Renegade Economists Show #275

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Following on from last weeks interview on ecosystem services valuation, Karl interviews Dr Michael Vardon. Dr Vardon is a special advisor to the Australian Bureau of Statistics on environmental accounting.

Dr Vardon introduces the System of Environmental – Economic Accounting (SEEA), which has been in development since 1993 at a standardised international level, but is now part of official research. In time this information will help us understand our net carbon balance and our relationship to scare natural resources. On the show Dr Vardon takes us through the environmental values we do and don’t account for presently, and where we’re going with the SEEA in Australia.

As a bonus, here’s Dr David Suzuki on the failings of economics to account for environmental value that’s sampled in the show.

For those interested in a vision of a sane economy, member K.D summarised her key learnings from Peter Barnes’ landmark 2007 book Capitalism 3.0. Acting on his beliefs, Peter kindly donated the book to the commons, allowing it to be downloaded (pdf). It can be purchased here. Most of these are direct transcriptions from the book.

CAPITALISM 3.0

A GUIDE TO RECLAIMING THE COMMONS, PETER BARNES

BOOK SUMMARY

My initial ruminations focused on climate change caused by human emissions of heat-trapping gases. Some analysts saw this as a “tragedy of the commons,” a concept popularized forty years ago by biologist Garrett Hardin. According to Hardin, people will always overuse a commons because it’s in their self-interest to do so. I saw the problem instead as a pair of tragedies: first a tragedy of the market, which has no way of curbing its own excesses, and second a tragedy of government, which fails to protect the atmosphere because polluting corporations are powerful and future generations don’t vote. This way of viewing the situation led to a hypothesis: if the commons is a victim of market and government failures, rather than the cause of its own destruction, the remedy might lie in strengthening the commons. But how might that be done?

Part 2 proposes a number of new property rights, birthrights, and institutions that would enlarge the commons sector in one way or another. I like to think that these proposals blend hope and realism. Among them are:
• A series of ecosystem trusts that protect air, water, forests and habitat;
• A mutual fund that pays dividends to all Americans—one person, one share;
• A trust fund that provides start-up capital to every child;
• A risk-sharing pool for health care that covers everyone;
• A national fund based on copyright fees that supports local arts;
• A limit on the amount of advertising.

THE COMMONS
= Nature, Community and Culture

In this book I use the commons as a generic term, like the market or the state. It refers to all the gifts we inherit or create together.

This notion of the commons designates a set of assets that have two characteristics: they’re all gifts, and they’re all shared. A gift is something we receive, as opposed to something we earn. A shared gift is one we receive as members of a community, as opposed to individually.
Examples of such gifts include air, water, ecosystems, languages, music, holidays, money, law, mathematics, parks, the Internet, and much more.

There’s another quality to assets in the commons: we have a joint obligation to preserve them. That’s because future generations will need them to live, and live well, just as we do. And our generation has no right to say, “These gifts end here.”

Assets in the commons are meant to be preserved regardless of their return to capital. Just as we receive them as shared gifts, so we have a duty to pass them on in at least the same condition as we received them. If we can add to their value, so much the better, but at a minimum we must not degrade them, and we certainly have no right to destroy them.

But there’s no inherent reason why commons can’t be managed as commons.
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Renegade Economists Show #274

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Mining and logging make the big bucks, but what’s the true cost? This week Karl interviews Ian Curtis, of Curtis NRA, whose landmark work on Eco System Service Valuation has won a serious battle in Papua New Guinea. He combines ecology and economics to calculate the cost of environmental degradation on people and land.

In PNG resource rents are too low to cover the cost of the damage, but last year in a landmark judgement courts found in favour of the traditional owners of the land, using the environmental valuation method to award them $90 million (but, as always, there’s a hitch).

Karl and Ian discuss the methods used to determine the value of land, from the rainforest to the open grasslands. Curtis also discusses the valuation of 600,000 hectares of now defunct stock routes in New South Wales.

To hear more about land valuation in Australia and beyond, follow the link above for this week’s Renegade Economists.

