1. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 1 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 1 Towards a Sustainable, Just and Efficient Distribution of Resources Joshua Farley Gund Institute for Ecological Economics at UVM

2. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 2 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 2 Outline of Presentation Why does distribution matter? The view from ecological economics Distribution and sustainability Distribution and efficiency What’s the existing distribution? Why is redistribution to be avoided? The conventional view Current trends in redistribution Steps towards a sustainable, just and efficient distribution of resources

3. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 3 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 3 Brief introduction to Ecological Economics

4. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 4 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 4 Economics as the Science of the Allocation of Scarce Resources Among Alternative Desirable Ends What are the desirable ends? –The highest possible quality of life for this and future generations –Quality of life is a lot more than just what we consume What are the scarce resources?

5. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 5 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 5 Pre-analytic vision Finite planet, where the laws of thermodynamics apply Scarce resources are low entropy matter energy Economic growth displaces ecosystem function Ecosystem services have become scarce resources

6. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 6 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 6 Sustainable Scale Scientific question Can’t be answered using standard science, i.e. experiments and repeatable observations.

7. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 7 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 7 Just Distribution Ethical question If we can’t have growth, we can’t grow our way out of poverty 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? How can we ask people who don’t have enough today to sacrifice for the future?

8. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 8 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 8 Efficient Allocation How do we create the most of what is desired from what is available? Scale must be determined first before we know what is available to be allocated Pareto efficiency= objective science BUT Preferences weighted by wealth Therefore, desirable distribution is a pre- condition for desirable allocation. Ethical question

9. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 9 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 9 Distribution and sustainability The poorest do not care about the future The richest consume the bulk of the world’s resources

10. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 10 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 10 Distribution and efficiency Diminishing marginal utility and interpersonal comparisons Negative externalities –Positional wealth –Health –The laws of thermodynamics and the destruction of public goods –Will technology create substitutes for public goods?

11. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 11 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 11 Distribution and Democracy 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

12. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 12 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 12 What’s the existing distribution of wealth (USA)?

13. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 13 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 13 What’s the distribution of income?

14. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 14 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 14 International 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

15. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 15 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 15 Distribution by factors of production (USA) Wages-70% Profit- 20% Interest- 8% Rent-2% Do natural resources contribute to production?

16. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 16 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 16 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

17. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 17 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 17 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

18. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 18 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 18 Policies towards a sustainable, just and efficient distribution of resources

19. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 19 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 19 Basic 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

20. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 20 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 20 Natural resources: redistributing Rent Rent= unearned income Land- rent Non-renewables- user cost Renewables- natural dividend

21. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 21 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 21 The land tax

22. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 22 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 22 Non-renewables: capturing user cost Scarcity rent, user cost or royalty= total revenue-total extraction cost 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

23. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 23 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 23 Weak Sustainability: oil to income

24. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 24 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 24 Renewable resources: the natural dividend

25. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 25 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 25 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?

26. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 26 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 26 Financial Capital: Interest and Seignorage What is seignorage? Reserve requirements Who should get it? –Ithaca hours

27. Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 27 Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level Fifth level 27 Summary and Conclusions Moral issue, but also relevant to efficient allocation From chapter –intragenerational distribution likely to increase QOL of wealthy –Intergenerational distribution likely to increase QOL of present Distribution deserves far more attention from economists