Peter Dietsch

Conventional wisdom today holds that private finance will be an important enabler of the transition to a net-zero economy. This paper argues that under two conditions, on the contrary, private finance represents an obstacle in the path to net-zero. First, under a ‘finance franchise’ arrangement where central banks delegate credit and money creation to commercial banks, the latter have incentives to finance any project deemed profitable. Second, given that the negative externalities of GHG emissions remain only incompletely corrected for, banks will expect fossil fuel projects to remain profitable for the foreseeable future. While many scholars have criticized the role of finance in climate policy, the novel contribution of this paper consists in analysing the interaction of these two features of modern economies and its implications for the green transition. The paper then spells out the normative and political consequences of an economy where these two conditions are simultaneously met. Since central banks delegate and oversee private lending, they bear significant responsibility for continued lending to the fossil fuel sector, despite frequent affirmations to the contrary. Possible avenues of reform include a credit policy that reduces fossil fuel funding.

The idea that pushing for more equality comes at a cost in terms of economic efficiency is widely accepted. Underpinning this idea is the premise that some of the most productive members of society will work less if we lower their pay. If this is true, some argue, it justifies paying the most productive a premium to work, provided doing so benefits everyone. This chapter argues that the standard version of the incentives argument suffers from two important blind spots. First, it assumes that the comparative advantage of the most productive members of society is rooted in their natural talents, that is, in a factor exogenous to the production process. Second, it adopts a static framework to analyze the bargaining process in which incentive payments are negotiated, where static means taking all informational inputs from the same moment in time. The chapter uses the debate between John Rawls (1999) and G.A. Cohen (2008) to illustrate the normative repercussions of making these two assumptions. The chapter qualifies as unjust incentive payments that reward individual productivity due to specialization rather than to natural talent. In addition, it argues that individuals would not be in a position to obtain such incentive payments if bargaining took place before rather than after the acquisition of specialized skills. Finally, the chapter discusses the objection that eliminating this type of incentive payments would be inefficient.

Governments increasingly use their fiscal policy to attract mobile capital from abroad. This tax competition puts a strain on the international fiscal system by undermining the capacity of states to make autonomous fiscal choices and by exacerbating inequalities. The existing regulatory framework is not able to address these challenges. Yet, what considerations should guide our efforts for reform? This chapter argues that a first necessary step consists in understanding the principles that justify the state as the principal locus of fiscal control in the first place. Building on an account of the legitimacy of the state and its fiscal powers, the chapter shows how tax competition is in tension with the principal objectives this account assigns to the state. It then outlines a normative response to tax competition that relies on both reforming jurisdictional rules and redistribution between states.

Global capital flows have increased in both size and complexity in recent decades. This entry categorizes the ethical questions that global finance raises into three groups. First, to what extent do global financial markets actually deliver on their double promise of facilitating investment and diversifying risk? Conversely, to what extent are they subject to market failures? Second, even if global finance is beneficial in the aggregate, the evidence suggests that the benefits as well as the costs it imposes vary significantly for different actors. What are the distributive dimensions of global financial markets? Third, money is inextricably linked to power. Thus, a comprehensive picture of global finance needs to include an assessment of the role of states. How do states shape, but at the same time depend upon, global financial markets? These three considerations overlap in important ways, but distinguishing them is nonetheless useful to identify different ethical dimensions of global finance.

The central thesis of Hassoun’s book states that coercive international institutions, in order to be legitimate, must ensure sufficient autonomy for those subject to them. While part i analyses the theoretical structure of this argument, part ii aims to assess its practical implications in the contexts of aid and trade. This effort to bridge the gap between theory and practice is welcome, even though the connection could be strengthened further. At the core of Hassoun’s theoretical stance lies the innovative idea of a sufficientarian account of the legitimacy of coercive institutions. This review suggests that, in contrast to a sufficientarian theory of the just distribution of material resources, relying on a sufficientarian view in the context of legitimacy is more controversial. Following the discussion of some more specific theoretical issues, the review closes with an evaluation of Hassoun’s proposal of a fair trade certification system for pharmaceutical companies.

