But when farmers A and B die, their heirs are still faced with the same situation. Farmer B's heirs have nothing to sell, but they do have the extra money that accumulated because of the compensation for resource depletion

The point is that the "Money" they now have is not "Value" - which equates to "something to sell" but its exact opposite - "anti-Value" ie a claim over Value or IOU issued by a credit intermediary aka a Bank, and backed by very little "Value" at all.

It's the difference between "Money" and "Money's Worth".

Ultimately everything gets equated with money and money has no value if there is nothing to spend it on.

Money has no Value, any more than a centimetre or a kilogram has a value. It MEASURES Value.

As John Law said

Money is not the Value for which Goods are exchanged, but the Value by which they are exchanged.

The farmers' problem writ large becomes the non-renewables vs renewables conundrum of "how do we finance renewables?"

And we do it by creating a "Pool" of future renewables energy production.

This "Pool" is a fund in which we may buy units (say MegaWatt/ Hrs or equivalent)by exchanging something of Value for them.

This fund then invests in renewable energy on the one hand and energy efficiency projects  - eg the roll out of Combined Heat and Power (CHP) networks - on the other.

These "investments" are in fact "energy loans" repayable over time in energy production at the market price, or - where energy savings have been financed - in payments made to the pool to repay the "energy loan", and financed by actual energy savings.

ie Joe Blow pays a Utility for the (reduced amount) of energy consumed, and the Pool for the energy loaned, until the loan is repaid.

In other words the "Pool" purchases future production of renewables and future flows of heat or energy savings at an agreed price, which may be a discount on today's price.

These streams of energy constitute "Value" or "Money's Worth", and if our farmers had exchanged their coal for units of future renewable energy, then they would have had something they COULD sell.

Similarly, there is the point that the farmers could have utilised their excess earnings to acquire the right to occupy farming land to replac what they had ruined.

This is where perhaps the most important form of Value comes in, and that is the right to occupy land over time.

It is this form of Value that in fact forms the backing for most of the "deficit-based" money currently in circulation, which came into existence through the creation of mortgage loans.

I believe that it is quite straightforward (REIT's are virtually there already)to create "Land Rental Pools" which have the potential to become a new and "fungible" asset class capable of forming something else that your farmers could sell.

The result would essentially be what people would regard as a land-backed Money: not a new idea - John Law put this forward in 1705

Money & Trade Consider'd

But he did rather f--k up the implementation in France with the Mississippi Bubble (which some would say led to the Louisiana Purchase and the modern USA).....

The bottom line is that we need to "Reverse the Polarity" of Money, and this IMHO is not just possible, but already beginning to happen.

Modern conservatives engage in one of man's oldest exercises in moral philosophy: the search for a superior moral justification for selfishness.Galbraith

The two farmers think ahead...

This time, when farmer B decides to mine the coal, he decides to manage the externalities by investing in alternate physical infrastructure rather than money in a pile. With the profits from the coal mining operation, and together with farmer A who's got plenty of grazing land for cattle, the two set out to build, maintain and operate a windfarm cooperative with the land in dual use for grazing cattle. Future generations continue this development, and live happily and prosperously ever after. How lucky they were that those before them thought to appreciate the underground riches so fortuitously made available to them as a limited resource of energy, and knew enough to reinvest this energy in a form of infrastructure that could perpetuate its bounty.

Long term stewardship of the earth as an enormous, connected, 'closed' system, with a fine, near constant, energy flux provided by the sun. What we see our 'economy' ('market'?) do to the various non-renewable resources seems like "eating ones seed corn". Or living high on start-up capital, without realising that if one does not make the proper investments, the party will come to an end one day, and one is left them without assets. Coal and hydro-carbons has offered us a bounty of concentrated, high-quality energy. The real tragedy is the failure to invest this energy in a way that it may perpetuate itself longterm.

