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Commerce · VII.11 · MMXXVI · daylight
ASSESSMENT · Chapter VII.11 — What We Owe the Next Thing
Three instruments: a ten-point quiz, eight reflection questions, five essay prompts. The quiz checks comprehension rather than recall. The reflections are private and first-person. The essays are arguable from more than one side.
THE QUIZ — ten points
Four on recall.
1. Name the five categories that make up an intergenerational balance sheet, and say why none of them can be added to another in the form each is published.
Public debt; pension promises; infrastructure and produced capital stocks; sovereign funds; the natural capital position. They cannot be added because each is produced by a different body on a different basis: some are gross and some net, some are stocks and some are discounted flows, some are national and some are for Great Britain only, and several are simultaneously a liability of one party and an asset of another inside the same population. One mark for the five, one for naming consolidation or basis as the obstacle.
2. State the consolidation rule for domestic public debt, and give the UK split per head.
A gilt is a liability of the state and an asset of whoever holds it, so only externally held debt is a net claim on the next generation's output. Of £39,941 per head, about £11,183 is external and £28,757 is one Briton's claim on another.
3. Write the intergenerational balance sheet as a function of θ, and say what θ = 1 and θ = 0 each mean and who argued for each.
IGBS(θ) = ΔN + θ · ΔM, θ ∈ [0, 1]. θ = 1 is weak sustainability — Solow (1974) and Hartwick (1977): capital substitutes for capital provided the resource rent is reinvested. θ = 0 is strong sustainability — Daly (1990): critical natural capital is complementary, not substitutable, and money does not cross the boundary.
4. What is recorded in this chapter's account as UNMEASURED, and why is that not the same as zero?
The change in the UK's non-atmospheric natural capital between 1995 and 2022 — soils, fish stocks, aquifers, habitat — for which no consistent published series exists. A zero is a claim about the world; a blank is a statement about the evidence. Recording it as zero would have strengthened the chapter's own conclusion, which is precisely why it had to be refused. Because it is UNMEASURED, ΔN is a lower bound on the natural deficit throughout.
Four on application.
5. A minister says: "We are leaving our grandchildren £2.7 trillion of debt." Diagnose the sentence.
Three faults, in ascending order of importance. It is gross, not net — the same grandchildren inherit the infrastructure and the household wealth. It is unconsolidated — £28,757 of the £39,941 is a claim by one Briton on another and does not reduce the national endowment at all. And it is one category of five, chosen because it is the one with the largest number and the most alarming sign. The strong answer adds that the sentence is nonetheless pointing at something real, and names it: the distributional question of who inside the next generation holds the claims.
6. A company's sustainability report states a single positive intergenerational figure with no switches shown. What do you ask for, and in what order?
The carbon value used; whether land or asset revaluation is included in the capital delta; the θ implied; and the register of what is unmeasured. Then ask for the four cells. The stronger answer notes that a single figure with unstated switches is worse than no figure, because it will be quoted — and that the four-cell format is the only practical enforcement mechanism a voluntary disclosure standard has.
7. Norway's fund is £211,981 per head and the UK's public non-financial asset stock is £19,231 per head — about 11.0 times. Does that settle whether Norway's intergenerational position is better?
No, and the reason is θ. Norway converted an exhaustible subsoil asset into a financial one, which is Hartwick's rule executed correctly and scores fully at θ = 1. At θ = 0 the petroleum stock is gone, the combustion happened, and a portfolio of global equities is not a substitute for it — and the portfolio's returns depend on the same natural capital being drawn down elsewhere. Norway is the best case for weak sustainability and is not thereby a case for strong sustainability. The strong answer notes that Norway's genuinely transferable achievement is the spending rule, not the fund.
8. Your organisation will publish an intergenerational account for the first time and θ* comes out above 1. What do you do?
Publish it. θ* above 1 means no belief anyone holds clears the ledger, which is not a reason to withhold the account — it is the reason the account exists. Publish the four cells, the UNMEASURED register and the sensitivity sweep, and attach the covenant to the method and the publication, never to the level, because an issuer cannot promise an outcome it does not control.
Two that cannot be answered without doing the arithmetic.
9. A country has ΔM of £84,280 per head and cumulative emissions of 15.64 GtCO₂e over the period across a population of 67.6 million. At what carbon value does θ* reach 1 — that is, at what price does the position become negative even under full substitutability? Show the working.
