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2021 | OriginalPaper | Chapter

5. Common Wealth Dividends, Generalized

Author : Brent Ranalli

Published in: Common Wealth Dividends

Publisher: Springer International Publishing

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Abstract

This chapter accomplishes four tasks. First, we situate what we have learned so far within the context of sustainable natural resource management. The imperative of sustainability places some constraints on how and when Nature should be treated as a source of universal dividends. Second, we explore the possibility of articulating a general theory of common wealth dividends, one that can unify the insights from the domains of land, natural resources, and ecosystem services and extend them to other domains such as man-made commons. Specifically, we examine the public trust doctrine, the labor theory of property, and the concept of economic rent. Third, we look at some specific examples of man-made commons (or commons with man-made elements) as candidate sources of common wealth dividends. Finally, we review some parameters of common wealth dividend program design.

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previous chapter Ecosystem Services and Carbon Dividends
Footnotes
1
Basu and Pegg (2020, 1374) point out that framing matters. “Maximize revenue” and “tolerate zero loss” may be mathematically equivalent when it comes to exploitation of non-renewable resources, but “maximize” is a fuzzy directive—one that a person can fall short of and still feel satisfied—while “zero loss” is a strict directive, and it is galvanizing. Humans tend to be loss-averse. (Cf. the researches of Kahneman and Tversky [1979] on prospect theory: “Losses loom larger than gains” [79].)
 
2
This is in accordance with what is known in environmental economics as “weak sustainability,” which posits a degree of substitutability between natural capital and other types of capital. Foundational writings include Solow (1974) and Hartwick (1977). The idea that society should invest all rents from exhaustible resources in reproducible capital goods is known as “Hartwick’s Rule.”
 
3
A good entry point into the vast literature on common pool resources is the short 1999 article “Revisiting the Commons: Local Lessons, Global Challenges” by Elinor Ostrom and colleagues (Ostrum et al. 1999).
 
4
Ellerman takes pains to distinguish the labor theory of property from the so-called labor theory of value (LTV), which states that a product’s value can or should be measured by the amount of human labor embodied in it. The labor theory of value (which is problematic—it falls apart completely when we consider that natural resources have value) goes back at least to Adam Smith, but is associated particularly with Marxist economics. Some early economists had a tendency to muddle the LTP and LTV together, or to justify one on the basis of the other, but they are analytically distinct.
 
5
The analysis of economic rent presented here largely follows the classifications used in Khan’s (2000) chapter-length study of the topic. An alternative framework is Boyce’s four-part classification (2019, 13ff), which offers a distinction between extractive rent (rent that accrues to those who exploit natural resources) and protective rent (rent paid by those who make use of ecosystem services), one rewarding exploitation and the other encouraging conservation.
 
6
Corporate lobbying was not always so intense; it emerged as a core element of American business operations in the 1970s. For an explanation of how that transition occurred and a review of relevant literature, see Ranalli et al. (2018).
 
7
In this simple and stylized example, it is necessary to assume that there are multiple producers and consumers in competition, that all products are of identical quality, that every unit produced during the period is sold during the period, and that all sales take place simultaneously at the end of the period (or at least in full knowledge of what the total production during the period will be).
 
8
Or even “shorting” the asset—signing a contract to sell it before one has purchased it.
 
9
As a consequence of there being no labor component to land and hence no “next-best” use other than no use—and as a consequence of its immobility—land has the curious property that taxing it at 100% creates no distortions in supply. I.e., when the alternative is letting the land lie idle, the owner has just as much incentive to rent it out for an after-tax income of $1 as for an untaxed income of $1,000. George was aware of this fact and used it as a selling point for his Single Tax.
 
10
We might even consider the permit auction concept to be even purer and more paradigmatic than the land tax. A Georgeist land tax is functionally equivalent to an auction of permits to use parcels of land, an auction in which the users of land participate and the nominal owners have no role. In this visualization, the agency that issues permits (for land use, carbon emissions, etc.) at auction puts the revenue to public use not because it is a producer surplus but because—like the authority overseeing the use of renewable or non-renewable resources in the earlier example—it is merely a manager of the resource, not an owner.
 
11
As an example, consider the rents that accrue to holders of taxi licenses when the supply is kept artificially low by regulators. One Australian inquiry determined that over 100 million AUD of public revenue could be raised in Victoria by jacking up the license fee to extract the rent from existing license-holders. But the more practical solution—and the one that better served consumers, the “long-suffering taxi users”—was rather to issue more licenses, leading to lower prices and reduced rents (Fitzgerald 2013, 33).
 