Theories of justice and intellectual property are vast topics in their own right. The contributions to this volume examine how they relate. How do our justifications for protecting intellectual property fare from an ethical perspective? Any attempt to tackle this question in a relatively short chapter like this one will have to be restricted in scope. My claims are limited in four ways. First, I concentrate on one kind of intellectual property protection, namely patents. Second, the claims of justice put forward concentrate on one context of justice, namely the distribution of health goods. Third, the discussion of distributive issues concerning health is limited further in that I single out the distribution of drugs rather than, for instance, access to doctors or hospital services. Finally, I adopt a cosmopolitan perspective, emphasising inequalities in the access to drugs at the international rather than at the national level.

Cohen’s book is one of the founding publications of Analytical Marxism, aiming to reconstruct and in some cases reformulate some of Marx’s core claims using the rigorous tools of contemporary philosophy. The first part of the chapter analyzes Cohen’s defense of the controversial idea of historical materialism. Can the idea that history follows some underlying law of progress, which is central to Marx’s writing, stand up to scrutiny? This part of the chapter discusses, first, the radical challenges to historical materialism formulated by rational choice Marxists such as Elster; second, a series of objections against functionalist explanation in the social sciences more generally; and, finally, some modifications Cohen made to his account of historical materialism in his later writings and in response to these critiques. The second part of the chapter analyzes Cohen’s conception of exploitation to illustrate the theoretical potential of Analytic Marxism more generally.

Monetary policy, and the response it elicits from financial markets, raises normative questions. This chapter, building on an introductory section on the objectives and instruments of monetary policy, analyzes two such questions. First, it assesses the impact of monetary policy on inequality and argues that the unconventional policies adopted in the wake of the financial crisis exacerbate inequalities in income and wealth. Depending on the theory of justice one holds, this impact is problematic. Should monetary policy be sensitive to inequalities and, if so, how? Second, the chapter argues that the leverage that financial markets have today over the monetary policy agenda undermines democratic legitimacy.

Governments increasingly use their fiscal policy to attract mobile capital from abroad. This tax competition puts a strain on the international fiscal system by undermining the capacity of states to make autonomous fiscal choices and by exacerbating inequalities. The existing regulatory framework is not able to address these challenges. Yet, what considerations should guide our efforts for reform? This chapter argues that a first necessary step consists in understanding the principles that justify the state as the principal locus of fiscal control in the first place. Building on an account of the legitimacy of the state and its fiscal powers, the chapter shows how tax competition is in tension with the principal objectives this account assigns to the state. It then outlines a normative response to tax competition that relies on both reforming jurisdictional rules and redistribution between states.

Central banks represent one of the key institutions of modern societies. The task of these institutions is to promote the common good. We provide three reasons to believe that, at least since the 2007 financial crisis, central banks do not live up to this task. First, their actions have serious unintended consequences, notably on economic inequalities. Second, while the independence of central banks from governments has been ensured, the leverage of financial markets on central banks has been neglected. Finally, the epistemic community of central bankers does not satisfy the conditions of an effective error-correction mechanism on monetary issues.

This chapter argues that central banks find themselves between a rock and a hard place when it comes to green central banking. Either they endorse the project, exposing them to the charge that they lack the input legitimacy to do so, or they eschew taking into account climate concerns, thus undermining their output legitimacy. Our discourse analysis of central bankers’ speeches shows that disagreements among officials from the same institution regarding green central banking are grounded on issues outside their core expertise. Furthermore, neither the conservative nor the progressive central bankers defend positions that have the potential to overcome the legitimacy dilemma we formulate.

La concurrence fiscale internationale est une composante essentielle du paysage fiscal contemporain. Cet essai analyse les responsabilités de l’État dans ce contexte d’interdépendance des systèmes fiscaux. Il soutient que l’État a le devoir 1) de mettre en œuvre le projet collectif défini par sa population, 2) de respecter l’autonomie des autres États et 3) d’assister les pays démunis. Cette conceptualisation des responsabilités étatiques a des conséquences théoriques et pratiques. Du côté théorique, la conjonction des deux premières responsabilités pousse à abandonner la notion traditionnelle de souveraineté́ comme non-ingérence. Aujourd’hui, une notion adéquate de la souveraineté́ doit être sensible aux externalités internationales produites par l’action d’un État. De plus, la conception de la souveraineté́ esquissée ici est compatible avec un impératif d’assistance envers les pays en voie de développement. Du côté pratique, le respect de ces responsabilités étatiques requiert un nouveau régime de coopération fiscale entre les pays.