θ = 1 requires the natural deficit per head to equal ΔM. So the total liability is £84,280 × 67,600,000 = £5,697.4 bn. Divide by the tonnage: 5.6974 × 10¹² ÷ 15.64 × 10⁹ t ≈ £364 per tonne. Two marks: one for multiplying back up to the national total, one for the division. The figure that makes this worth computing is that the UK's own published 2050 carbon value is £378 a tonne — above it.*
10. ΔM is £84,280 per head, received at a median age of 61. A person is 40. At the Green Book's 3.5 percent rate, what is the present value of that inheritance at the moment they most need it, and what proportion of the transfer is destroyed by the wait?
Twenty-one years at 3.5 percent gives a discount factor of 1.035⁻²¹ = 0.4856. £84,280 × 0.4856 = £40,924. Destroyed: £84,280 − £40,924 = £43,356, or 51.4 percent. The mark is for noticing that no wealth is lost in aggregate — the sum transferred is unchanged — and that what is destroyed is the value of timing, which is why moving the receipt forward is the cheapest available improvement in the whole account.
REFLECTION — eight questions, private, first person
These are for one person and a pen. They are not discussion prompts and they do not have answers.
- What did I actually inherit — not in money, but in working stock: tools, language, a trade, a place, an assumption that certain things are possible? Who paid for each of those, and did I ever find out what it cost them?
- When I imagine "future generations", whose face do I see? Is it a child I know, or an abstraction? What changes in my reasoning when I substitute the one for the other?
- What θ do I act as though I believe? Not what I would say in a room — what my actual decisions about money, time and place imply about how far I think one kind of good substitutes for another.
- Where in my own life am I running the land switch on myself: counting a rise in the price of something I already own as though I had built something?
- What is the thing I have not measured because I suspect the measurement would be uncomfortable? What would it cost me, in hours, to find out?
- Something was handed to me at the wrong time — too late to change what I attempted, or too early to be understood. What was it, and what would the right time have been?
- Who is already treating me as a source of inheritance, and do I know it? What are they taking from me that I have never counted as being transferred?
- If someone built an intergenerational balance sheet of my own life — what I am handing forward, net, across every category at once — which line would I want them to look at first, and which one would I hope they skipped?
ESSAY PROMPTS — five, each arguable from more than one side
Each requires a source the chapter cites and a source it does not.
1. "Publishing θ is a greater contribution to intergenerational justice than publishing the balance sheet itself." Argue it. The case for is that a threshold survives disagreement about inputs and converts a philosophical dispute into a vote; the case against is that a threshold with no level attached is a debating device that permits indefinite deferral. Use Neumayer (2013) from the chapter's citations, and one source it does not cite — the literature on materiality thresholds in financial reporting, or Pearce, Markandya and Barbier's Blueprint for a Green Economy* (1989).
2. "Land revaluation belongs in the intergenerational transfer." The chapter excludes it in one cell and includes it in another, and 78.2 percent of the headline delta turns on the choice. Argue one side properly. Use the ONS national balance sheet from the citations; bring in a source the chapter does not use — Ricardo on rent, George's Progress and Poverty (1879), or the contemporary land-value-tax literature.
3. "Generational accounting has failed, and comprehensive wealth accounting will fail in the same way." Auerbach, Gokhale and Kotlikoff (1991) is in the citations and their programme did not become standard practice. Diagnose why, then argue whether the failure mode is shared or genuinely different. Bring one evaluation of generational accounting that the chapter does not cite — the IMF or OECD reviews of the method are the obvious route.
4. "Norway proves weak sustainability works." The fund is £211,981 per head, the rule has held since 2001, and the consumption path has been smoothed across generations exactly as Hartwick predicted. Argue for and against. Use Hartwick (1977) from the citations, and a source the chapter does not cite — the resource-curse literature, or Norges Bank's own analysis of the fund's exposure to the assets whose extraction the fund is meant to outlive.
5. "What we owe the next generation is a schedule, not a quantity." The chapter's central reframe: £84,280 handed over, £40,924 received at 61, to about half the cohort. Argue the counter-case seriously — that timing is a private matter, that early endowment weakens the incentive to accumulate, or that the aggregate is what a generation owes and distribution is a separate obligation. Use Bourquin, Joyce and Sturrock (2020) from the citations, and one source the chapter does not cite — Atkinson on inheritance taxation, Piketty's work on inherited wealth, or the evaluation literature on child trust funds and baby bonds.