Managing wealth….all of it

Hedge funds, private equity, the one percent, Warren Buffet, the oil boom in North Dakota….are all in the news partly because we’re intrigued by wealth. Most of us would like to have more of it. In the news too are stories we’d be happy to not hear so much about, the loss of personal wealth in the recession, home prices…crisis in Greece.

The bigger story, call it economics or capitalism or commerce, is of how we get, move and allocate the stuff and services of life among (mostly) those here now. Usually it’s so routine we don’t give it that much thought. But sometimes the stream of wealth seems to thicken and lump. Market sclerosis perhaps, when some get none and others too much? It may be the case today, and we’re paying closer attention.

The stream is denominated in dollars. Quantifying in dollar terms is convenient, but it leaves out of the accounting some things of value. For example, what is the worth of a little girl’s laugh, or a sunset? You can’t put a dollar value on either. The way we count might play a part in the lumpiness as well. And the accounting is really deficient for considering the flow between those here now and the ones who will follow. For sure our conventional way of thinking about wealth and our methods for measuring it have room for improvement.

Part of the problem may be that we’ve come to think of wealth as only something that can be possessed by an individual. An individual lives just so long. At the end there is need to close the books, consolidate everything into a single journal entry and move on. Calculate it in dollars and cents, and then just cut a check and pass it on to whoever is the beneficiary.

But there are drawbacks to this simplified accounting. Some people make their final exit but continue to contribute, for example through the knowledge or art they’ve created. Others leave continuing destructive influence even though they’re in the grave. Simply, for most of us closing the books with a final entry listing only the balance of the retirement fund and the proceeds from the auction of the other “stuff” won’t be an adequate accounting in total. It doesn’t tell our story. But will it really matter to us, or anybody else once we’re gone? Probably not.

If this is our only scorekeeping system there is another flaw that does matter. The system fails to keep track of the other wealth, the part that an individual can’t call exclusively his own. This part, the common wealth, tends to get overlooked. It is treated with less importance because it’s not countable. We live in a world of numbers, and it seems that only what is countable counts.

But common wealth, property of the commons, was recognized by the founders. And philosophers before and since have agreed that private property is not the only property. Three of the original colonies plus Kentucky even named themselves agents of the commons. It is still the Commonwealth of Massachusetts, the Commonwealth of Pennsylvania and the Commonwealth of Virginia.

So what’s this have to do with energy and the content you would expect on this blog? The environment. A healthy environment is a common wealth. More significantly, it’s a common wealth vital to generations present and future.

What has become clear recently is an understanding that human activity, commerce and just plain living, involves an exchange of stuff with, and has a lasting impact on, the environment. We take stuff out and put stuff back. What we take out is different from what we put back, which wouldn’t necessarily be a problem because mother nature will eventually put things back into her order. Trouble is it takes a long time…a very long time. Very long time for greenhouse gas concentrations means centuries or perhaps millennia. Exactly how long carbon dioxide levels remain elevated due to fossil fuel combustion is the subject of research and debate, but there’s little question it’s much longer than a single human lifetime.

Resources extracted, oil for example, may eventually be replenished, but this would occur over millions or perhaps hundreds of millions of years. In practical terms, oil reserves in the ground are not replenished. They are a finite part of the common wealth and rightfully cannot be taken without permission.

Burning up fossil fuel reserves reduces the common wealth that is left for the future. Increasing the greenhouse gas content of the air also reduces common wealth. Elevated greenhouse gases will change the climate, the only one humans have evolved to exist in. Taking away that natural climate is taking away common property, common wealth.

One could argue that we have no obligation to those who follow us. Of future generations, “let them fend for themselves.” But isn’t that the height of arrogance? Doesn’t it smack of the attitude of the self-proclaiming, self-made man, that we know always to be false? It would be like saying all the resources we possess are of our own creation, and therefore we have the right to do with them as we please.

Passing on a disturbed environment is an intergenerational transfer of a problem. It is the passing of reduced wealth.

