Chapter Three: What Economies Do

Introducing the Four Essential Economic Activities

financial capital commercial production Figure 3.1: The Role of Financial Capital in Commercial Production

Resource Maintenance: Attending to the Asset Base of the Macroeconomy

FlowsStock Additions Time Subtractions Initial Stock Next Stock Initial Stock Next Stock Figure 3.2: The General Stock-Flow Diagram

Additions or Inflows Subtractions or Outflows Stock Figure 3.3: A “Bathtub”-Style Diagram

Distribution: Who Gets What, and How?

Group of HouseholdsShare of Aggregate Income (%)Lower Limit of Each Fifth ($) Poorest Fifth3.4$0 Second Fifth8.6$20,453 Middle Fifth14.6$38,550 Fourth Fifth23.2$61,801 Richest Fifth50.3$100,000 Richest five percent21.7$180,000 Table 3.1: Distribution of U.S. Household Income in 2009

Figure 3.4: Lorenz Curve for U.S. Household Income, 2009

Figure 3.5: Lorenz Curve for Sweden Household Income, 2009

Percent of Households Cumulative Percent of Income A B Figure 3.6: The Gini Ratio,

Share of Income (%) Top 5% of households Bottom 20% of households Figure 3.7: Income Shares of the Richest and Poorest Households,

The Three Spheres of Economic Activity

Business Sphere Economic Activity Social Context Physical Context Core Sphere Public Purpose Sphere Natural Inputs (flows of natural resources and environmental services) Outputs (pollution and wastes) Figure 3.8: Social and Environmental Contexts of Economic Activity