>Landowners however can just sit back and collect rent. Given that land is fixed, it's way easier for landowners to collude than it is for either labor or capital (sans land) to unionize.
Where I live in the Dominican Republic land prices are sky high. Comparable to coastal California land.
That happened here too during our Celtic Tiger boom. Property speculators mushroomed, bought up and set up land banks, then sat back and waited for the inflated price to make it worth their while. Parcels of land changed hands multiple times, at increased prices each time, with nothing being built on them because it made more money to wait a little while for the price to keep going up then sell them on.
Of course, once the bubble burst, all this land was now relatively worthless. George is right there, but like any asset, if there is demand for it price will go up. I don't see how you can fix that by a simple land tax.
you can't have a 'bubble' if there's no way to privatize the rise/fall in underlying land demand - those losses/gains would be shared by society - which is why LVT creates a virtuous cycle where governments and people have a shared incentive to increase land value through public works (this is stiglitz's 'henry george theorem'.
An LVT means that you need to pay yearly in order to sit on the land. This hits from two ends: A future developer is willing to pay less for the land because of the additional tax burden, and waiting for the parcel to go up in price quickly becomes a losing proposition. It would turn real estate, where waiting earns money, into an asset more like a car, where buying it makes sense if you're using it, but just sitting on it means you're losing money.
Yes. It seems to be true everywhere. I checked out some farm land in the interior. I thought, "I could afford that!" Turned out the price was per SQUARE METER.
I know nothing about the Dominican Republic per se, but I know that real estate in third world countries in general, and Ukraine in particular, is outrageously expensive, considering.
This is because real estate isn't viewed as an investment (in the sense of generating returns) as much as it is a relatively safe place to park money. Banks aren't trusted, and everyone knows that the local stock market is a mug's game. Currency and other restrictions may prevent local gentry from investing abroad or repatriating their gains, and besides, these investments aren't really understood or trusted either.
Land, houses, things one can touch and feel and that cannot be easily absconded with, that is where value is stored. In some societies, India, for instance, gold also plays a similar role. Gold has the advantage and disadvantage of being eminently portable.
A friend of mine worked as a corporate raider in Ukraine, playing various financial hide-the-sausage games with western investors. She would squirrel away her earnings in her mattress until the mattress started getting too lumpy, then buy another apartment and start the process over again.
She didn't rent out any of the places she owned, since even a cheap apartment cost some $250,000 and the rent it paid wasn't worth the hassle of chasing down renters every month, much less tenants trashing the joint or stealing the wiring.
That makes sense about not trusting banks. I rent a house in a nice part of Boca Chica, DR. The are building an apartment building on the lot behind my house. They started over two years ago.
It was December. First a couple of workman came and stripped every green leaf from the lot. Then they dug ditches, mixed concrete, and poured footings. Then built low concrete block walls. About 3 feet high. It looks like it will be four apartments.
They did all that work in ten days. Probably the fastest crew I have seen in this area. Then they went away. FOR A YEAR AND A HALF!
Last summer they came back and in another ten days completely finished the first floor including a very precise flat concrete floor at ceiling height.
By this time I could see by the plumbing stacks that they were not stopping at one floor. Too bad I thought. They are going to block the light from the north.
Then they went away again. It has been nine months and no new activity.
What is going on with this process? I think when they have money they build. Then they wait to accumulate more money. They are not borrowing money from a bank at the exorbitant interest rates here.
I've seen that movie before as well, even in places like Poland, which is very different and which has a different banking culture from, say, Ukraine.
My raider friend didn't owe money to any bank, FWIW. She bought her apartments for ca$h. As in "suitcases filled with bricks of green cash" like she was Tony Montana or something.
It seems odd given what happened to Ukrainian landowners within living memory. I would have thought portable wealth would be more popular? But I guess if land is all you got that's what you invest in.
I should have added: gold isn't hard to come by in Ukraine, but at the same time, you can drive through new housing developments that are entirely sold out, and that mostly sit empty.
Actually I'm not sure what you're referring to. Individual (not organizational) land and property ownership was resilient both to the collapse of the Soviet Union and occupation of Crimea. And even with occupied regions it's a bit of a tossup - if you owned land in the Crimea it's massively more expensive now, if you owned land in occupied Eastern Ukraine - it plummeted in value (but at least you still have it).
Additionally, in developing countries real estate is the only efficient source of collateral for loans for investment projects, bidding them up above their fundamental value, due to their high pledgability as an asset.
Not so much in Ukraine, in large part because of some of the vagaries of Ukrainian real estate law (if you change the "техосмотр" -the technical description of the real property as found on the deed, for instance, by changing the square area, you can get a corrupt judge to invalidate your mortgage and you can give your lender the middle finger).
Sorry, this story about Ukraine is almost completely wrong (maybe, maybe it was somewhat true before the Russia-Ukraine war started in 2014). The reality is almost opposite - outside of the very top of the market, apartments are reasonably priced and generate nice return on investment. Prevailing rate seems to be around 800-1000 usd/sq.m., depending on condition and district., and 90% of the market is below $100k, I believe. For example, with $50k you can get a half-decent 1-bedroom apartment ("2-room"), and rent it out for maybe $300/month, so 7.2% p.a., not bad at all. New construction is abundant, as well. Of course, people still struggle as the average monthly income is around $400 or so.
Of course, at the very top, elite property is expensive, but there's very little being bought and sold, and owners are very very open to negotiation. I've been offered property at one of the most prestigious highrises in Kyiv for $2500/sq.m. which is like 50% of list price, guy owns several floors and is motivated to sell (won't be surprised if he's actually one of the corporate raider types who parked his money there).
This is great. I'm going to create a page for Henry George in the UBI Master Directory. Probably "UBI and Georgist Philosophy". Then I will link this interview.
Jump links to the appendix look broken, but I found Ctrl-F "Appendix-A" or whatever seems perfectly serviceable to locate the linked section, as well as to jump back to where it was referenced after you're done.
1. I still don't understand the insistence on saying that workers are paid out of production rather than capital. For one thing, it seems transparently false - the review mentions the example of workers building a ship, which might take a year, but they still get paid even before the ship is built. It argues that they are paid from the partly-built ship, but they're clearly not - they're paid out of the saved money that the person who founded the shipbuilding company brought in (or borrowed). You could even demonstrate this by having the capitalist put highlighter marks on the particular dollar bills they bring to the venture, and then you will see that the workers get paid in highlighted dollars. But also, who cares? What hinges on this totally theoretical point? I still don't feel like the review/book explained this very well.
2. Would a land value tax unfairly benefit eg Google (who maybe need a little land for their HQ and a server farm, but land is only the tiniest fraction of their costs) compared to eg farmers (who need lots of land)?
Theoretically a land value tax should have no effect on the cost of renting land. It may even reduce the cost of rent (since just holding land is now costing you money- thus unused land maybe more likely to be rented out to recoup the cost of the tax). Thus it shouldn't be unfair to either Google or the farmer.
I'm confused. Homeowners seem pretty against having the government raise property taxes, which I interpret as them reasonably expecting to have to pay more money to have a house. Increased property taxes on housing would hurt homeowners relative to, I don't know, homeless people. It would probably also hurt renters since the landlords would pass along some of their costs. Why would a land value tax be different?
How so? Property is reassessed at points in time. It can also be reassessed after a value-add project since permits have been issued thus notifying the local government that the value has changed.
George wants to capture the increased ‘land value’ the other landlords see when one improves their building and the others increase their rents. It is a specific example cited. In raising the LVT George ‘takes’ what isn’t due the non-improving owners.
The pragmatic use of LVT is to tax the purposeful idling or minimizing of what should be a property, sales, income... producing parcel. It is an targeted solution to an urban density problem.
You seem to be modelling it as if it were a tax that increased the costs associated with renting out land. It doesn't, it increases the cost of owning land.
Landlords cannot respond to this tax by raising rents to cover their losses. They remain in a competitive market. The marginal cost of supplying an additional unit of land hasn't changed because crucially the amount of land is fixed, and the tax is levied regardless of whether the land is rented out or not
Thus a land tax will indeed be awful for existing land owners, but renters will either do no worse or win somewhat. Future land owners will not suffer, because the land tax will be factored into the price.
This is because a land tax effectively devalues land by transferring its future earnings to the state.
The equilibrium price of land will thus remain the same in a standard neoclassical model of this market. Really it might even go down a bit, as land owners who were previously content not renting out their land need to cover the tax.
It actually works out more like an expropriation than a traditional tax.
The mechanism by which taxes are passed on depends on a supplier being able to change how much they supply based on the market price.
Sure, you can just say "hey I'm being taxed, so now I'm charging more for it" and *hope* people pay it, but the *economic force* that makes the market agree your offer is a worth taking is the fact that when you tax schnozzberries by a dollar per bushel, schnozzberry farmers on marginal plots that only had a profit margin of a dollar per bushel cease production. This drives down the supply, driving up the price, and so consumers are grudgingly willing to pay a dollar more per bushel even though the tax was originally levied on the supplier and not them.
With land all you can do is refuse to rent it out, but that's not the same as taking it out of production. It still exists, and you still pay land tax for holding it regardless of whether you rent it, whereas the farmer doesn't pay taxes on berries he doesn't grow. Without the ability to constrain the supply, and having to pay the tax simply for owning the land, you have no ability to affect the market price of land and thus pass on the tax to your renters. This is pretty widely recognized in modern economics and it's why folks like Friedman called Land Tax "the least bad tax."
Renters - no. Presumably they're already charged whatever could be squeezed out of them. Also, in the LVT-based system, if someone 'takes a stand' and demands a price which exceeds what they could pay - well, they'll be forced to move out. Which means now the owner pays the tax without making any profit. Which means they're son bankrupt and lose that land.
After some brief disruptions, the system should just stabilize. And now all rent goes to the state's budget. Which means it could, for example, remove income taxes. And do an UBI-lite with additional surplus (I'm assuming LVT > income taxes, but maybe not enough for true UBI sufficient for living off it). Which means surplus wealth of the labor increases (well... actually the corp. would just decrease wages, rly - it's quite obvious with Facebook paying less remote workers who moved out of high-cost areas... but that situation also shows Facebook was literally paying the USD by which they reduced the wages to the landowners!)
The bit with homeowners sucks through, very badly. Maybe the initial impl. should have some additional provisions just for that one time status quo changes.
Landlords can pass along the costs of property taxes because property taxes move the supply curve of property to the left, increasing price. This is not so for land value taxes - since the supply of land is fixed.
1) Higher taxes on a good reduces the price of that good. Under Georgism, existing homeowners will indeed be shafted. That's a feature, not a bug, albeit it certainly increases the difficulty of implementation.
2) Rent is not calculated by landlords seeking a given return, it is the maximum the market can bear (i.e. the maximum renters are able and willing to pay in that particular market).
2.1) Property taxes don't change a renter's ability to pay, for obvious reasons (there's no reason there should be a relationship between the job giving me a raise and property taxes).
2.1.1) At least not in the short run - in the long run one could argue that property taxes (albeit not land taxes, for reasons outlined above) discourage building more houses, as *new* projects are determined based on whether they pass a certain profitability threshold.
IANAGeorgist (lean Austrian, actually), I don't know what's what beyond the contents of this review, so please take everything I say with that in mind. That said:
1) I think it may be attempting to make a conceptual rather than literal point - that it's out of the expected value generated by the worker's labour that the wages are paid, and if that value wasn't being generated by said labour, then that labourer doesn't get hired. Just imagining the scenario as atemporal but still sequential - imagining that the labourer can take an arbitrary number of steps of labour in a single instant of time - makes it more understandable to me, and may help with the point being made at its root.
(Now, ours is the kingdom of the goddess Kali, she who is time and the devourer of time, and in her world, everything *doesn't* happen atemporally; additionally, in both worlds, losses are possible. But if this behaviour is repeated, the business entity or whatever doing this goes bust, so - short of an entire social-economic unit of people going collectively insane and losing their refpoints for what's up and down economically - this state of affairs can't continue for long. And even in cases of collective insanity, eventually people just die as their ability to produce even basic food is destroyed - witness Mao and his time, and the destruction of farmers' implements made of metal in a mad, quoxotic and insane quest to meet 'production quotas' for iron by throwing said implements into village furnaces that just... destroyed them, and produced useless iron. So the situation is eventually unstable - you either go out of business, or - if there are no brakes on this loop - your entire society goes insane and dies. But that's an aberrant case.)
