Critical to any well-functioning society is the need to allocate property, capital, wealth, and resources. Within market-based societies, we take the process of allocations for granted. People are accustomed to their ability to purchase goods and services of their choice, so long as they are willing to pay the price and have the wealth to obtain the title. For most goods, the title is merely possession, and for other items, such as vehicles and homes, the government may register the title and will arbitrate its exchange. 

We understand this system well. There are some items that cannot be allocated efficiently in this familiar free market system. The roads we drive on, the airwaves we enjoy, and even the schools that educate our children or the police and fire departments that keep us safe and the armies that protect our borders are all provided to us without regard for our income or ability to pay. 

This combination of private and public goods constitute a mixed economy. A large share of our free market system in the United States is actually government administered, and paid for through our taxes. Unlike private goods for which the wealthy can purchase a greater share of the goods and services because of their higher income, these public goods we enjoy favor the poor. All are entitled to the same level of services, but in this case the poor pay less, and may even pay nothing at all. 

Some may object to a claim that every economy, including ours, is a mixed private/socialist economy. The socialist part is the large sector of these public goods administered by the government. As a share of the economy, the U.S. socialist component is quite large, given the 48% share of government spending in our Gross Domestic Product in 2022. When the United States was still a developing country back in 1907, that share was 6.55%. Our share of national spending under government control is one of the highest in the world, and is identical to that of Norway, which most people argue is a socialist country. 

Before readers liken socialism to communism, note that there is a wide spectrum in socialism. The most successful form, such as practiced in Norway, has a vibrant free market sector but considers natural resources as owned by the public and managed for the greater good. Companies can profit from the factories they build, the machines they purchase, and the people they rent, but the natural capital they use must be purchased from the state. 

The rationale is that our resources are a form of natural capital and that people collectively own these natural banks. They are managed to benefit all humankind, now and in the future, and the revenues they earn from resource sales go to permanent funds that accumulate to benefit future generations, especially once the natural resources run dry. In essence, over time, the natural fund is replaced by a financial fund. Norway’s permanent fund, the fourth largest in the world, is currently valued at about $1.4 Trillion, the equivalent to about three years of their GDP. 

One significant advantage of such a permanent fund is that it affords the nation the luxury to use their natural capital in a sustainable way. Norway need not suffer  companies constantly clamoring to draw their resources down more quickly in the mortal quest to either profit now rather than later or extract the resource before someone else can. Normally, such a competitive race works well in free market countries. It generates low prices for consumers and profits for producers. So long as vigorous competition is done sustainably, the private sector and both the current and future generations thrive.

But, with resources, we must either live within their means to reproduce, such as with fisheries and forests, or we must ensure our generation removes only our fair share of the lithium in the ground, or, for that matter, emit into the atmosphere only our fair share of the carbon dioxide that contributes to global warming. 

Free markets tend to fail in the management of natural capital, while socialism fails in the efficient production of free market goods and services.  As we must now wrestle globally with decades of excess in greenhouse gas emissions, and we are contemplating diverting large funds to pay for the costs that global warming is bringing to bear on some nations, it is perhaps time to recognize what capitalism does really well but also create a new compact for how we will manage our natural capital for the good of all humankind. This discussion is just good business. A corporation is given a charter to build a better mousetrap, pay all the costs of the factors they employ, and, in the end earn a fair profit for themselves. When the factors they consume belong to all of us, it is not unreasonable to expect them to pay a price that factors into account the resources we take now and what we leave for our children. 

In turn, government too should be careful of the trust they administer on our behalf. If our generation has no moral right to take more than our share of resources from future generations, so too should we have no right to leave bills for our children of our excessive consumption today. Interestingly enough, both Norway and the United States have a similar level of national debt as a percentage of GDP, at around 130%. Perhaps the two nations are far more alike than we might have believed.