Nature has a certain order that is not violated. Life is a process where the old give birth to, and give way to, the young. Children are born of parents, not the other way around. Parents normally die before their children.

The transfer of wealth is also normally in the same direction. Children are born naked, penniless and ignorant. Parents and the “village” around them gradually transfer accumulated intellectual and material wealth and nature’s bounty to them. They in turn will pass it to the following generation.

In a normal state of affairs there’s a relationship regarding the transfer of filth. Dirty diapers go from baby to parent, not the other way around. The ice cream stain on the car seat gets cleaned up by Dad, not by the messy 5 year old. Adults pay for janitorial services at school because the kids leave a trail of dirt and disorder.

Creating and leaving behind a contaminated environment is a wrong direction transfer. Whether it’s metals in a water resource, radioactive waste that must be sequestered for hundreds of years, or air with elevated levels of CO2, it should be recognized for what it is, an inter-generational transfer of human filth. It is an entry on the liability side of the balance sheet, a reduction of wealth.

Handing future generations any liability is inherently unfair. That includes passing on an atmosphere contaminated with our pollutants. This is important to understand with regard to any pollutant we leave behind, but particularly so in the case with CO2 contamination because of its persistency. How costly the problem will be can only be estimated, so there is room for legitimate disagreement on precisely the wisest course of action. Beyond dispute however is the fact that handing a problem from parent to child is not normal, it’s not fair and it’s not good wealth management.

Dialogue about wealth usually misses relationships between generations. We don’t properly do the accounting for inter-generational transfers. We’re constrained in our thinking by our habit of viewing reality framed by the length of a human life. For energy issues we now know that time window is too short. We ought to recognize and act on our responsibility for energy consumption decisions that will have impact long after we’re gone. We should manage the wealth.

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About wattnextblog

I'm Bill Ferree, a chief officer of WattNext, Inc.
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2 Responses to Managing wealth….all of it

  1. jim rotella says:

    Yes there is a certain order to the universe, to life and an even greater orderliness to civilization. There are some great points in this writing, one of which suggests that the best things in life are not things. So true. Yet, to get those qualities of life, certain “things’ must be acquired — food shelter, clothing, potable water and a few others. Complex social structures have evolved along with inventions of how to use and refine the resources around us to provide for a more comfortable,secure lifestyle; one that liberates our potential to evolve into ? and gain greater understanding of our universe. The question for our time is how much government should we have to regulate our processes so the ability to pursue our individual potential is protected, and the ecosystems we cherish are preserved. It seems many have equated a civil society with large government, and large government policies.But history shows that enlarging governments grow on the false promise of more security for all, — at the expense of individual liberties. And the results too often are massively destructive. We will soon witness a Greek tragedy coming to our country because of disastrous government economic policies. And here again, many in this generation are profiting unfairly at the expense of future tax payers. “Unsustainable” is a kind adjective for the outrageous spending and debt our governments incur. We face enormous challenges that I feel won’t be resolved by politicians or peacefully.

    • wattnextblog says:

      Ah yes, protecting the individual’s right to pursue his/her potential balanced against the interests of the rest of the tribe. A difficult task. It requires the wisdom of Solomon, and few have it. This situation is a special challenge because of the persistence of CO2. Scientists with credentials and a willingness to show their methods argue there is good reason to believe some CO2 released today will still have atmospheric impact 500 years from now. The balancing act needs to consider those who will be here then as well as our individual interests today.

      Financial calamities like the one you predict are nasty, but they are over quickly compared to the potential duration of the fossil fuel climate impact that worries the scientific community. In an economic panic, if a currency gets trashed, it is soon replaced by another. Property claims may be thrown out, fairly or unfairly, but the physical stuff that humans need mostly stays intact. I certainly don’t advocate collapse or revolution. If it happens we’ll all get beat up, but we’ll probably survive. I’m not as confident if the larger ecosystems are damaged to the extent that now seems plausible.

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