2) I presume the expectation is that land value rent on farming is likely to be very, very low; and the gains from using modern agricultural technology (these gains would *not* be taxed, in the Georgist scheme, because it's the return on *capital*, NOT land) would be so enormously more significant than the land itself as a factor of what gets produced that it would basically be completely immaterial.
But all this is just a guess, please remember that IANAG.
IAAG, but I'm also a big dummy, and for what it's worth I thought that was a pretty good explanation and better than I would have done.
I agree that part of the review Scott references in 1) (and peeking at my copy of P&P to see what George says about it at length) is a bit fiddly. George's apparent hand-waving about risk as a justified return to capital feels like something I'd like to get a more involved take on too, in case the review isn't doing it justice, or George provides a better explanation outside of P&P.
My only take on 1) is that I think George is probably responding to established wisdom of his time which really sees capital as this absolutely fundamental thing that labor absolutely can't in any way shape or form function without, which the review touches on a bit later, and presumably this relentless beating to death of words and concepts is supposed to help him undermine that notion somehow.
My (possibly extremely dumb) take on 2) is that George might be less concerned with sticking it to the Googles[1] of the world then he does the EFFECT of Google moving in to Mountain view and all the landlords jacking up the rents for everybody until nobody can live there unless you work for Google. I also genuinely don't know if there's some weird ways land value taxes would actually hit Google pretty hard --- Amazon for instance actually has an enormous network of brick & mortar buildings in their distribution infrastructure that's a key part of their competitive moat. One thing's for sure -- Google's land can't send itself to Ireland and back to avoid taxation.
[1] (if they produce lots of value by hiring smart people to produce useful products without also gatekeeping access to natural resources, good for them -- though I wouldn't be surprised if George had many sharp words for them on the question of Monopolies in fields other than Land)
> (these gains would *not* be taxed, in the Georgist scheme, because it's the return on *capital*, NOT land
I don't think land value can be divorced from the possible uses it could be put to. In the city, you can see that the value of the land depends on the community around it, but in farming, isn't the value of the land dependent on the kinds of practices available to you to benefit from it?
Yeah the review goes into it. It gives the example of how you could have a some land with a "latent" resource in it that's worthless until someone discovers a use for it -- either by a community springing up, or someone just invents/discovers something new. The review also mentions a section where George addresses the possibility for the line between improvements & the "land itself" to start to blur (e.g. plant a forest on a plot and wait 20 years).
But you are still able to assess the value of the land separately from its improvements. Farmland being next to a good farm-to-market road increases its value, but the road belongs to the state and was paid for by taxes, the value the farmland gets from being next to it is not an improvement on the farm land itself. But if you plough the land and dig a well on it and build a toolshed and irrigate it and do all these other things, those are improvements and allegedly assessors are used to being able to suss these distinctions out already.
That all makes sense, it's more the idea that gains from modern agriculture would not be taken into account in land value that doesn't make sense to me. When someone invented modern acricultural techniques, that increased (unearned by the owner) the value of all acricultural land, simply by virtue of it being possible to apply them to the land. Of three kinds of land - (1) land that has had modern agriculture applied to it, (2) land that is amenable to having modern agricultural techniques applied to it, (3) land that is not amenable to having modern agricultural techniques applied it, the difference between (1) and (2) should obviously not form part of land value tax, but I the difference between (2) and (3) should. That means that at least some of the productive capability of modern agriculture would find its way into LVT.
> it's more the idea that gains from modern agriculture would not be taken into account in land value that doesn't make sense to me
Yeah I agree that the fact that *someone else* could *also* use modern agriculture on your farmland would serve to increase the unimproved value of your land. I think George says as much per the review -- improved technology increases productivity, which drives up land prices, extends the margin of production and all that.
I'm not George so I can't speak for the man, but basically his idea is not to tax capital or improvements like buildings, tractors, wells, etc, and he seems to imply that ploughing a field, planting a field, etc, all count as improvements as well (with the fuzzy boundary of some of these more organic improvements becoming indistinguishable from the land itself over time).
The potential for someone to come in and have a better use for your land then you do, which drives up its price, would be part of the base land value according to George, however, if I understand him right.
Why would you think that gains from modern agriculture wouldn't be taken into account ?
Value is relative, gains from modern agriculture make the wealth extracted from that nature to go up.
To take another, already used example : nature with oil in it would have a lot more value if it's economically viable to extract that oil than if it's not (also, once that oil is extracted it stops being nature and becomes wealth, so nature goes down).
Do you have a good link to an Austrian critique of Georgism (preferably not from Rothbard, whose arguments I tend find simplistic and terrible)? I would imagine such a critique leans heavily on time preference of workers and the need of capital to satisfy such high time preference. I agree that George is not claiming that the workers are actually paid from the proceeds of the sale, but that how much they are paid depends on how much the sale is expected to bring in. But again, this ignores the time value of money as well as the risk taken by the supplier of capital due to uncertainty.
IIRC, Eugen von Böhm-Bawerk makes approximately the argument you're making: that employers essentially front payment to the workers, expecting to be compensated for the payments (plus interests forgone) out of the revenue made by selling the product(s) made by the workers.
Henry Hazlitt has a famous book about economic fallacies, I don't recall the name, where one of the chapters is called something like "enough to buy back the product". Böhm-Bawerk's argument suggests that employees will be paid enough to pay for the product minus the interests they were essentially given for free by being paid before the product was sold.
In some sense, it's a loan in the opposite direction of time: the employer pays employees in monthly installments. The employees manufacture a giant schnozzberry. Once the schnozzberry is built, they (the employees) sell it on the market and give the employer the principal of the loan (which is the entire sales price). This is of course not what it says in anyone's employment contracts, but the flow of money, labor and berries over time is the same.
But of course, the actual loan-like thing is in the opposite direction: we all prefer money now to money later (since we can easily store it if we only want it later), and the employer hires people at wages which compensates for forgoing the expenditure of money between the time of wage payments and the (estimated) time of sale.
Google actually owns a surprising amount of land: On their balance sheet, "land and improvements" is ~50 billion out of 320 billion of total assets, or more than a seventh (IDK how much the *unimproved* land is though). Reason being, what land they do hold is likely extremely expensive per unit area compared to some pastures or farmland in the middle of nowhere. And even if it wouldn't affect them directly, a LVT would capture the increase in residential land values surrounding those tech companies, which Georgists probably see as more important.
On other tech companies:
Facebook doesn't seem to own nearly as much physical land, but it probably derives a significant portion of its revenue from network effects, which, if you squint a little, looks kinda like "land but on the internet" (physical land value = physical proximity to stuff, digital proximity to stuff = ???). Of course, it is dissimilar to land (physical or otherwise) because you can make more of it. Not actually being a Georgist, IMO it matters more that a) network effects can be taxed or regulated in similar ways, and b) taxing or regulating it competently would likely increase surplus. Same with Amazon and Twitter and Uber. Kinda similar with Netflix but clearly network effects aren't that powerful/valuable if everyone and their dog is starting a streaming service or two.
On point 1:
I feel like the issue here is that there's been a distinction between financial and economic (i.e. real, physical) capital drawn, not very clearly, and since pretty much everything can be attributed to financial capital it's more useful to talk about the future production that financial capital is attached to. But honestly I don't really care right now either.
Also short, common-word *.com addresses! They're not making any more of those. I wonder what the weirdest, edgiest edge case of Georgist "land" would be...
"Economic Rent, also known as ground rent or Ricardian rent, is the flow of value that explains the market price of all resources of nature. Their value is a
function of the demand people place on them, certainly not due to the
investment of labor that is made in them. Many natural resources besides land (really locations) yield rents: water, air, the electromagnetic spectrum, airport time slots, fossil fuel and mineral wealth are the most readily understood. But so are DNA and all the biota of the world, language, computer code and website domains. It is not hard to think of many parts of our market economy that command a price without any labor by human beings. These rents are a large portion of our common wealth – what was classically called “the commons.”
I was thinking, that perhaps "people capable of programming computers" is such a limited resource - this was my impression about reading about the "IQ shredders" https://www.isegoria.net/2014/07/iq-shredders/
In theory you can give birth to and bring up additional smart people, so maybe it's not exactly fitting the definition of "land", but in practice it seems that smart people busy with high paid work aren't quite keen on multiplying, so it's suggested by the article that supply of this resource is actually shrinking over time.
So increasing salaries in IT can be viewed not as "wages" for "labor", but more like "rent" for the "land", where each programmer is a land-lord of their high-IQ brain.
> In theory you can give birth to and bring up additional smart people
More people means not only more supply of labor, but also more demand for consumer goods. Fertility and immigration work similarly in this respect. [They also have differences, of course.]
Ethically, Immanuel Kant would suggest that code monkey breeding farms would treat people merely as means and not (also) ends in themselves, and would object on those grounds.
More prosaically, it's plausible that workers in selective professions collect a good chunk of salary and a little bit of oligopoly rent. However, oligopoly rents tend to dwindle as the number of competitors grow (c.f. https://en.wikipedia.org/wiki/Cournot_competition, reading "firms" as "workers"). Also, the main mechanism which enables mono- and oligopolies to charge a higher price is that of restricting supply. Provided the labor unions are not given the power to force some people out of the profession in question, there is no way (e.g.) one programmer could reduce the total number of programmer labor hours supplied by other programmers. If each programmer is one among very many (say, hundreds or maybe thousands), each person's decision to work a little less has a negligible impact on the wage bargaining position of the rest.
So I would guess workers in most selective professions overwhelmingly earn wages and basically no rent, provided inflow of people into that profession is only limited by competence and willingness.
Earning lots of money just because the supply and demand curves intersect and a market clearing price that's comfortable for you is not an example of rent.
Compare also to the long-run industry supply curve on p. 397 of Intermediate Microeconomics (5th ed.) by Hal Varian: loosely speaking, it shows that the more oligopolistic an industry is, the easier it is for slightly inefficient competitors to enter—their share of the oligopoly profits cover for their inefficiency. They are also more strongly incentivized by the greater oligopoly profits. In the limit, this behaves like perfect competition. I apologize that I can't find this diagram online.
Domain names in general should be taxed as land, with the taxable base = asking price for the domain name.
This should get rid of a bunch of the ridiculous cybersquatting (yes a domain name I owned was snatched up by cybersquatters because I was too busy *having a baby* to notice the warnings that my card had expired)
Abt network effects, I'm not really sure it makes sense to try to shoehorn them into the Georgist framework. I think Georgism checks out, but a minimalistic, "single tax" idea is pointlessly restrictive.
LVT + various Pigovian taxes on luxuries & other stuff with negative externalities (so that they don't need to be illegal 'for people's own good e.g. heroin', and CO2) + some level of capital gains tax + maybe-very-minor-wealth-tax + inheritance-tax, progressive and with some reasonably high floor. That comes out the top of my head to replace all(?) other taxes (and probably still end up with a huge pile of cash to redistribute as a 'dividend' - or if not, do something else with them, or drop them in order of capital gains then wealth tax).
Network effects of Facebook are a really, really weird kind of monopoly resulting from pure inability to coordinate. The whole construct could be simply dissolved without taxing Facebook or dismantling it, actually.
I've already spoken about it online a few times, but thankfully someone elaborated on it recently. Weirdly it's Moldbug. Not sure how do links work in Substack comments, so: graymirror.substack . com/p/tech-solutions-to-the-tech-problem (just C-f "Protocol extraction" to skip the Cathedral-talk). I'll quote it below.
"One way to peacefully attack the tech behemoths is protocol extraction—analyzing and reconstructing the secret protocols that their apps use between client and server.
If these secrets were open to the world, any fool could write a Facebook client. This would set another power against Facebook: the power of the client against the server. For example, Facebook would struggle to force third-party clients to show its ads; even worse, multi-server clients would emerge and become the user’s true center of gravity, making it easy to switch servers and destroying the lock-in that is Facebook’s capital.
Obviously, these superior clients—a whole marketplace replacing a captive monopoly—would create immense consumer surplus. What Facebook has been doing is tying its monopoly in one market—social servers—to a monopoly in another—social clients. These are two separate lines of business that, if the Internet was used as the network it was supposed to be—a network of open protocols—would not be connected at all.
Obviously, this is exactly what antitrust law was meant to prevent. Obviously, the right remedy would be for a judge to order Facebook, or Congress to require all big social companies, to simply disclose the specifications for their internal APIs—and handle any packets matching these specifications, regardless of what software sent them. Congress could turn every app into an API, creating a Cambrian explosion of clients— not to mention a huge number of good American code-monkey jobs.
