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 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?

3. Distribution 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

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  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  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. What’s the Existing Distribution of Wealth?

7. What’s the distribution of income?

8. The L-curve of Income Distribution  http://www.youtube.com/watch?v=woIkIph 5xcU

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 15.5%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

13. 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?

14. Inter-temporal Distribution  Discounting the future  Should we do it? Why?  What it means  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  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.  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  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  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?  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?

22. Your views  Should we have more income tax?

23. Your 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?

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  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