How does one argue successfully for this? This is, um, difficult... This is about opinion formation, i.e. we need good propaganda (pdf). The people must be taught/told what to think, just as they must be coerced into buying pianos:

If, for instance, I want to sell pianos, it is not sufficient to blanket the country with a direct appeal
...
The modern propagandist therefore sets to work to create circumstances which will modify that custom. He appeals perhaps to the home instinct which is fundamental. He will endeavor to develop public acceptance of the idea of a music room in the home.
...
The music room will be accepted because it has been made the thing. And the man or woman who has a music room, or has arranged a corner of the parlor as a musical corner, will naturally think of buying a piano. It will come to him as his own idea.

Under the old salesmanship the manufacturer said to the prospective purchaser, "Please buy a piano." The new salesmanship has reversed the process and caused the prospective purchaser to say to the manufacturer, "Please sell me a piano."

So, we are back to the "get rich, buy media" point, again...

In the case of The two farmers consult an economist, can't the money inherited by the heirs of farmer B be used to restore the land to a somewhat productive state?

Can the last politician to go out the revolving door please turn the lights off?

Why no one should care for what Neo-Malthusians say: One problem is that the Neo-Malthusians tend in general to be a**holes who parrot the constant refrain 'population is the problem', when this cannot possibly be true when (e.g.) 5% of the world's population consume 25% of the world's resources (extend to include Europe, Japan and Australia). Malthus is about population versus food supply growth, but modern problems are about a small percentage of industrial peoples screwing up an already deeply f*cked world at the expense of everyone else. (In turn, this is not a matter of individual choice, but a systemic problem originating in the nature of capitalism.) It's bad enough that the rest of the poor bastards have to deal with quasi-feudal conditions, without having to factor in climate change and sea level rise as well.

You yourself point this out when you mention that populations such as China's were stable for generations.

It isnt't about population. F*ck Malthus. It's about a small percentage of brainwashed, ball-less f*cks (that's us) lying down and taking it all in return for a few consumer goods ... in return for the destruction of the Earth. And it is personal, for those of us who have children, for they are the ones who will face the consequences. Want a definition of cowardice? Ask your contemporaries to look in the mirror. (Ask me to look in the mirror ... I have children.)

If you think this is an exaggeration, look at what Wat Tyler and 200K peasants did in the absence not only of the Internet, but a modern postal system. And they only failed because they were such trusting and fundamentally honourable saps. We should all cry for shame.

The two farmers consult an economist

Can't they just eat the economist instead?

Economist is rational and loves money.

http://www.smh.com.au/news/business/dark-art-of-econometrics/2007/08/26/1188066946510.html#

Dark art of econometrics

I DOUBT if the economics profession has ever worried much about ethics - its own or anyone else's - but perhaps it should. A profession with no disapprobation of dubious conduct is asking to have its reputation trashed.

Economists give no thought to ethics or other social norms of behaviour because such matters find no place in their neoclassical model.

To an economist it's no insult to assume that businesses are motivated solely by a desire to maximise their profits. Would they sell their services to the highest bidder? Of course; it would be irrational to do otherwise.

Indeed, so far from worrying about ethics, there are some economists who believe it's irrational to obey the law unless the chance of getting caught, combined with the size of the penalty, is sufficient to outweigh the benefits of breaking it.

So it's not likely many economists are much exercised over the growing practice of private firms of economic consultants making a living by selling their expertise as econometric modellers to governments or interest groups that are pushing or opposing particular policies.

[...]

If commercial modellers were as independent and respectable as is claimed, they'd put far more effort into spelling out and drawing attention to their model's limitations. Instead, they calm their consciences by including an impenetrable disclaimer somewhere in the report, knowing full well that their customers and others will quote (and misquote) their results with nary a reference to the disclaimer. It will be read only by those who don't need to be told.

Equally, commercial modellers would put more effort into correcting the record whenever their customers and others misrepresent their findings, which is ubiquitous. They know full well the way their findings will be misrepresented, but it doesn't seem to give them pause.

The activities of the commercial modellers will eventually discredit the use of economic modelling in the public policy debate. But models are so potentially misleading that this may be no bad thing.

Via Mark thoma.