But of course the System will never do any such thing to itself. So that’s out, now. Still, sometimes when there’s a will there’s a way.
There is a will for one such API: the YouTube API, whose protocol is tracked by the famous youtube-dl project that—downloads YouTube videos. Even this is not easy. Still, it is physically impossible to create a protocol that cannot be reverse-engineered.
For a comparatively small amount of money, perhaps even funded anonymously, it might be possible to analyze, document and maintain the private protocols of all major social services—turning all their apps into APIs, and creating a compatibility library sound enough that a whole ecosystem of polysocial clients can stand firmly on it.
For tens of millions of dollars in code-monkey ramen (although you might want to spend at least as much on legal), you could devastate hundreds of billions of dollars in monopoly capital. Nothing personal—you’re just “commoditizing the complement.” How about it, donors? I’d maybe go with… ZCash… for this one. (Maybe the world needs a donor-advised fund that makes distributions to ZCash addresses.)
Of course, this magic library is useless if no one’s phone will let them use it. This is another good thing for donors to support: free-software phone stacks. Which will work even better if they can reverse-engineer private Google protocols…"
I'll note that decentralized alternatives to Whatsapp and Youtube already exist : Matrix and PeerTube as an example.
Matrix is particularly relevant, because that's what Gab uses now (though they decided to split themselves from the rest of the network).
But you'll notice that Parler was still created. Why ? I'd guess that because pre-Matrix Gab was not allowed on Apple Store & Google Play, and later lots of Matrix clients went to pains to specifically block Gab (more because they hated that kind of crowd than because they were forced to ?)
Gab is ActivityPub/Mastadon-fork, rather than Matrix btw (Matrix is more IM-focus than "general social media")—though it's not like there isn't a whole load of neonazi content on certain Matrix homeservers.
Network-effects-as-land is a stretch yeah, and on second thought I don't want to think of it that way any more than I want to think of intellectual property as land. Economically, they both attract rent though, and apparently George advocated for regulating "monopolies of scale" and that basically looks like what (I think) most people would be happy with.
peak.singularity mentioned Matrix, and I'd like to add that they do have bridges to Telegram and Facebook Messenger, among others, but the UX is not great, in part due to issues with login ("oh yes, it's very suspicious you're not logging in from an official client"). Similarly, services like nitter and bibliogram tend to end up rate limited, etc. On the other hand, I did manage to find what Henry George thought of natural monopolies the following being paragraph 11 of a platform he wrote:
"With respect to monopolies other than the monopoly on land, we hold that where free competition becomes impossible, as in telegraphs, railroads, water and gas supplies, etc., such business becomes a proper social function, which should be controlled and managed by and for the whole people concerned, through their proper governmental, local, state or national, as may be."
It is, and I believe many people, Georgists included, would consider it anticompetitive to a degree.
About infrastructure: A lot of it tends to already be owned by the government (roads, the post office, etc) and it's easy to see how a government can build more if it's beneficial enough to increase land rent by more than it costs. For that currently in private hands, I'd suppose it'd be most fair to have it brought back at a fair price and/or regulated to charge the marginal economic cost. Georgism seems to me as much an anti-monopoly movement as it is one specifically anti-land-monopoly, it's just that the land monopoly is the strongest: "the robber that takes all that is left", as he puts it in Protection or Free Trade.
In EU, the monopolies of mobile cariers were forced to provide access to their infrastructure to "virtual operators", so that the physical network (which causes the network effects) must be shared (at reasonable fee) with new players. I strongly believe a similar thing should be forced on Facebook (enforce that GraphAPI etc. give enough functionality to application developers that they can essentially run their own "social network" on the subgraph of the whole FB's graph), Slack (enforce that IRC bridges are again functional), Messenger (so that XMPP bridges work) etc. What do you think?
- this level of the Internet is way less standardized
- during the last years Facebook has been on the countrary clamping down on what it used to share, because some companies abused it (Cambridge Analytica, the recent phone numbers leak)
- I'm not sure that Facebook can even be 'retooled' this way : going from centralized to decentralized ?!
- the bridges kind of suck anyway, much better to have the functionality directly in the protocol, but what's even left of XMPP in Facebook Messenger ?
- Facebook (& its other companies like WhatsApp) is probably to big anyway at this point, it must be shut down
"After thinking about it, it's not just about fungibility, but about ease and durability of storage and transport :
At one end of the spectrum you have stuff like ice, oysters and strawberries, then further long the spectrum you have apples,
then in the middle (?) of the spectrum : stuff like grain and gold,
while the other end of the spectrum would be things like hawala, Internet-carried conventional banking and bitcoin."
And what does hawala, conventional banking (even with paper money) and bitcoin have in common ? They all require a network ! (And their "value" most likely rises with the usual network law, as the square of nodes ?)
Coming back to Facebook, remember Doctorow's "Whuffie" ?
(social reputation replacing money - note that that book predates Facebook by a year)
I read the ship thing as saying something like this:
Before anything is done, the laborer has some time T and the capitalist has some amount of capital K (which is some combination of money and shipbuilding resources I guess).
The laborer spends T and the capitalist spends some fraction of K (say aK, a < 1) to build half a ship, which is more valuable than T + aK.
But the ship is owned by the capitalist, so really all that's changed so far is that the capitalist has gained some value larger than T (since the capital transfer was just K -aK +aK). Thus, when the capitalist pays wages to the worker, you could say it's coming out of the value the capitalist and laborer generated together.
I'm not sure whether that makes any sense though, I Am Not An Economist.
Yeah that's mostly how I see it. If you are in the ship building business, then except for the first ship you build, you can see wages as coming from the sale of the ship. Your capital is all the stuff you bought to make the ships, dry docks, cranes, welding equipment. The first ship you build is a little special, and you have to borrow to make payroll.
Re: 1, I think George's point is that that capital didn't simply fall out of thin air or get plucked off a magic money tree. Those highlighted bank notes came from selling goods or providing a service, not by "and I reached under my mattress and there they were", before they were socked away in the bank as savings. So it all comes out of production - if the employer is paying his workers to build ships, he must be selling ships, so the money from selling ships yesterday pays today's wages. But you can't sell a ship until it's produced (well, you can build it on commission and get paid in stages until it's finally built, I guess), so it's the fruits of former production that give you that money. If the employer borrowed that money to set up a shipyard, then the money from the bank came from depositors who had saved it there from the proceeds of buying and selling.
It's the same notion about usury being a sin, where Dante includes moneylenders/bankers in the Seventh Circle of Hell (the violent) on the liminal edge where that circle transforms into the Eighth Circle (fraud). Usury is violence against nature, as it makes a sterile instrument (money) 'unnaturally' breed by interest, not by doing anything fruitful as being used for buying and selling but simply "pay me for letting you hold this money in your hand". If I lend you 100 nobbles, you can't just pay me back the 100 nobbles, you have to pay me back 120 nobbles. Where did the extra 20 nobbles come from? What is this charge for? It's an invisible cost, pulled out of the air.
I don't think that quite works that way. Sure the money paid back to the banks, the banks can pay back to the treasury, decreasing total currency in circulation. But the interest paid on the borrowed amount is not paid back to the treasury but is spent on paying workers, rent, and as profits to the owners of the bank. That money continues being circulated.
> If I lend you 100 nobbles, you can't just pay me back the 100 nobbles, you have to pay me back 120 nobbles. What is this charge for?
It is a charge for lending the money rather than the other guy who's willing to pay you 119.99 nobbles.
And at root (and in a world with only one borrower) it's something to compensate you for your patience: you're spending money later rather than now, and you're giving up the flexibility to spend it whenever you want, until the loan is repaid (compared to just keeping the money in your mattress).
Can I borrow your car for 5 years at no charge if I promise to repair any damages? Would you feel entitled to compensation for something you lost? Should I pay at least your bus tickets in that period?
> Where did the extra 20 nobbles come from?
The borrower.
> it makes [money] breed by interest
Setting up a loan is not the same as creating new currency. Or rather, it can be in some banking systems, but the two don't necessarily have to go together.
Coming at it another way: the money in my bank account breeds not only when I lend it out, but also when I add my monthly wages and spend less (over time) than I earn. Are labor and lending equally unnatural acts of violence against nature?
[I'm not sure I'm arguing against your or Dante or both, but I want to put this out there anyways.]
Land is defined as stuff from nature. not land as land on earth
one example of land for google I presume is the https://www.google.com/ domain name. follow the idea, I assume that google gain value from other website existing and the stance is to tax google to subsidize society at large
I would point out that although there are some parallels with domain names to practices in real estate speculation (e.g. domain name squatting) a major difference is that you can create new domain names. I guess you can't create another www.google.com, but nothing in theory stops whoever mints new domains from spinning off www.google.fart
Arguably, though, the total value if you integrate over the space of domain names is bounded, i.e. the set of even slightly desirable domain names is finite. So in practice I think a kind of Georgian tax on domain names could be enacted by assessing the general desirability of your domain at regular intervals, e.g. using search trends or something more sophisticated. This would mean that a squatter would suddenly have to pay a hefty tax if their domain suddenly became culturally relevant.
Yeah might be worth considering! A use it or lose it fee for this kind of thing seems like it would solve some things whether or not you go full George with it or not.
I think the use of the term "land" here is unfortunate, because what George really means, I think, is "natural resources." But then people might not include land in that category, so perhaps we should use "land and other natural resources," understanding that this includes things such as the EM spectrum and domain names.
2. Google does own a lot of land, and patents/IP count as economic land. Oracle should be considered a landlord as much as it is an innovator- the patent wars were pure rent-seeking. (There's a balance here to encourage innovation, prizes for IP, or taxing IP ownership like land, could help).
Part of why, imo, george's movement got out-flanked aesthetically by marxism is precisely because he didn't care about *how much* wealth a person or company had, but *how* it was acquired. That's a little less straightforward than "eat the rich," so after george died it was difficult to keep the raggedy alliance of libertarians and socialists and labor together. The government also did some straight up monopoly-busting, land redistribution, etc, to address some of the problems. All property taxes are, in part, land value taxes- they just *also* are taxes on improvement, disincentivizing improvements.
To your first point, i think the other comments have responded better than I could've.
Really glad you put this review up - I've often thought that reading between the lines, the places where you tend to see government intervention as just vs unjust roughly align with georgist principles- and to be clear, henry george popularized them in the english-speaking world in the 19th century in this form, but the ideas have been talked about everywhere for most of human history (mencius, ibn khaldun, as mentioned some indigenous conceptions of ownership). 'Legal systems very different from our own' covers one or two of these examples, I believe.
> Part of why, imo, george's movement got out-flanked aesthetically by marxism is precisely because he didn't care about *how much* wealth a person or company had, but *how* it was acquired.
While you're right about Twitter meme content, when they talk theory Marxists and Georgists make the same distinction about "how it was acquired". The difference is that George says we'd be better off minimizing rent*, and Marx says we'd be better off minimizing both rent* and interest*.
(*where "rent" and "interest" are defined in the Georgist way as in the book review above)
"Part of why, imo, george's movement got out-flanked aesthetically by marxism is precisely because he didn't care about *how much* wealth a person or company had, but *how* it was acquired."
Marxism makes plenty of criticism about how wealth is acquired in a capitalist system.
Re: 1) I asked a Georgist friend of mine about this and here's his reply:
> I partly agree with Scott about the importance George puts on this question. The wage-fund, was a popular idea at the time and still has spin-offs today, like the idea that artificially enriching people who are already rich is a good way to increase capital creation.
> As for the merits, George made a strong case. Any exceptions, like the one George outlined, where labor accidentally produces nothing of value, are outliers. Remind Scott to stick with George's definition of 'capital' and it will make more sense. I've worked on a ship. I've repaired a ship. It wasn't done when I finished; it was just better. The ship was better and worth more. That was 'capital' I created with every hour of my work. It was not removed from anything that the ship owner had.
Re 2, land-based agglomeration effects are HUGE in Silicon Valley; Google has enriched landlords in the Bay Area by an amount that far exceeds its market cap. So in that sense, Google needs valuable land more than most businesses, though it pays for it indirectly through higher salaries. But the key point of Georgism is that people who are able to put land to _productive_ use actually benefit since they will be able to buy the land they need for much cheaper and pay the rents out of the value they extract.
