Towards a Sustainable, Just and Efficient Distribution of Resources

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Towards a Sustainable, Just and Efficient Distribution of

Resources

Joshua Farley

Gund Institute for Ecological Economics at UVM




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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




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Brief introduction to Ecological Economics




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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?




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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




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Sustainable Scale

• Scientific question

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




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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?




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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 scienceBUT• Preferences weighted by wealth• Therefore, desirable distribution is a pre-

condition for desirable allocation. • Ethical question




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Distribution and sustainability

• The poorest do not care about the future

• The richest consume the bulk of the world’s resources




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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?




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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




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

Trends in wealth distribution

15

25

35

45

1983 1988 1993 1998

Top 1% Next19% Bottom80%




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What’s the distribution of income?




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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




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Distribution by factors of production (USA)

• Wages-70%• Profit- 20%• Interest- 8%• Rent-2%• Do natural resources contribute to

production?




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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




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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




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Policies towards a sustainable, just and

efficient distribution of resources




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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




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Natural resources: redistributing Rent

• Rent= unearned income

• Land- rent

• Non-renewables- user cost

• Renewables- natural dividend




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The land tax




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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




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Weak Sustainability: oil to income




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Renewable resources: the natural dividend




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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?




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Financial Capital: Interest and Seignorage

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

– Ithaca hours




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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

Towards a Sustainable, Just and Efficient Distribution of Resources

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