we have a guaranteed minimum income? Roosevelt’s 4 freedoms A right to health care? A right to food and shelter? A right to other basic
needs?
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Your viewsYour views
Should we have more income tax?
Should we have more income tax?
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Your viewsYour views
Should we have more progressive income tax?
What’s the tax rate for hedge fund managers?
Should we have more progressive income tax?
What’s the tax rate for hedge fund managers?
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Should we cap incomes? View of Plato and Ben and Jerry View of Peter Drucker Actual status: Average CEO Views of the
‘founding fathers’ Economic rights
vs. political rights Social obligations
vs. individual rights
Should we cap incomes? View of Plato and Ben and Jerry View of Peter Drucker Actual status: Average CEO Views of the
‘founding fathers’ Economic rights
vs. political rights Social obligations
vs. individual rights QuickTime™ and a decompressor
are needed to see this picture.
Basic PrinciplesBasic Principles People keep what they earn with the sweat of their
brows Wealth created by nature and society distributed
equally Public goods replaced with public goods
Negative externalities of inequality are internalized Those who benefit most from government services pay
the most One of the most important services of government is the
protection of private property
People keep what they earn with the sweat of their brows
Wealth created by nature and society distributed equally Public goods replaced with public goods
Negative externalities of inequality are internalized Those who benefit most from government services pay
the most One of the most important services of government is the
protection of private property
Natural resources: redistributing RentNatural resources: redistributing Rent
Rent= unearned income Land- rent Non-renewables- user cost Renewables- natural dividend
Rent= unearned income Land- rent Non-renewables- user cost Renewables- natural dividend
The land tax The land tax
Non-renewables: capturing rentNon-renewables: capturing rent
Ricardian rent = total revenue-total extraction cost
Scarcity rent = value arising from scarcity Investment in substitutes
Salah El Serafy, 1989, “The Proper Calculation of Income from Depletable Natural Resources”, in Environmental Accounting for Sustainable Development, edited by Yusuf J. Ahmad, Salah El Serafy, and Ernst Lutz, Washington D.C., World Bank.
Alaska permanent trust
Ricardian rent = total revenue-total extraction cost
Scarcity rent = value arising from scarcity Investment in substitutes
Salah El Serafy, 1989, “The Proper Calculation of Income from Depletable Natural Resources”, in Environmental Accounting for Sustainable Development, edited by Yusuf J. Ahmad, Salah El Serafy, and Ernst Lutz, Washington D.C., World Bank.
Alaska permanent trust
Weak Sustainability: oil to income
Renewable resources: the natural dividend
Renewable resources: the natural dividend
Renewable resources: ecosystem services
Renewable resources: ecosystem services
Who owns them? Pollution taxes Taxes on ecological degradation? Who should be compensated?
Sky trust How do we compensate the future?
Who owns them? Pollution taxes Taxes on ecological degradation? Who should be compensated?
Sky trust How do we compensate the future?
Financial Capital: Interest and Seignorage
Financial Capital: Interest and Seignorage
What is seignorage? Reserve requirements Who should get it?
Ithaca hours
What is seignorage? Reserve requirements Who should get it?
Ithaca hours