Chapter Three What Economies Do Introducing the Four

Chapter Three: What Economies Do

Introducing the Four Essential Economic Activities

Figure 3. 1: The Role of Financial Capital in Commercial Production financial capital commercial production financial capital

Resource Maintenance: Attending to the Asset Base of the Macroeconomy

Figure 3. 2: The General Stock-Flow Diagram Stock Flows Stock Additions Initial Stock Next Stock Subtractions Time

Figure 3. 3: A “Bathtub”-Style Diagram Additions or Inflows Stock Subtractions or Outflows

Distribution: Who Gets What, and How?

Table 3. 1: Distribution of U. S. Household Income in 2009 Group of Households Share of Aggregate Income (%) Lower Limit of Each Fifth ($) Poorest Fifth 3. 4 $0 Second Fifth 8. 6 $20, 453 Middle Fifth 14. 6 $38, 550 Fourth Fifth 23. 2 $61, 801 Richest Fifth 50. 3 $100, 000 Richest five percent 21. 7 $180, 000

Figure 3. 4: Lorenz Curve for U. S. Household Income, 2009

Figure 3. 5: Lorenz Curve for Sweden Household Income, 2009

Cumulative Percent of Income Figure 3. 6: The Gini Ratio, 100 80 60 A 40 B 20 0 20 40 60 Percent of Households 80 100

Figure 3. 7: Income Shares of the Richest and Poorest Households, 1968 -2010 25. 0 Top 5% of households Share of Income (%) 20. 0 15. 0 10. 0 Bottom 20% of households 5. 0 - 1968 1974 1980 1986 1992 1998 2004 2010

The Three Spheres of Economic Activity

Figure 3. 8: Social and Environmental Contexts of Economic Activity Physical Context Social Context Economic Activity Natural Inputs (flows of natural resources and environmental services) Core Sphere Business Sphere Outputs Public Purpose Sphere (pollution and wastes)