12
See Huber (2020) on the effects that the metastasizing “non-GDP” (i.e., nonproductive) finance sector has on the real economy.
 
13
For a critical perspective on this argument of Adam Smith’s, see Ranalli (2016a, b). Interestingly, years before Smith made his famous use of the “invisible hand” argument in Wealth of Nations, he test-drove it in The Theory of Moral Sentiments, writing (somewhat rashly, and prefiguring George H. Evans) that “The rich... are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants” (Smith [1759] 1976, 304).
 
14
How fungible (interchangeable) are frequencies? Lower frequencies can more easily be broadcast over a wider geographic range, and they can also better penetrate obstacles like walls. High frequencies can pack information more densely and generally require less power to transmit. For any particular application, the entire range of the spectrum might not be suitable, but most likely a very wide range of it will be.
 
15
For an account of the origins of the wireless property rights regime in the U.S. and parallel developments in Europe, see Kruse (2002). In addition, a classic work on the use and regulation of the radio spectrum in the U.S. is Levin’s 1971 The Invisible Resource.
 
16
Are domain names really a limited resource? They are limited to 253 characters, and the final characters in the string must place a domain name in a recognized top-level domain, of which there are over a thousand. So the number of legitimate domain names is finite but enormous. And it is also plastic—a change in the rules could expand or diminish it. What gives domain names market value is not their absolute scarcity, but the scarcity of domain names that are useful (short and meaningful). A rough analogy would be to say that the amount of “land” in the galaxy (on dry planets, asteroids, etc.) is finite and indefinitely large, but the market value of land is driven by the limited amount whose location and other characteristics make it viable and attractive to potential users.
 
17
To make this point perfectly clear: When modern banks issue a loan, they are not, as laypersons often assume, shifting money from one place to another. They are crediting a deposit account with money that did not previously exist. Since the newly created money is backed by the full faith and credit of the currency-issuing government, banks are performing an inherently public function.
 
18
There are, of course, plenty of other alternatives in the form of different types of local currencies (see, for example, Hallsmith and Leitaer 2011). But as valuable as these alternatives can be in filling niches, they are known as “complementary currencies” for the very good reason that there is no foreseeable lack of demand for widely circulating government-backed currencies.
 
19
Benes and Kumhof (2012, 16): “To be fair, there have of course been historical episodes where government-issued currencies collapsed amid high inflation. But the lessons from these episodes are so obvious, and so unrelated to the fact that monetary control was exercised by the government, that they need not concern us here. These lessons are: First, do not put a convicted murderer and gambler, or similar characters, in charge of your monetary system (the 1717–1720 John Law episode in France). Second, do not start a war, and if you do, do not lose it (wars, especially lost ones, can destroy any currency, irrespective of whether monetary control is exercised by the government or by private parties).”
 
20
In this context, I believe “modern” (as opposed to pre-modern or indigenous) would be the correct distinction; plenty of “non-Western” societies share the individualism and nation-state governance that is characteristic of modernity and would be able to incorporate an innovation like common wealth dividends with no significant cultural disruption. For more on this distinction, see Ranalli (2016c).
 
21
Observing that opinion polls in Mongolia showed a strong preference for mining revenue to be invested by the state and/or spent on long-term social development (i.e., health and education) rather than distributed as dividends, Cummine (2016, 147) remarks that “in some communities, in-kind benefits may better satisfy the preferences of a recipient population” than cash dividends. It is possible that cultural factors may play a role in explaining the polling results (bearing in mind that Mongolia has been a nation-state for a century and is no longer predominantly pastoral—60% of the population now lives in the capital city (Yeung and Howes 2015, 5)—so it is as “modern” as most nations). But another entirely plausible explanation, as presented in Chapter 3, is that the Mongolian people understood that the mining revenue would not last indefinitely, and they preferred that it be directed toward long-term investments, consistent with the sound principles for managing non-renewable resources discussed above.
 
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Metadata
Title
Common Wealth Dividends, Generalized
Author
Brent Ranalli
Copyright Year
2021
Book
Common Wealth Dividends

Print ISBN: 978-3-030-72415-3

Electronic ISBN: 978-3-030-72416-0

Copyright Year: 2021

DOI
https://doi.org/10.1007/978-3-030-72416-0_5