> they're paid out of the saved money that the person who founded the shipbuilding company brought in (or borrowed)
As per the article, money is not capital. If that money was earned via production, the workers are paid out of production.
The boat, on the other hand, can be used for shipping, in which case it would be functioning as capital. So to summarize, the workers are paid from production (saved money) rather than capital (the ship).
Not really transparently false any more than saying that you're "spending the Bahamas trip money" on car repairs - all money is fungible so no money belongs to anything, right? But the only reason you loan the capital to build the boat is because you anticipate the labour put into the boat will pay back the capital. In a perfect-information world with zero percent interest, the capital wouldn't be relevant, but the labour still would be. That's the point Georgists are trying to make.
1) The consensus position he wants to debate is that it there’s too little capital chasing too many laborers.
2) The positions of “farmer” and “farmland owner” are already in practice quite distinct. Georgism would obliterate the returns on owning farmland but not on working it. Setting aside corporate tax, Google pays a kind of “tax” to the landlords of Mountain View through what are nominally wages. It argues we would all be better off if Google could grow even larger with that weight off its back.
1. (paid out of production rather than capital) George is fighting the idea that without capital, there is no production and no work for workers. He says this is not true: only land is required. As long as you have land you can work and generate wages.
Capital does increase efficiency, and it does make longer-term project possible or at least more practical, but in the en it is not required.
It's all in support of its ultimate conclusion: land enables production and land only should get taxed.
Regarding highlighted dollars: sure, when profit is far in the future, workers are paid in capital. But this is only an advance on the proceeds of production. If you remove production, capital wouldn't flow to the workers as wages. If you remove capital, the workers could still generate wages (e.g. by picking berries and selling them, or whatever).
By George, ideas are land. Google may hoard access to land they discovered value in [trade secrets], and Google may be granted temporary monopoly over land they discovered value in in exchange for making their discovery public [patents], but in any case Google is using a *lot* of land. Furthermore, the land *value* of the Googleplex and other properties is likely very high compared to farmland.
Thus, to your presumed point that a modernized land value tax might greatly shift the modern tax burden, that seems to entirely depend on the details of a specific proposal, the extent of its definition of "land", and the tax bill determined for modern "land". How much might Google be charged in comparison to WeWork or ExxonMobil?
As for the farmer, I think a quick search for the effective tax rate actually paid by America's largest corporations will show that the farmer already frequently pays a higher rate under the present system.
As to the fairness of who pays how much land value tax, I think the more interesting comparison would be between farmers and J. K. Rowling (as George seems to have a rather different view of copyrights than of patents). Indeed, a LVT seems like something where the farmers pay more than Rowling.
Regarding the highlighter marks: the way I read this, it seems to me like George's reply should be that, since dollar bills are not wealth, but merely a pointer to wealth, exactly which physical bills are being used to pay wages has no influence on where the actual wealth is coming from.
That being said, it also seems to me like the sort of counter-example mentioned (where wages are higher than the wealth labourers generate) should be fatal to this view, even if these examples are not sustainable (after all, they are certainly possible and might even be metastable if the person paying the wages is inefficiently juggling many different enterprises but not suffering net losses). I suppose George insists on this because it makes labourers seem less dependent on capitalists than the alternative, and he is trying to shift attention away from that particular interaction. I assume it is also possible to strengthen the position somehow with the sort of atemporal approach mentioned in another comment, but I can't see how that can ever both account for the aforementioned counter-examples and make any meaningful difference.
In accounting (?), there's a notion of a 'going concern', i.e. a profitable business/enterprise that 'should' continue to exist (and operate) indefinitely.
'Assuming' a going concern, workers are paid out of production – 'on average', e.g. from the perspective of a profitable ship builder.
Arnold Kling has a phrase/acronym that I think covers this pretty well, PSST – patterns of sustainable specialization and trade.
You're totally correct that _creating_ such a pattern requires capital and thus, in a very real sense, workers are paid from 'capital' – at least initially. And, when those patterns _cease_ to be sustainable that's also in a very real sense equivalent to a farmer 'eating their seed corn'.
"As for compensation for risk, George says that risk averages out and disappears when you take the God's eye view and sum all of society's transactions together. If I take the winning side of a bet and you take the losing side, I enjoy gain, you suffer loss, but the amount of wealth in the world hasn't actually increased as a result of our bet."
But there are many bets which don't have people on both sides, an consequently a societies total transactions and economic activities can be more or less risky in aggregate.
what bets don't have someone on the other side? those just sound like 1 vs society, or the present beneficiaries of the status quo the gambler expects to change, the 'other side' is diffuse but exists
I was actually curious about this part of the review as it seemed like a bit of a hand-wave, can you give some more detail?
I'm a small business owner and I regularly find myself in situations where you hear "Okay, I'll pay you a good reasonable wage to do this work, and then I'm going to be taking a risk on whether it pays off, if it goes big then I get my big cut as I took nothing up front, if it doesn't pay off then I basically got nothing from the project." So there's this natural sliding scale between upfront compensation and revenue share (or equity) based on the risk someone takes on. How does this fit into the framework about the Georgist notion of capital?
Any bet against nature might qualify, e.g. saving money by constructing a weaker building is effectively betting against a catastrophic weather event. My understanding us that a lot of farming is essentially betting on the weather.
Tons of bets are not zero-sum! If I'm a miner I'll make a bet on where to excavate, and if it turns out I'm wrong, I lose, and in aggregate humanity loses too. (Still, it is probably true that in aggregate the win:loss ratio of all humans together is nearly constant)
If I bet my art collection will be stolen, but actually it would not have been, I can hire security, but no benefit accrues to me from that (a fact I cannot know, so I keep paying the guards anyway). btw you might point out that the security guard benefits from the wages, but the security guard would benefit equally from doing a productive job like "factory worker", and in the latter case aggregate wealth of society becomes higher. A malfunctioning society suffering from higher risk of theft (for whatever reason) will waste more labor on security guards and suchlike. By George, of course, the malfunction can print be traced somehow to landlords.
Collectively, most of humanity has spent the last 30 years making a bet that switching to clean energy isn't worth the cost, so let's just keep burning Georgian land (oil) until we run out. The consequences of that bet, good or bad, are largely independent from what the cost of switching to clean energy would have been. (aside: of course, there were some countries and businessmen who did invest in clean energy, and so we're finally starting to see some light at the end of this tunnel) By George, this is a special case though, a case in which human actions can affect the total supply and value of land.
Yeah, though wages are a distraction here - wages are value but they aren't wealth.
However, if the alternative to being a security guard is staying jobless, then *something* is gained by the whole society by you being hired as a security guard. It isn't wealth, but it isn't *just* value - what is it ?
In that case the gain is from wealth redistribution, as the marginal dollar is much more valuable to the security guard than the wealthy art-owner. The art-owner might have used the marginal money to buy an extra or upgraded car, while the otherwise-jobless security guard would use the same money for basic things like rent, food and furniture. Mind you, in a normal no-UBI society with a poor job market (so that the guard would otherwise be jobless), the art-owner has good reason to hire security guards, as unemployment tends to cause theft (crimes of desperation).
So how does this work empirically? I Googled Land Value Tax experiments, and the first result is a write-up on Harrisburg in 1982 and Allentown in 1996, which fixed blight and helped protect vulnerable groups through the use of LVT. Pennsylvania lets you tax land value more than building value.
It's worth mentioning here that there is at least one Philadelphia City Councilor who is serious about an LVT, which could have excellent results for the southeast part of the state. (The current Philadelphia wage tax is an excellent example of "if you want less of something, tax it". Many high-income jobs and individuals have moved to the suburbs because of the wage tax.) https://www.youtube.com/watch?v=QomEl3rV2LU
IANAGeorgiat - pretty committed Austrian, in fact - and I am enormously impressed by this review, and by the conceptual elegance of Georgism.
Like many other theorists, I find his analysis of the situation into its constituents astute, but am not sold on the solution until and unless it's empirically tried thoroughly. So here is what I've updated on, and the questions that have opened up for me as a result of reading this:
1) This summary has convinced me that the Austrian account of the 'mixing of labour' theory of ownership WRT that not created by the hand of man is not complete (it is hand-wavish as the best of times), and that a greater nuance is needed there to flesh it out. Good opportunity for theoretical *and* practical work!
2) The question of the equilibrium dynamics that result from this theoretical lacuna - the equilibrium being critiqued here being that of nearly all the gains of productivity and wealth (in the Georgist sense of those terms) being captured by rent, and the resultant unjust and overall shitty results - I am now convinced is a real one.
3) George does not address some very important question - who, whom? being the biggest one. There may be ways to fairly calculate how much the various levels of aggregation - neighbourhood, town, county, larger level entity, state, country, etc (and in some sense the world? potentially applicable to question of pollution, etc, and other commons problems?) - contribute to land value, thus leading to the rippling everywhereward of positive incentives. But who can be trusted to actually do this calculation, and not be a dickwad about it? What prevents higher-level landlords, etc, and all the resultant garbage just happening at a higher level - thus making everyone the milch cow of the state instead of Ms. Nguyen?
4) The problem of identification and sentiment is real, and I'm not going to pretend it's not. Stability is power, transience is impotence, as the ever astute Sir Appleby said of the civil service and elected politicians, respectively. I damn well want to be able to buy land in a city I expect to be a nice place and continue to live there because I saw the opportunity and took a risk on it. If I'm not renting to anybody, what the fuck, man, how can you just tell me to get up and get out?! This is outrageous! I live here! My friends and community are here! My extended family lives here! Fuck you and your economic optimisation, we're human beings, not soulless automatons in the service of economic efficiency (as *YOU* conceive of it - what happens if I don't agree with you?!). Completely unaccetable.
But... the problems are real, too! What is to be done?
Here's a proposed solution that immediately suggested itself to me:
a) If you rent out your land but do not use it yourself, then you have to pay the LVT.
b) If you use the land yourself, then you do not pay the LVT while you're using it, but your capital gains tax is massive - so there's still *some* gain to speculation, but very little/modest compared to what it is now.
c) If you sometimes own/use the land and sometimes rent it out, then some combination of the above two that I haven't though of but I'm reasonably confident exists and someone may be able to elucidate as a fun intellectual puzzle?
This clearly prevents the situation where I don't actually have property rights in the land which is my property, thus forcing me off my land; yet it also ensures that the only reason I'd have to *not* move off it and move somewhere else - or even better, develop it, pay the land rent, and collect on my investment in the improvement - is because I *actually want to stay there and/or use the land*, not just because I'm usuriously/avariciously HODLing.
I presume this has already been thought of by *someone*. (If not, you may thank me for making this not inhuman and Molochically horrible!) Any Georgists care to help me with this?
Addendum: this seems a clean refinement of the Austrian theory of ownership, in that it is claiming that your ownership of something you have mixed your labour into should be qualitatively and quantitatively matched with the labour you have mixed into it - and since it is not in fact your labour that has created the land ex nihilo, it is impermissible to claim that your ownership extends to it - but it *is* in fact completely permissible to claim your ownership extends to it *in a way qualitatively and quantitatively matched with the labour you have put into it*.
This exposes a cleavage - that of 'property because labour mixed in' and 'property because it prevents disputes and resultant violence, and allows planning and action at all, and also man is a territorial animal and it's a basic instinct of his and you try to mess with this and it'll end horrifically', both of which are implicit in the Austrian analysis but not so clearly delineated.
(More about this an another top-level post; I believe it deserves independent discussion. There are also *serious* problems with Georgism's conceptual framework which I believe lead to tyranny and atrocity quite naturally in their full development/unfolding, but I think that I may be able to extract the *kernel* of the good idea from the oft moralistic and ressentiment-tinged *shell*...)
Georgism solves the first but not the second - it does not address my objection 4, which I hope the (seed of a) scheme I outlined above addresses and solves, in preventing expropriation, which is a terminal goal for me.
In general: Bravo, bravo! I have rarely if ever seen anyone actually a) show a real weakness/point of incompleteness in the Austrian categories, and then b) *refine* the conceptions it was working with, instead of just using it as a political cheap shot. Wonderful! I had become jaded by reading things which were clearly incoherent and not even rising to the level of being wrong for so long that I'd given up hope of constructive contributions from economic discourse. This was like a draught of cool water in the parched and dessicated heat of the desert of discourse today. Great good fortune to you, stranger, for this!
