Towards a Sustainable, Just and Efficient Distribution of Resources

1. Towards a Sustainable, Just and Efficient Distribution of Resources Joshua Farley Gund Institute for Ecological Economics at UVM

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. Brief introduction to Ecological Economics

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. 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. Sustainable Scale • Scientific question • Can’t be answered using standard science, i.e . experiments and repeatable observations.

7. 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? Just Distribution

8. 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 Efficient Allocation

9. Distribution and sustainability • The poorest do not care about the future • The richest consume the bulk of the world’s resources

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. 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. What’s the existing distribution of wealth (USA)?

13. What’s the distribution of income?

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. Distribution by factors of production (USA) • Wages-70% • Profit- 20% • Interest- 8% • Rent-2% • Do natural resources contribute to production?

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. 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. Policies towards a sustainable, just and efficient distribution of resources

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. Natural resources: redistributing Rent • Rent= unearned income • Land- rent • Non-renewables- user cost • Renewables- natural dividend

21. The land tax

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. Weak Sustainability: oil to income

24. Renewable resources: the natural dividend

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. Financial Capital: Interest and Seignorage • What is seignorage? • Reserve requirements • Who should get it? • Ithaca hours

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