The power to raise taxes is a sine qua non for the functioning of the modern state. Governments frequently defend the independence of their fiscal policy as a matter of sovereignty. This article challenges this defence by demonstrating that it relies on an antiquated conception of sovereignty. Instead of the Westphalian sovereignty centred on non-intervention that has long dominated relations between states, today's fiscal interdependence calls for a conception of sovereignty that assigns duties as well as rights to states. While such a circumscribed conception of sovereignty has emerged in other areas of international law in recent years, it has yet to be extended to fiscal questions. Here, these duties arguably include obligations of transparency, of respect for the fiscal choices of other countries, and of distributive justice. The resulting conception of sovereignty is one that emphasises its instrumental as well as its conditional character. Neither state sovereignty nor self-determination is an end in itself, but a means to promoting individual well-being. It is conditional in the sense that if states do not live up to their fiscal obligations towards other states, their claims to autonomy are void.

Dans cet article, nous présentons deux arguments en faveur d’une attention accrue des banques centrales à l’égard des implications distributives des politiques monétaires. En mobilisant la doctrine du double effet, nous montrons que la responsabilité des banquiers centraux quant aux effets distributifs de leurs politiques monétaires non conventionnelles est engagée. De plus, étant donné que le levier traditionnel de la fiscalité fait face à de sérieuses difficultés aujourd’hui, l’appui des banques centrales pourrait être décisif pour la réduction des inégalités économiques. Nous évaluons ensuite les arguments théoriques et empiriques soulevés par les banquiers centraux contre cette proposition. Nous concluons que ces objections ne minent pas l’attrait d’une responsabilité des banques centrales en matière de distribution.

Delegation to independent agencies can reap real benefits for policy-making. In the case of monetary policy, it shores up the credibility of the central bank. However, the discretion of IAs needs to be constrained to ensure their legitimacy. This letter focuses on one potential constraint, namely, the idea that IAs should not make choices on distributional trade-offs. Given that monetary policy today has significant distributive consequences, if this constraint were respected, the independence of central banks would have to be repealed. This would be just as undesirable as a monetary policy whose distributive consequences remain unchecked. Instead, this letter encourages the search for alternative solutions and puts forward three possible institutional arrangements to manage the tension between the distributive consequences of monetary policy on the one hand and central bank legitimacy on the other.

In recent decades, and in particular since the shift towards independent central banks, there has been no explicit coordination of fiscal and monetary policy. In the Eurozone, this lack of coordination represents an important flaw, especially since the Eurozone is not an optimal currency area. Complementing monetary union with a transfer union represents one possible solution. This paper argues that the negative impact of post-2008 and post-Covid-19 unconventional monetary policy on income inequalities provides a second reason to coordinate fiscal and monetary policy. Among various institutional arrangements to implement such coordination, the paper defends the idea that the European Central Bank should be sensitive to distributive considerations when formulating its monetary policy. Such an arrangement would help both to contain the distributive side-effects of monetary policy and to at least partially remedy the flaw at the heart of the Eurozone as long as an outright transfer union remains unfeasible.

The idea that pushing for more equality comes at a cost in terms of economic efficiency is widely accepted. Underpinning this idea is the premise that some of the most productive members of society will work less if we lower their pay. If this is true, some argue, it justifies paying the most productive a premium to work, provided doing so benefits everyone. This chapter argues that the standard version of the incentives argument suffers from two important blind spots. First, it assumes that the comparative advantage of the most productive members of society is rooted in their natural talents, that is, in a factor exogenous to the production process. Second, it adopts a static framework to analyze the bargaining process in which incentive payments are negotiated, where static means taking all informational inputs from the same moment in time. The chapter uses the debate between John Rawls (1999) and G.A. Cohen (2008) to illustrate the normative repercussions of making these two assumptions. The chapter qualifies as unjust incentive payments that reward individual productivity due to specialization rather than to natural talent. In addition, it argues that individuals would not be in a position to obtain such incentive payments if bargaining took place before rather than after the acquisition of specialized skills. Finally, the chapter discusses the objection that eliminating this type of incentive payments would be inefficient.

Given available technologies, current consumption behaviour is incompatible with the goal of keeping global warming below 2 °C. Economists present carbon pricing as the most efficient tool to induce people to adjust their consumption behaviour. This Perspective critically analyses the ethics, economics and politics of one key form of carbon pricing: carbon taxes are levied to discourage fossil-fuel-intensive consumption. The core claim of this Perspective is that progressive individual carbon taxes (that is, taxes whose rate increases the more emissions an individual generates) are not only more effective but also more just than the flat-rate carbon taxes prevalent today.