Re 3, the difference is that rent paid to a landlord doesn't come back to you in any meaningful way. But money paid to a state comes back to the citizens. (Not with perfect efficiency but significantly greater than the landlord)
I'd say its the opposite, the landlord at least faces some competition/incentive to add value and make more money. It's much easier for a renter to switch landlords than states.
Or make LVT a progressive tax, tied down to the net worth. Say, <$100K, none. >$500K, full. Some percentage at (several points) in between. $500K might be higher, dunno.
Or maybe it'd actually work to make it so that a person isn't charged a LVT on a land which is both a) owned by them, b) their primary residence. I'm not sure how enforcible is b), so maybe even "1 location of their own choosing". Where 'location' is restricted in various ways to fit only actual homeowners and not someone who owns a square kilometer of land or sth.
But it doesn't necessarily solve the problem of a family living in one place but one member just gave out property rights amongst them. Or a (criminal) landowner making an informal deal with some homeless people and giving them the property rights (enforced in ...criminal... ways)
" What prevents higher-level landlords, etc, and all the resultant garbage just happening at a higher level - thus making everyone the milch cow of the state instead of Ms. Nguyen?"
Nothing. The rents would still gobble up the value like they do now. Other than removing the speculation component from the equation - which doesn't work even if LVT is cautious, say, targeting 50% - you're paying indefinitely a huge sum of money _hoping_ land value will rapidly increase. Soon.
If you model 'the government' to which taxes flow as a third party, not a 'society' - then typical reaction is "government is stealing from these people, why are you supporting taking from them, why is their wealth a concern at all?". But that perspective reduces to nonsense given that government has power to take anything. So modelling it as a third-party enemy is pointless. All useful conversation needs to happen in the frame of "should WE tax it?".
If we approach it from that frame, it's the question of moving current system, with its sources of the budget -- to another one. Right now we tax various stuff, it goes into the budget. What if we do the LVT? Now all of the rent goes to the budget. Presumably it'd exceed income taxes. We _could_ drop them. Or not - it's a completely different question.
Assume for a second we move 50 years into the future. Now ~all owners of the land just inherited it. Should society's wealth really flow to them. What are the incentives? Why tax income, just to preserve their - ultimately based solely on status quo - property rights.
If we make "have a certain national budget" an invariant, why would we want to depress economic growth by _not_ shifting tax burden to the unavoidable sink - which extracts massive amounts of value in ways completely independent from the owner merit?
Rents can't be avoided if land is 'free'. If it's communal, you can't use it to build fixed structures on it - otherwise they're effectively not yours. If it's managed by the command economy.... well, it's just bad at allocating it properly. LVT seems like a sanest idea yet. Land is still allocated by market forces, but wealth isn't gobbled up by the - ultimately - feudal lords.
Also - recently I sort-of came up with a similar thing without hearing about LVT but couldn't figure out how to deal with common ownership of land while letting people actually... live. Now that I think of it, separating structure-value (improvement) from the land seems definitively doable to some extent. Details would be iffy, but suppose someone owns a piece of land with skyscraper plopped up on it.
All that is necessary to do is calculating the cost of building said skycraper - building the building - on a nearby, empty piece of government-owned land. Add some safety margin. Look into the documentation of an actual skyscraper.
Determining value of land seems a bit harder, but it could involve looking into the transactions of renters, for example. Not like state doesn't track renters and landlords.
The issue of the commons that you raise might actually have some very interesting implications. If the government now has a more direct financial stake in the wellbeing of the land then policing negative externalities becomes a way higher priority. If a company dumps toxic waste in a river and spoils the adjacent farmland, it is destroying the revenue base of the government.
Climate change is set to reduce a whole lot of land value and the resulting revenue projections in a hypothetical LVT state would align its priorities with mitigating it.
Anchor links (to appendices) are once again broken, linking to a different page entirely. Please replace them with relative links. (Or to this same page, which should work, although relative is of course better.)
While I find Georgism tempting, my problem with it is that, essentially, exclusion of rival uses for land is an externality, thus LVT is a Pigouvian tax, and "Coase plus Pigou is too much of a good thing" (http://www.daviddfriedman.com/Laws_Order_draft/laws_order_ch_4.htm). The issue, as I see it, is not that land is enclosed, but that that enclosure was accomplished by force (as in TFA's Henry VIII example) meaning that the market never had a chance to compensate the victims.
Whereas in a Friedmanite ancap utopia, I only recognise your title to some land because my protection agency has made a contract with your protection agency which includes some kind of land registry. Which *maybe* means that if an LVT works as well as advertised, then one would get written into those contracts, on a bilateral basis? This went in an unexpected direction...
It's both. From the perspective of society as a whole, it's an opportunity cost; but from the perspective of the individual using the land, the cost is borne by the other people who wanted to use it, which means it's an externality. (I mean, yes there's also the internal opportunity cost of the different potential uses a single person might have for that land, but precisely because that's not an externality it doesn't pose any problems of political economy.)
Great review! So what are some good arguments against Georgism? The link "If the Land Tax Is Such A Good Idea, Why Isn’t It Being Implemented?" doesn't really answer the question IMO, it reads more like a guide for how to argue for Georgism at the local level. Why aren't land taxes common and popular?
they were *extremely* popular while george was alive and roughly up until 40-years after. but the political structures at that time in countries like the UK where Churchill supported a 'People's budget' funded by a LVT included landowners in explicit power - the house of lords! Who could strike down LVTs. Georgism as a philosophy also lives in a weird space where it doesn't have as many punchy boogeymen as marxists, so it was out-competed by the left.
Georgist ideas were very influential on Sun Yat-Sen and wolf ladejinsky, who then impacted asian politics with some real-world tests on some of these principles.
In america, half of FDR's cabinet were georgists, but the LVT movement already 'failed', outcompeted by the income tax movement as the primary new funding mechanism. They tried to 'spread the manure' by encouraging suburbanization, which for a time worked as 'new land' to help laborers. But eventually, as pikkety points out, the bill comes due, and rents started picking up again, and ofc with the 07 crisis, we started building heaping mounds of speculation on land.
I would say the idea is once again gaining popularity. Georgists insist that the discipline of economics intentionally and systemically shut out the 3-factor model of production, but I think it was more stupidity than malice - suburbanization gobbled up the effects of land rents and things seemed to be going well for a few key decades, and marxism gobbled up the idea of political activism in the economics profession, it wasn't 'cool' to be a georgist after he died in most of the world.
I don't think laying out the problems of society in a rational and very detailed manner should count as a "boogeyman". Marxist writings are very incisive.
The pragmatic answer is because owners of land are politically and economically extremely influential, so their preferences take precedence over the common good
It seems like at least in built-out suburbia where houses have similar values, property taxes sufficiently approximate land taxes already, other than a few odd vacant lots, so turning it into a proper land tax would make little difference? Very high property taxes tend to be unpopular for the usual reasons. Saying "oh, it's a land tax now" isn't going to make higher property taxes popular, and neither is saying "plus, the point of this is to crash real estate prices."
Also, the main barrier to change is now zoning laws. Fixing this might allow single-family houses to be replaced by duplexes, triplexes, and so on, which would be a very good thing and some loosening up is happening already. But it's not clear we need higher property taxes to force the issue by getting a bunch of home owners to sell because the property tax is too damn high.
The spirit of land taxes might be preserved by not assessing new duplexes, apartment buildings, and so on at a higher rate than a regular house? Sort of a YIMBY discount. This won't appeal to people who want to stick it to the landlords, though. And, possibly there could be a gradual adjustment leaving property taxes at around the same rate on average for existing homeowners, but technically based on land value.
I'm still having trouble picturing how a land value tax is supposed to work.
If someone just doesn't pay, do you seize the land? That's how property taxes work. But if you seize the land and not the buildings on it, what happens? Or, if you don't seize the land, how do you collect?
If the tax exceeds what anyone reasonably expects to collect in rent or use-value, can they renounce ownership? What happens to the land then? Or does it become a hot-potato?
Is the tax based on the rent the land does receive? The rent it could receive? The rent, minus that part which is secretly the super's wages? The sales price? All these things seem gamable.
If an owner-occupier can defer the tax until sale or death, does this include a corporation? Because they can defer indefinitely, or be bankrupt when the time finally comes. For that matter, do we expect individuals to be able to pay when the tax finally comes due?
The same way that property taxes are levied currently. The state sends you a bill; if you don't pay it, the consequence is that the state seizes it to pay your bill.
A private analogue of this is unpaid mortgages being seized by the bank via foreclosure. If you can't pay your monthly mortgage payment, you are forced to sell the property to someone who can.
I agree that in the edge case, the tax rate is so high that the expected value of the land is negative (no valuable non-taxed improvements, tax rate set incorrectly), and no one will buy it. Then you may need a mechanism to renounce ownership short of losing all your other assets via bankruptcy. This is why an 85% tax rate rather than 100% is suggested, but there's also a clear feedback mechanism where if the tax rate is inappropriate, everyone renounces/declares bankruptcy, and the locality recalibrates their tax rate.
But the point here is that this is a fundamental recalibration of land ownership as valuable only in so far as you have a productive outlet in mind for the land, so if you aren't using the land for an appropriate amount of labor/capital production, then it *should* be negative value (think depreciating/expensive-to-upkeep car, not appreciating urban plot).
The land isn't truly collectivized, it's still owned by a person -- the state is instead taxing 100% of the land-based rent. The point is to make owning raw land unattractive from a speculation/rent-seeking perspective, it is still valuable from a "Having a place to invest capital/labor" perspective.
The state could seize it from that person, then resell it to an entrepreneur who is willing to pay the tax rate in order to develop the land and profit from the improvements/labor they put in.
The state in this case would also be seizing any improvements on the land, but if they were valuable enough to matter, the owner could sell out to escape the tax burden instead of being seized (as gentrified residential-neighborhood owners currently might do when property taxes increase).
No, there really is <B>no</B> need whatsoever to be complicated.
What happens when you owe the government money for any other reason? It makes you pay the debt, one way or another.
That Georgism does not do <i>general</i> expropriation of improvements like Marxist collectivization doesn't mean it prohibits ordinary means of debt collection. Ordinary debt collection includes liens, seizures of assets, and garnishment of wages.
The review mentioned that we already assess both the underlying value of the land as well as the value of improvements. This would be a tax based on the underlying value only. It's not the value of rent obtained, but for a well functioning assessment system, it would be pretty close to the value of the land without improvements if we were taxing 100%. Also as mentioned, many Georgists apparently say 85% would be a better number. So if the land's value, absent improvements, is able to extract $X in rent, the tax would be $X*0.85. If the landlord is able to provide improvements beyond $X (meaning, beyond the base value of the land's rent value, for instance by building better housing on it), then the landlord could collect much higher rent and make a tidy profit above the taxes.
The real kicker here is that the land would have to be productively used and could not sit idle. The main effect would be to reduce or remove speculation as a portion of the cost of land. A lesser but still significant effect would be to eliminate long standing rent charges when no additional value is being added (slum lords barely maintaining an apartment building but still charging steadily increasing rents).
>If someone just doesn't pay, do you seize the land? That's how property taxes work. But if you seize the land and not the buildings on it, what happens? Or, if you don't seize the land, how do you collect?
It doesn't have to work the way property taxes work. The assets they seize might not be the same as the assets being taxed. So maybe they would seize land and buildings together, or maybe some other asset.
Also, at least in spherical cow world, you should always have enough money to pay the tax, since what's being taxed is the money you earn above and beyond your wages and the return from your capital.
"Also, at least in spherical cow world, you should always have enough money to pay the tax, since what's being taxed is the money you earn above and beyond your wages and the return from your capital."
This is the part that makes the least sense, at least in places with a reasonably high proportion of homeowners. In a suburban area, most landowners will own a house with a yard, which they will live in, rather than rent out. They are paying their mortgage using the wages of their own labor from somewhere else.
Do mortgages suddenly disappear in Georgist spherical cow world? Or do the middle class stop owning their houses, and everyone rents?
Yes, that's definitely the part that's hard for me to conceptualize.
I don't live in a land of slumlords with fully paid off properties, so most rentals are a part of someone's house, that they are now, or were recently, paying off in the form of a mortgage. Thus, rents are priced at something approximating a percentage of the mortgage roughly corresponding to how much house I have reserved for me, plus annualized improvements, plus whatever makes it worthwhile for the landlord to do this. So maybe my rent is $600/month (real number from outside a big city), for a duplex apartment built into someone's house. I live near some other, similar houses, and some apartment buildings.