Renegade Economists Show #273

As broadcast on 3CR, Wed Jan 30, 2013

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Following on from George Monbiot’s article supporting Land Tax last week, the show features a BBC interview with UK Green MP Caroline Lucas on her legislative bill to the House of Commons asking Treasury to model the effects of Land Value Tax.

Karl discusses Mike Whitney’s quote on the role of property speculation in the US housing bounce then moves to discuss who really benefits when a major resource find is discovered like the $20 trillion Coober Pedy shale oil and gas find.

Thom Hartmann finishes the show with his excellent piece on the commons asking – why aren’t we all shareholders of the earth?

Much of the content discussed by Thom can be found in the work of Peter Barnes – here is the link to Capitalsm 3.0 (scroll down for the creative commons PDF).

Linc Energy’s $20 trillion shale oil and gas find could re-shape Australia’s economic and energy based future.

The lives of the average Australian could be helped by this bounty we have all been gifted. Even if this unproven find is worth 1/4 of the headline value, the finding must raise questions for Australians about who should profit from this resource windfall.

The 2011-12 year saw the Federal government of Australia receive just $1.5 billion from its resources. Just two of our highly profitable mining companies in Woodside and Santos earnt some $5 billion (EBITDAX) in that year. As many will know, BHP and Rio Tinto earnt closer to $20 billion each over that period.

According to Goldman digs up some resource tax reality:

.. the average global royalty rate is 3.9 per cent. The average rate in Australia is 5.6 per cent.

This is held up as a disincentive for Australian investment by the mining lobby. However, these are minimal returns to the public. Citizen’s of the world must become more aware how much money is being made and what we can do to receive a fair return.

Last year’s BHP’s 2012 annual report boasted about its willingness to pay $54 billion to its shareholders over the last ten years. A yearly dividend average of $5.4 billion is considerable. Investors deserve a return on capital. The money lent is used to invest in machinery that depreciates. Taking this principle at face value, the Australian people deserve a greater return than shareholders because these are finite natural resources. This is magnified in the knowledge that iron ore appreciated by 900% over the last decade. This uplift was through no effort of the mining company.

Alex Martell, a commenter on the Goldman Business Spectator article above sums it:

When it comes to extraction of national mineral/petro resources, any profits above a fair rate of return for the miner belong to the country in question (Goldman digs up some resource tax reality, January 24).

Hi rates of capture of these profits indicate government efficiency in standing up for its citizens and collecting these profits (e.g. as Norway does as noted by Maurice Munsie above).

The Australian government I’m afraid has been inefficient in this respect and super profits continue to go to a handful of players with significant influence and ability to protect their economic rents at the expense of current and future generations of Australians.

24 Jan 2013 4:43 PM

The environmental impact of digging up costly shale oil and gas could well spell then end of life as we know it on planet earth. With the climate shift well and truly underway, we cannot give these resources away for a song as the wealth gap increases and uncertainty abounds.

The public further loses out with locals in the Coober Pedy community set to face an enormous property bubble as property ‘investors’ snoop in to play the ponzi game, passing the parcel from one to the other for quick, easy, barely taxed profits. As the Australian Property Investor reported yesterday on a local real estate agent:

“I’ve had so many calls, you wouldn’t believe it,” she says. “My brain is about to explode.”

Who benefits? Locals will suffer from rising rents that are then passed on in higher retail prices. The average miner will have to sacrifice much of their earnings in high rents to guarantee a place to live in the sweltering heat. In some communities the only alternative they face is to live in a shipping container in 45 degree heat. No wonder rents are already going up $10 per week in Coober Pedy! Will houses like this still be $85,000 in a year to come?

The Alaska Permanent Fund is one way the entire public could benefit from what was once understood as the common-wealth. A yearly Citizen’s Dividend is paid of some $1000 – $2,000. How would that help your family? Another alternative to handing miners the trillions is to follow resource blessed Saudi Arabia, where locals pay zero income tax.

One thing is certain, there’s a sure profit for those who already have money to enter the land game at any level. Read more on resource rents.