Distribution

1
Distribution
2
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 cant have growth, we cant grow our way
  out of poverty.
• How can we ask people who dont have enough today
  to sacrifice for the future?

3
Distribution and Scale

• The poorest do not care about the future
• The richest consume the bulk of the worlds
  resources

4
Distribution 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

5
Distribution 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

6
Whats the Existing Distribution of Wealth?
7
Whats the distribution of income?
8
The L-curve of Income Distribution

• http//www.youtube.com/watch?vwoIkIph5xcU

9
Great Compression, Great Divergence
10
Diminishing Marginal Utility?
11
Income Distribution and Taxation
12
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 15.5growth
• 1 of GNP of US would double income of of 24
  poorest countries

13
Distribution by factors of production (USA)

• Wages-70
• Profit- 20
• Interest- 8
• Rent-2
• Do natural resources contribute only 2 to
  production?

14
Inter-temporal Distribution

• Discounting the future
• Should we do it? Why?
• What it means

15
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

16
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.

17
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

18
Current Trends in Redistribution
19
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

20
Policies towards a sustainable, just and
efficient distribution of resources
21
Your views

• Should we have a guaranteed minimum income?
• Roosevelts 4 freedoms
• A right to health care?
• A right to food and shelter?
• A right to other basic needs?

22
Your views

• Should we have more income tax?

23
Your views

• Should we have more progressive income tax?
• Whats the tax rate for hedge fund managers?

24

• 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

25
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

26
Natural resources redistributing Rent

• Rent unearned income
• Land- rent
• Non-renewables- user cost
• Renewables- natural dividend

27
The land tax
28
Non-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

29
Weak Sustainability oil to income
30
Renewable resources the natural dividend
31
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?

32
Financial Capital Interest and Seignorage

• What is seignorage?
• Reserve requirements
• Who should get it?
• Ithaca hours