So now the government wants to tax 100% of the land value of this house. How will they do that? One way to calculate it seems to be whatever's left over after accounting for materials and labor. The house was built 70 years ago. So the cost of the original materials and labor plus maintenance will be... annualized over those 70 years? That can't be right? Compared to the rent for an entire house? To the rent for an empty field? There are no empty fields of comparable size anyone in the town is renting.
Maybe they do an appraisal, and decide that the house is worth $200,000, and $50,000 of that value is "unimproved land." Since nobody rents unimproved land, but some people buy it, how will that value be annualized into a "rent"? 1/30 o the cost of a 30 year loan? 1/x where x is the average amount of time the land is held?
"According to Ralph Gabriel's Course of American Democratic Thought, in New York alone 200,000 people came to see his body lying in repose, half of which had to be turned away. For context, that one crowd was roughly the size of 1% of the entire population of New York at the time."
I'm assuming this is a typographical error. Shouldn't it read "10 % of the entire population of New York at the time"?
I can’t be the only one who read that sentence as “half of his body had to be turned away” and had to reread it a couple of times to understand he meant *the crowd* was turned away
The page linked in support of this claim estimates the population of the "New York Urbanized Area" in 1890 at 2,693,000 and in 1900 at 3,802,000. Taking those as lower and upper bounds for the population in 1897 would yield an estimate of ~5-7.5% for the percentage that showed up at the funeral (linear interpolation would peg it at ~6%).
Having updated the post to read 10%, you ought for consistency to update the corroborative link to one estimating the population of NY circa 1897 at ~200,000.
I'll always be happy to read an excoriation of the British over the Famine, but the tragedy was that it wasn't *deliberately* engineered, it just crystallised out of a set of conditions that had been set up for various historical and political reasons, and that only needed one little push for the entire thing to topple. I suppose George would feel vindicated in the post-famine era in Ireland, where people learned the (wrong?) lesson and "land hunger" became a thing - if you owned your own land, you couldn't be evicted. More land = more success and security. George would say "this is my textbook example of the wrongful use of land and how you set up further poverty and misery down the line".
Okay, let's step back from Irish history for a moment.
"Okay, but won't the landlords just pass the land tax on to their tenants?
By George, no. Rent is a price, and price is governed by supply and demand. Supply of land is fixed, so land value tax has no effect on supply. What about demand? Except in cases where it causes the economy to boom (a good thing), land value tax won't increase land value – what it always does, however, is reduce the demand for land by speculators. If it costs nothing to hold on to land, of course I'm going to want to grab some and HODL. If the rent I could hope to gain is taxed away, I won't bother."
Except that (a) if it's not profitable to charge high rents, I'll just hold on to my land. If it's not worth the while of speculators to pay me an inflated value for it, it's not worth me doing anything with it. Even renting it out, because you'll tax me on the value of the land and the rent will go to paying that, so I lose nothing even if I gain nothing by letting it lie idle for weeds to grow on. Indeed, if I manage things correctly, I may even be able to offset my tax liability against it as a loss! (b) land is valuable in proportion to demand. Large English estates often went under due to being "land rich, cash poor" and the shift in generation of income from 'rental income' to 'returns on investment' in the 19th century was driven by this (c) landlords will *always* find a way to pass on taxes to the tenants.
Let me tell you about a deliberate little fiddle of a rent scheme that everyone, including the government, winks at. HAP http://hap.ie/ is a new scheme that came in a few years ago to replace the former rent subsidy schemes in operation. At the time, still in the throes of the aftermath of the economic collapse, many landlords were willing and indeed glad to take on tenants who were in receipt of rent subsidies. However, as the economy improved and rents began to rise to the market rate, landlords were now reluctant to take those tenants as they could only afford a certain fixed rent. They preferred to go for tenants that they could charge full whack.
What to do? You had a problem of people waiting for social housing, who could not by themselves afford private rented accommodation, and thus a resulting homelessness problem. On the other hand, you're paying out taxpayers' money. If the rental allowance is *too* generous, this will lead to rent hikes because landlords *will* charge up to the limit. You as the government are caught between the rock of paying more and more in subsidies as landlords up the rent - which makes the voters angry - and the hard place of increasing homelessness - which makes a different sub-set of voters angry.
So, despite the fact that this is not supposed to happen, prospective tenants were given "nod and a wink" advice. When signing the rental agreement, the landlord would put down the notional value of rent charged - whatever the amount of the allowance was. Then the tenants would pay, out of pocket, a top up on that so the landlord was getting as near to market rate as possible. So the scheme to help the low-paid and those on social welfare avoid having to pay most of their money on rent ended up with... the low-paid and those on social welfare still having to pay most of their money on rent.
My point about land value is that George is right in one way, and wrong in another. It's only worthwhile for speculators to hold onto that land until they get higher prices, in his example of the village that will get the railway in ten years time, *because* demand will boom with increasing opportunity, increasing trade, increasing employment. It's not worth the while of very many people to buy that cheap land and set up a business there if there is no local demand and no convenient means to ship their goods to market. They probably won't build housing either as the influx of population for the thriving town hasn't happened yet, so there is no demand.
So it makes more sense, if you have money and want to maximise your return on it, to buy now while the land is cheap and hold on to it in the expectation of the boom in value. He can certainly make a *moral* argument for why this is undesirable behaviour, but I don't see an *economic* one. Setting up a factory on the patch of land that will probably fail due to lack of outlets is wasting your money. Building houses that lack tenants is a waste of money. Maybe you can farm it, though if we're talking land in and around a village, that's probably not effective.
I've just skimmed your post but I feel you misunderstand, that the proposed tax is not only on the current rent. but it is tax on theoretical rent that can be extracted which again theoretically equal to the value gain by just holding the land [I am not sure how he propose to assess that]. if you have rental income it would be deducted to that. if you don't have rental income it would keep accumulating until you sold the land and realize your gain at which point the gov would collect the accumulated tax. this way owner occupy or inheritor would not have to pay the tax unless they sell the land
it is suggested that improvement [house, trees] would not be taxed but I don't understand how that would be enforced.
"but it is tax on theoretical rent that can be extracted"
Yeah, these are the kind of tricky little details that, should a Georgist land tax ever get passed, everyone is going to loophole the *hell* out of.
For example, in the case of Carl from "Up", his land tax would be based on where he's living. Formerly, this was in a residential area, so whatever the average value of houses in that area would be a basis for the tax on the land he occupies, let's say $300,000. He's not getting any rent on it because he owns the house and lives in it. Now, however, all the other houses have gone. This is now high-value development land, and the tax rate goes up accordingly. *Theoretically*, Carl can sell his plot for $1 million because it's the last plot that the developers need so they can go ahead. *Now* Carl has to pay land tax based on a value of $1 million. A retired man on a fixed income probably *would* have no choice but to sell his house, whatever George says about "no compulsory sale or purchase".
As to land tax for rental properties - suppose the property is in an area that is now gentrifying? Properties now become more valuable, land tax goes up accordingly. Landlord of rental property - be it a house or block of flats - is going to pass that on in rent increases to the tenants, let's be real here. Maybe he'll even sell the property as it is worth more now than any rent he is currently getting, in which case, good luck with finding new housing former tenants.
Or maybe the value of the tax will be pegged to the value of the property. This is a huge incentive not to maintain and upkeep it or add value in any way. "But that means low rents for the landlord?" Oh, my sweet summer child. Perhaps. But as long as the landlord can juggle "rent that I can charge for my slum apartment is just enough more than the land tax", they'll do it. And again, any tenants that don't like it can lump it and go trek twenty miles outside the city to find someplace to live that they can afford and is in better condition. Oh, you can't get public transport to your job from twenty miles outside the city? Well then, guess you have to put up with living in a slum apartment - after all, beggars can't be choosers.
I just want to make clear that I just want to add a minor correction to your post above. I do not understand the idea enough to say it is good or bad. I am just trying to steelman it for you.
now to derail the thread completely:
again Carl would not have to pay any tax unless he start renting it out or sell the land, as long as it is not used for rent extracting purpose [by actually renting or holding to push price up to sell] the tax remains theoretical [i.e. not collected].
I believe that the book addressed it as follow:
renter rent place A because it gives 10 ultis more than place B only on the land [assuming capital like the actual house/ apartment/ trees are simplified elsewhere], landlord extract 9.5 from renter. giving only 0.5 actual ultis to renter.
Gov, therefore, should tax the land from the landlord 9 ultis then redistribute to both now renter has 5 ultis [0.5+4.5]. landlord has 5 ultis [9.5-9+4.5]. Land lord can not raise the ultis extraction anymore else renter would just leave for place B.
again I am also confused as to how the 9 ultis would be calculated to tax, but if I am reading correctly, this should be the broad idea.
I was under the impression that the book proposed that land tax would replace tax on the house/appartment therefore incentivize house/apartment investment.
> again Carl would not have to pay any tax unless he start renting it out or sell the land,
That's not how land value tax works, it applies if you improve and rent out, or if you leave as an empty field, or if you live there or if you build a factory. The same amount in all cases. Clearly if you own the land, you are forced to "make use" of it and gain value of at leave the LVT, or else you'll need to sell.
"Landlord of rental property - be it a house or block of flats - is going to pass that on in rent increases to the tenants, let's be real here"
I think everything hinges on this. George asserts this won't happen, as do a lot of modern economists. I guess the real thing to do here is look for examples of LVT applied in practice and see if it holds up.
That’s the point I don’t understand. Each slum lord would be taxed the value of his rents (or 0.85 of it, say). Wouldn’t they all just raise their rents? The tenants have nowhere to go because every slum lord is doing this. So they either pay or become homeless.
If the Land Tax is converted to a universal basic income, then maybe the tenants will have more money, but it’ll go back to their landlord, wouldn’t it?
I guess what I’m asking is: What is the mechanism by which a LT eliminates slums? I think I get that it should happen, but I don’t see how.
Actually, no, landlords cannot just pass on the land value tax to tenants. Landlords get what tenants can pay, not what landlords think they need.
Carl from "Up" could defer the tax until he dies, at which point it would be taken from the sale price of the house and land.
The tax will never go up with improvements to the property, as it is a tax on land values _alone_ and not improvements, ever. So the landlord can freely improve the building and charge more rent for that with no penalty.
This would seem to dovetail magnificently with old school Space Libertarianism, and the allure of the Endless Frontier.
On the desolate icy expanses of Callisto and Pluto, and especially home on Lagrange, where the only land is locked up in cylinder habitats and is vacuum is free, virtually all of the value of land will have to come from capital.
Until some wiseguy buys up the rights to all the asteroids and starts speculating on rocks in the Kuiper Belt...
"George notes that the mass die-off of the Black Death in England in the 1300's significantly reduced the productivity of the individual laborer, and yet wages went up. That's because the decreased population also caused a massive drop in competition for land, in turn causing rents to plummet. (For more detail on this read about the Peasants' revolt, also known as Wat Tyler's rebellion).
George says the opposite happened during the reign of Henry VIII, who seized the lands of the church and those held in common by the peasants, and handed them out to newly minted aristocrats, which was followed by suppressed wages."
Yeah but it wasn't just "after the Black Death, land was cheap". Before, if there were three jobs for ploughmen going and you had ten peasants, then you can get away with paying a groat and a kick in the pants to your prospective employees. After the Black Death, if there are three jobs for ploughmen but also four jobs for blacksmiths, five jobs for millers, and six jobs for gravediggers (since the previous holders of these positions all took sick and died), and you have ten peasants, then you have to offer more than a groat and a kick in the pants. Maybe you have to go as high as three groats and no kicks to get a ploughman. Particularly if you took advantage of the low rents to add on twenty acres to your farm, now you *really* need ploughmen to make this profitable. Land can be zero to rent but it does you no good if all the peasants who would have worked it keeled over dead from the plague.
You've mentioned the Famine, but does George say anything about the Highland Clearances, where the value of land now lay in sheep-rearing rather than having tenantry on it?
"In the first phase, clearance resulted from agricultural improvement, driven by the need for landlords to increase their income (many landlords had crippling debts, with bankruptcy playing a large part in the history). This involved the enclosure of the open fields managed on the run rig system and the shared grazing. Especially in the North and West of the region, these were usually replaced with large-scale pastoral farms stocked with sheep, on which much higher rents were paid, with the displaced tenants getting alternative tenancies in newly created crofting communities, where they were expected to be employed in industries such as fishing, quarrying or the kelp industry. The reduction in status from farmer to crofter was one of the causes of resentment from these changes.
