DistributionDistribution

Current EventsCurrent Events Government shutdown

over health care

Slashing expenditures on food stamps “Among the 254 counties where food stamp

recipients doubled between 2007 and 2011, Republican Mitt Romney won 213 of them in last year’s presidential election, according to U.S. Department of Agriculture data”

Government shutdown over health care

Slashing expenditures on food stamps “Among the 254 counties where food stamp

recipients doubled between 2007 and 2011, Republican Mitt Romney won 213 of them in last year’s presidential election, according to U.S. Department of Agriculture data”

Why Does Distribution Matter?Why Does Distribution Matter?

Ethical and practical question Ethical and practical question

Distribution and EfficiencyDistribution and Efficiency

Diminishing Marginal Utility?Diminishing Marginal Utility?

Distribution and DemocracyDistribution 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

The Quiet CoupThe crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

By Simon Johnson, The Atlantic

The Quiet CoupThe crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

By Simon Johnson, The Atlantic

What’s the Existing Distribution of Wealth (stock)?

What’s the Existing Distribution of Wealth (stock)?

Top 20%? Middle 20%? Bottom 20%?

Top 20%? Middle 20%? Bottom 20%?

What’s the ideal distribution?What’s the ideal distribution?

The L-curve of Income Distribution (flow)

The L-curve of Income Distribution (flow)

http://www.youtube.com/watch?v=woIkIph5xcU

http://www.youtube.com/watch?v=woIkIph5xcU

Distribution TrendsDistribution Trends

Income Distribution and Taxation

Income Distribution and Taxation

Great compressionGreat divergence

Middle class America

Distribution by factors of production (USA)

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?

Why is redistribution to be avoided? Conventional viewWhy 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 NYT editorial

Higher Taxes Mean I'll Work Less

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 NYT editorial

Higher Taxes Mean I'll Work Less

Most taxes are distorting, and lead to inefficient outcomes

Current Trends in RedistributionCurrent Trends in Redistribution

Hedge fund managers tax rates: 15% on profit share

Share of corporate profits going to finance in 1980: 5%. In 2010: 40% Only significant financial innovation: ATM

machine (Paul Volcker)

Hedge fund managers tax rates: 15% on profit share

Share of corporate profits going to finance in 1980: 5%. In 2010: 40% Only significant financial innovation: ATM

machine (Paul Volcker)

U.S. bank industry profits hit record $42.2 billion in second quarter

Finance set to surpass tech as most-profitable U.S. industry

Credit market debt,net of gov’t

Current trends in redistribution: enclosure of the commons

Current trends in redistribution: enclosure of the commons

Values produced by nature Non-renewables: minerals and energy (royalties) Renewables: Goods and Services (natural dividend, waste

absorption, etc.) Air waves, orbits etc.

Values produced by society Private property Land Knowledge and information Money and seignorage

The enclosure trend

Values produced by nature Non-renewables: minerals and energy (royalties) Renewables: Goods and Services (natural dividend, waste

absorption, etc.) Air waves, orbits etc.

Values produced by society Private property Land Knowledge and information Money and seignorage

The enclosure trend

Policies towards a sustainable, just and

efficient distribution of resources

Policies towards a sustainable, just and

efficient distribution of resources

Your viewsYour 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?

Your viewsYour views

Should we have more income tax?

Should we have more income tax?

Your viewsYour 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?

Should we cap incomes? View of Plato and Ben and Jerry Actual status: Average CEO Economic rights

vs. political rights Social obligations

vs. individual rights

Should we cap incomes? View of Plato and Ben and Jerry Actual status: Average CEO Economic rights

vs. political rights Social obligations

vs. individual rights

Basic PrinciplesBasic Principles People keep what they produce 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

People keep what they produce 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

Natural resources: redistributing RentNatural resources: redistributing Rent

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

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

The land tax The land tax

Non-renewables: capturing rentNon-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

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

Weak Sustainability: oil to income

Renewable resources: the natural dividend

Renewable resources: the natural dividend

Renewable resources: ecosystem services

Renewable resources: ecosystem services

Who owns them? Pollution taxes Taxes on ecological degradation? Who should be compensated?

VCAT, Sky trust How do we compensate the future?

Who owns them? Pollution taxes Taxes on ecological degradation? Who should be compensated?

VCAT, Sky trust How do we compensate the future?

Financial Capital: Interest and Seignorage

Financial Capital: Interest and Seignorage

What is seignorage? Reserve requirements Who should get it?

Ithaca hours

What is seignorage? Reserve requirements Who should get it?

Ithaca hours