The second phase (c.1815–20 to 1850s) involved overcrowded crofting communities from the first phase that had lost the means to support themselves, through famine and/or collapse of industries that they had relied on (such as the kelp trade), as well as continuing population growth. This is when "assisted passages" were common, when landowners paid the fares for their tenants to emigrate. Tenants who were selected for this had, in practical terms, little choice but to emigrate. The Highland Potato Famine struck towards the end of this period, giving greater urgency to the process."
Going back to the Famine, the effects would have been mitigated if the landless labourers, who relied on the potato crop as their main food source, could have been absorbed into industrialised towns and cities as in England during the period of agricultural collapse post-repeal of the Corn Laws. But again, for various reasons, Irish industry had been deliberately crippled in order not to be competitor with British industries and to keep Ireland open as a market and as a producer of agricultural goods to feed Britain.
The appeal of "One Weird Trick" - in this case, the introduction of a land tax - to solve tangled problems is a perennial temptation to the human race, but simple answers generally don't work that well for complex problems.
> Yeah but it wasn't just "after the Black Death, land was cheap". Before, if there were three jobs for ploughmen going and you had ten peasants, then you can get away with paying a groat and a kick in the pants to your prospective employees.
From my own understanding of P&P, and this review, George might be agreeing with you! You see, he is asserting that it is the total monopolization of land that drives laborers to compete with one another. In a world where land & natural resources aren't gatekept at the price of rent, they wouldn't have to bid against each other for labor -- the would just do whatever productive activity they wanted. We're so used to a world in which laborers "supply" themselves to "capital" for employment, that we take a simple # of laborers / # of paid jobs = price of labor formula for granted, but it's only "Hey I own the land, what will you agree to pay in rent for the privilege of working/living on it?". This is how labor productivity can skyrocket without laborers seeing any of the benefits.
So what I think George says about the black death is not "Well land is cheap now" but that it temporarily broke the back of land monopoly, and so labor didn't have to compete with itself and bid itself down to nothing.
RE: Highland clearances -- here's a full text of the book, CTRL+F didn't turn it up, but he might have mentioned it in another work?
The Land Value tax has another key benefit: it has falsifiable predictions, and can be implemented incrementally and achieve incremental benefits (as we've seen in some IRL implementations). Georgists sound like marxist cranks citing 19th century economists, but georgism itself is like an MSG that can be sprinkled over just about any political philosophy and 'fit in'.
It did get tiresome after a while, but I can appreciate having a schtick and sticking to it, and this was too good of a schtick not to use. We were warned, and honestly if I were in the author's shoes I would probably also have overused it so I can't be too mad about it.
Simply implementing a Land Value Tax in the manner that George suggested will almost certainly trigger a banking/financial and economic crisis as the rents that this tax seeks to eliminate have been a) capitalised into the price of land and b)the land in question has been levered up to a very high degree. The LVT will cause a significant fall in prices which will lead to defaults, bank failures and even personal bankruptcies (e.g. a middle-class family with a 90% LTV mortgage in a metropolitan city). For example, the same problem applies in removing farm subsidies where the value of subsidies has been capitalised and levered such that any removal will trigger bankruptcies and financial losses.
This is not a criticism of George as the same conditions may not have applied in his time. One possible solution is to introduce the tax in stages with a modest tax to begin with.
No reason it has to be implemented at 100% instantly. You can implement it in gradually increasing amounts over a longer timescale, with advanced notice of the changes so people can financially adapt. That's how lots of laws are done.
I don't entirely disagree. As I mentioned, this is a possible solution but the timescales will need to be much longer than most people think. If you simply announce that taxes will go to 100% over a period of, say 10 years, the price of land will factor in this increased taxation in the future and fall almost immediately thus leading to pretty much the same consequences as if taxes had been implemented at 100% from day 0.
Hm, if you follow the theory, wouldn't it predict that the major benefits only occur when the LVT is very high? Essentially, the idea is that a LVT removes the incentive for (high) rents, isn't it? This is because with a 100% LVT, landowners don't profit from higher rents, so they don't charge them. However, when the LVT is 50%, they still have the incentive to get as much rent out of the land as possible.
This is not the only positive effect of LVT. Another one is that with 50% LVT, the rent does not go completely to the landowner, but to the state, which can (for example) redistribute it. This effect stays even with 50% LVT. But my impression from the book review was that George was rather aiming at the first point.
Another possibility that might or might not suffer from the same issues: instead of gradually increasing the percentage of LVT over time, you could also set a cap of X (per square meter or so), and charge only value that exceeds X. You could start with a high value of X, and decrease it over time. Or not decrease it -- as far as I understand, the main theoretical benefits that George predicts would already take place when you only charge value above X. Of course, both ideas (gradually increasing percentage and gradually decreasing cap) don't exclude each other. I would be interested to learn what people with more background in economics think of that.
Yes, of course, but a sudden transition to a 100% LVT (having a lot in common with expropriation) would be either politically impossible, or only possible after a revolution (which has its own issues).
If I understand correctly, the tax on the land shouldn't be 100% of the fair-market sale value of the land, but 100% of the fair-market value of the rent on the land, which would probably be something like 8% of the fair-market sale value of the land.
The tax should be the prevailing interest rate times the land value.
If the land were earning less than the prevailing interest rate through land rent and appreciation, the owner would presumably sell it and buy a different asset which does pay that rate.
Conversely, if land is increasing in value faster than the prevailing interest rate, you'd think that the price would get bid up to the point where the return on land is back in line with the return on other things.
But 50% LVT or even less will already help to make speculation less profitable and give therefore give some land back to the market that was blocked before. This could lower the price of land for anyone who wants to use it.
I suppose just knowing that significant LVT will come in the long therm will reduce speculation and prices
If you can be sure that income tax and or sales tax will be reduced by the amount that LVT is increased, you'll get a lot of support from people with high incomes but little land.
Just thinking about this as a landlord, it's clear that a LVT would immediately bankrupt me. I make a reasonable return on my property now, but an 85%+ LVT would cause me to lose lots of money, LOTS of money, and the value of the properties would plummet, so I would immediately lose an enormous amount of wealth (labor value that I converted into land + capital). If you eliminated all other taxes it would help but probably still be very problematic. I don't think phasing it in would be especially helpful unless over a really long period of time.
85% sounds incredibly high. Am I understanding correctly that you mean "pay 85% of the value of your land (sans buildings) to the government every year"? I was thinking more like 1%, especially to start.
What level of tax would make you continue to be a landlord without changing anything?
Is there a level of tax that would make you want to build more housing on your property so you could get more rent per land value?
There's also the argument that this would vastly reduce the value of land, so "100% of the value of land" doesn't mean nearly as much as "100% of what it costs to but in the current market"
OK but at the same time, if that's the case it would totally wipe out my equity and probably a lot of the bank's equity as well and we would take massive losses even if the rental business could continue, right?
Yes (the idea is to make land have zero value as equity). This is one reason to introduce it gradually instead of at once - if it sets in over several decades, then the equity will go down gradually instead of at once.
(As a minor math point here, I think this implies the tax increase function should be concave - higher taxes starting now affect everything the same, but higher taxes starting ten years from now also have some effect on values today, so for the value to decrease linearly the later tax increases should be smaller)
There are significant transaction costs in real estate, so an additional tax could be small enough that I would continue as I have, but it would have to be smaller than existing property taxes- 1% of existing value/yr or ~1.5 month's rent. That kind of a change wouldn't bankrupt me, but it would crush me and make it so that I was losing money, however a new buyer at a much lower price could presumably make money, so I would just get out and take the loss and would be better off that way.
> Is there a level of tax that would make you want to build more housing on your property so you could get more rent per land value?
Any level of tax would have that incentive - the land value component of your investment goes down, so the rent payoff component of your income from the land goes up and you have more incentive to increase it.
Your ability to do that with an existing structure is limited, particularly considering setbacks and other regulations. I.e. I could probably, theoretically, add a bedroom to a house if the numbers made sense, but I couldn't add a level. Might this system end up essentially eliminating single family housing as inefficient and replacing it with fewer, higher apartment towers? Maybe all the suburban developments would revert back to farmland? It's a bit hard to think through the dynamic effects of such a system.
Yeah, this is a general issue. Almost any idea to improve the american economy is a no-go so long as the current obstructive zoning law regime remains in place.
I've been noodling on this, and what do you think about this as a transition plan: When the LVT is implemented, the federal government immediately pays current landowners the current land value of their land. So that keeps current landowners whole and gets the thing off and running.
Downsides:
1. If you want this to be expropriative, the wealthy landowners are getting paid for the expropriation.
2. It's a lot of money. Can the feds borrow enough to cover the action?
You can't compensate for the loss in the value of land. It will be too expensive. For example, UK land value is more than £5 trillion (ref https://www.reuters.com/article/us-uk-property-land-idUSKBN1DZ2UT) and the govt can't even realistically make up for a 20% loss in value.
That sounds right to me and it's a huge barrier. I'm persuadable that LVT is the least worst tax, but if transitioning to it ruins all landowners and scuttles the economy as a whole due to vast and overwhelming societal disruption, then maybe it doesn't matter that it's least worst in theory!
I wonder if you could "ease into it" along the lines I'm talking about, say 1% a year?
Perspective: Currently something like 1/3 to 1/2 of our net worth would be taxed under an LVT. We couldn't possibly pay for it without selling the land (or maybe some sort of creative mortgages?)
One option would be to consider the land portion of the purchase price (with some reasonable level of interest added) a “prepaid LVT” and you don’t have to start paying until it’s used up. Meanwhile you continue to find the government with other taxes as the LVT phases in.
"Inflation is always and everywhere a monetary phenomenon"; if the Federal Reserve prints enough money, surely nominal prices won't drop and you don't get total economic collapse?
Whether the Fed can prevent a deep recession will depend on what tools they are willing to use. The current toolbox of QE + buying corporate bonds + liquidity facilities is insufficient. If the toolbox is expanded to include helicopter drops (which is really a monetary + fiscal intervention), then the recession can probably be contained. But this would still lead to bank failures and widespread bankruptcies among the property-owning middle class.
The alternative would be a bailout of the financial sector and the landowners but this would seem to defeat the purpose of the LVT.
As we went from high levels of growth, to a stable economy, and now entering the period of structural economic contraction (we might be already there since ~2009, the GDP/year was never a good economic indicator, and I'm suspecting that it's being artificially propped up), it's going to be "interesting" to see how the political economy adapts.
It's not certain that capitalism can even *deal* with this kind of situation, since the assumption of growth is basically in its "DNA" :
That was a good link, thanks. Ol' Bucky Fuller had the right vision. None of this is ever going to make sense until we start measuring in units of energy, not units of currency, though his faith in computers' capacity to centrally plan hasn't been borne out. It would be interesting to try and adapt this Georgeist framework along those lines.
You could implement LVT in a graduated fashion tuning the tax in such a way that land values stay constant. Initially, this would result in very low rates but over time the tax will rise sufficient to neutralise the price impact of any increase in demand for land.
If you have a huge bubble (of anything) and you see, that this bubble is a bad idea so you take measures to prevent such bubbles to exist. Of cause this will cause the existing bubble to burst, and it will create great stress on all of those that invested in this bubble.
Of course we can come up with many ideas how ti make the transition as soft as possible ant how to deflate the existing bubble rather than burst it. But all this still means that a lot of value that has pumped up this bubble will be lost. In this regard i think the main problem is that the current real estate bubble could be 'too big to fail' because it could tear down the rest of the economy. If it wasn't like this I'd say: all companies that need speculation or income without any work for their business model to work desire to go bankrupt.
An completely different point is the personal problems and feelings of the people loosing something in this process. I understand these feelings and I want to make the transition for them as easy as possible. I can imagine several ways to do this.
1. Individually calculating the LVT:
Nobody says that there must be one fixed absolute amount per square meter. The Idea is that LVT eats up almost 100% of the rent, where 'rent' is used in the sense George defines the word.
So the calculation should be like: LVT = 'Income generated by this property' - ( 'expenses' + 'compensation for owners work' + 'profits from improvements(the building)'
Obviously this gives very different numbers on different uses of the land. So at least for the transition we could calculate this on an individual level, to make it reasonable fair and avoid hardships on the cost of increased bureaucracy.
Some examples how this will work out:
- a farmer owns field A and field B is leased from a landlord. The landlord has no work with the land and has no improvements build on it, so the rent payed by the farmer equals the rent in the sense of George and is 100% taxed away. Now the landlord makes no money from the land and has no incentive jack up the rent or even keep it. But if he likes to he can keep it without loosing anything (except some work for the bureaucracy, but this could count as expenses. Lets change to the farmers perspective: He does the same work on both fields and sells the crops for the same amount, the whole calculation is the same for both fields except the rent he pays to the landlord for field B. In other words the additional profits he makes from field A is exactly the the same amount as he pays for field B and this amount gets taxed away because it is the profit he makes only because of owning the land. No farmer should go bankrupt because of this, it just equals out the difference between farming your own land and farming rented land and makes it easier for new farmers to start without inheriting a farm.
- So what if the field gets residential area and there are homes built on it? Wouldn't this fuel speculation as prices than get much higher than for farmland? Well, if the landlord (or the farmer) than sells the land to a higher price to somebody who wants to build his home on it, they can keep the usual price that would be payed for farmland, the rest gets taxed away because it clarifies as rent in the sense of George.
- a family owns their home in a residential area, their neighbors live in the same kind of house, but they only rented it. Let's look at the differences. The neighbors pay a monthly amount X to the landlord, that's their cost of using this house and the land it belongs to.
The calculation for our family would be: housing worth amount X minus all expenses and minus the profits of the improvements (the house itself) gives the LVT. For ease of transition we can include all costs of the mortgage they used to buy the house into expenses if the house was bought before the introduction of the LVT. If their total expenses exceed amount X they will pay no LVT and there is no change to before. Otherwise their cost of living will still be lower than their neighbors because the profits of the house itself counts as interests and is not subject to LVT. So they may loose wealth because their house is worth less, but it's not ruining them and there is no big impact on everydays life.
- the example above also applies to businesses operating on their own property.
- a landlord owning a apartment (or whatever) building. For easier understanding we assume he is doing no work himself, he outsourced all the maintenance and administration to a service provider. He has income from the residents, part of it is used to pay the service provider, another part is his legitimate interest (profit from the building being capital) and the rest is taxed away as LVT. This way the landlord has no interest to jack up the rents for the residents without investing in the building, because he could keep nothing from this increased income. He still makes a profit from owning without work, but it is less now because it is only from owning the building not from owning the land. If this is a problem perhaps he has to do some work (perhaps administrating his building) to also get a wage and lower his standard of living towards the average person that has to live from the wage only.
2. The state could act as a grantee for all the credits and mortgages that use real estate as security if this real estate looses a lot of value because of LVT. This would hopefully save the banks and financial system from collapsing because the securities are gone.
There could be more Ideas, but it's too late now...
Thanks, this was very much the missing piece if information to me.
Another thing that at first I didn’t get, but now think I do, is: this tax is levied on the moment of a transaction (buying/selling a property or land, or maybe also when asking for rent income), rather than, each month or so, right?
I have a comment on Malthusianism. As a biologist, I tend to think that our escape from the Malthusian cycles experienced by most mammals has to be temporary.
Humans are not having a greater number of surviving offspring in a more prosperous world (mostly) because they have invented birth control mechanisms (actually, turning from clan societies to individualism is also probably important). In the past, humans did not need to have a great desire to have babies to reproduce well; it was enough if they had a great desire to have sex, and that led them to having as many babies as possible. Natural selection didn't need a desire to have many kids.
Now that we have birth control, and all born kids are helped to grow up safely by safety nets in societies, natural selection will grab hold of any heritable trait that causes humans to want or to produce more kids than others. Today there's nothing better, biologically, than to want to have a big family of kids. If this desire is even partly heritable, it should spread. It will take a long time because of our long generation time, but eventually human population should be back to large families of kids.
I mean, you can't escape the greater reproduction caused by heritable traits leading to their greater spread, even at the age of em it will be an important thing in evolution. Does anyone know anything to disprove this or to raise a hope that the non-Malthusian period can last?
as wealth increases, population growth per person doesn't increase too - people have fewer kids when they have more money.
i don't think that trend will reverse and people will 'go back' to wanting a ton of kids. i'm not sure there's any way to disprove your hypothesis since there isn't really a way to prove it without zooming forward a few centuries, but it does stand in the face of the data we have in the status quo, which is that, given more security/free-time, humans spend more time on themselves than on huge families.
Yes, that's true, but the only thing that allows this is, as I said, that in the evolutionary past we didn't have selection pressure to desire many kids. We had many kids even if we wanted to have more time for ourselves just because there was selection pressure to have a great sex drive and there wasn't any good birth control. Now that this mechanism is broken, there will be a huge selection pressure to want more kids. If this wanting is at all heritable, it will spread.
I know several people who have about ten kids just because they really wanted to. If this personality trait is somewhat heritable so that their kids also want more kids, then this trait will propagate. There's nothing to do against it.
i...don't think 'i know people who have ten kids' is really robust data. that kind of huge family is extremely rare in the developed world - there's no 'U' curve for fertility in sight in any rich country. 'Wanting to have lots of kids' is kind of tautologically genetic- i don't think we're gonna see some new selection pressure compared to when humans *needed* to have lots of kids to survive. we no longer need that, and won't in the future, so why would there be new pressure? social pressure? idk i think your thesis here is preeeeeeeeeeeeeeeeeety unfounded unless you can point me to something more substantial you're thinking of.
no-no, not social pressure. Purely mathematical. Just imagine that some people have ten kids and two of their kids also have ten kids, and so on; after a few generations they will dominate the earth, while you and I, who only have 0-2 kids (and our kids also have 0-2 kids), we'll be gone almost extinct.
Now, I also don't know if the 10-kid parents whom I know have a heritable trait causing it. I hope they don't. :) Sometimes the selection pressure cannot raise because there just isn't a good selectable trait in the population. For example, cryptically colored moths would greatly benefit from losing the symmetry of their color scheme: the symmetry often makes them more visible to predators. But they cannot lose it, because the color symmetry is so canalized in insects that there just isn't any individual who has a heritably non-symmetrical coloration.
If we are lucky then we also don't have and never will have any individual who has a heritable trait causing a desire to have many kids; however it seems unlikely to me. Humans have many psychological traits and many of them are clearly heritable.
I predict fecundity memes, not fecundity genes, will do most of the work pushing us back toward Malthusian equilibrium. I'm thinking of religious and nationalist ideologies.
I mean, not *nothing*. There is a very clear and obvious way to stop it i.e. state-enforced fertility controls and/or eugenics (nb: to work, you'd have to kill all children born in violation of the controls - else there's still a selection pressure for people willing to flout the laws). It's just, well, dystopian.
In biological terms, we don't have to worry about this for quite a while - it'll probably be another couple of hundred years before the growth rate rises back above zero, it'd take a millennium of 1960s growth to fill up Sol, and there's some spillover capacity beyond that (not a lot, though - exponential is faster than cubic, so without FTL expansion will eventually be outpaced by growth). More concerning, as Scott noted in the Moloch essay, are artificial ways to spam new people (uploads/AI/artificial wombs).
We have the historical example of the Chinese trying to impose fertility controls, and failing.
For the growth rate, Africa seems to be a big question mark : they don't seem to be reducing their fertility as would have been expected ? (Though maybe it's because they aren't developing as expected either ?)
I mean, state power has been growing throughout the last few hundred years; unless this reverses for some unexplained reason, future governments will be able to do things beyond the capacity of past ones.
Oh damn. But...we evolved the sex drive when we were, like, fish. At this point our behavior is webbed into so much physiology and sociology that, even if your mom gave you a genetic nudge towards 10 kids, you might experience it as a mysterious passion for dog rescues or community theater. I think the lines between genes and behavior have grown so long and tangled that something else would change the game before it finished.
I've wondered about this too. I work in elite private schools and there are some families with 5 or so kids. Really educated and successful people who decided they wanted to have a lot of kids. If I had enough resources I would have as many kids as possible. But due to lack of wealth I only have two. My father had lots of kids too. The heritable trait for wanting to have kids and spread genes goes beyond just sex drive. And some people have a stronger desire to pass their genes than others.
This is exactly what happens in Ringworld, with the result that Earth is governed by a totalitarian UN that enforces the fertility laws by summarily executing unauthorized parents.
I personally doubt that this kind of evolution will happen fast enough to have relevant effects before we get our grubby paws into it. It seems doubtful to me that we're more than a few generations, at most, from taking the reins on our own genome
I hope Jack H is right about this particular aspect of the Malthusian question, that humans' propensity to have large families tends to fall with widespread economic security, which allows children not to be regarded as a retirement plan, and industrialization, which allows children not to be regarded as labor in subsistence farming. If we're wired any other way, then I can't see a way of restraining population growth that is either practicable or morally acceptable. Economic development needs to induce people to willingly choose zero/negative population growth reproductive strategies; otherwise, I think we're drawing dead when it comes to perpetuating human civilization.
With respect to Malthus, I am more concerned with a more proximate problem, namely that our escape from the trap was powered by fossil fuels. I follow Georgescu-Roegen in this regard, that coal, oil & natural gas' qualitative difference as a stock of energy that can be expended in arbitrary quantities at will was the key. The pre-Newcomen engine world was one in which humanity had to live within the energy budget defined by plants' capacity to collect & convert a portion of the flow of solar energy. The only stocks available to carry over solar energy with respect to the human economy from one season to the next were stored food, livestock, the embodied energy in durable goods, and trees, which have the longest shelf life, as it were, measured in decades or centuries. The liberation of millions of years' worth of stored solar energy in the form, initially, of coal was the key element which allowed economic growth to exceed population growth and therefore escape the Malthusian trap.
Georgescu-Roegen was philosophically pessimistic because he could see the Red Queen problem inherent in this regime. Even if humanity discovered technology to overcome the most proximate resource constraint, each successive resource constraint would approach ever faster. Humanity became like runners trying to jump hurdles on an increasingly fast treadmill, since both factors impacting our ecological footprint, population and per capita consumption, increase without bound, and the game is over as soon as we miss one hurdle.
For myself, I would be content if we can make the transition to the high-energy solar-based economy before we lose the ability to use fossil fuels to build the necessary infrastructure, if we can find better battery tech (I don't think there's nearly enough lithium available). That would punt that particular problem a couple of centuries down the road, allow us to throw clean energy at the food & water problems (YOU MUST CONSTRUCT ADDITIONAL DESALINATION PLANTS), give humanity some breathing space to see if we can find the right economic structure to eliminate poverty, and then get to a position to test the ZPG postulate mentioned in the first paragraph.
Thankfully, this was all in Joe Biden's platform so I'm feeling pretty relaxed about it.
Is Joe Biden's platform radically different from Obama's platforms ?
I really don't see Biden to do anything to shut down hydrofracturation of hydrocarbons, besides making hand movements like he's doing something, while it's just the natural reduction of output on the other side of the peak tight oil...
Sorry, I was being snarky. I forgot the rule for Scott's blog, "Assume everyone here is even more literally-minded than me."
That's very interesting about whaling! I hadn't thought about that before. I mentally model we humies' relationship to fossil fuels as addiction because I think there's something deep in all of us that desires the command of fire, cf. Prometheus, and once we have a taste of "Fiat lux" we will not give it up. The moral & ecological consequences of that desire were relatively legible with whaling, but the key mechanism by which that desire redounds to our detriment with fossil fuels was obscure for centuries until we figured out the chemistry of the atmosphere. It only surfaces in things like the Romantics' instinctual revulsion toward soot & smoke, e.g. Blake's poem "The Chimney Sweeper", which are easily dismissed, and not without some justice, as mere sentimentality.
Ah, my bad, I should have realized the snark from having this last phrase being in the same post as the mention of Georgescu-Roegen !
Generally, I'd say, fascination with and addiction to power in general, for obvious evolutionary reasons.
But yeah, fire/light has an extra mystic/sacred aura of its own...
(proof : what does the word "aura" brings into mind as association ?)
I assume that the Romantics were well acquainted with the issues coming from soot, smoke & smog, the equivalent of which we can see in China these days ?
If you're going to use a town in Saskatchewan as your example of the middle of nowhere there are far better choices than fictional Podunk. Try Ituna, Elbow, Eyebrow, or, my hometown, Moose Jaw! All real towns!
How will a LVT interact with the distortions in the market caused by the fact that buying property abroad is one of the few ways for citizens of the PRC to get around strict capital controls?
Also do Georgists expect that the benefit of an x% LVT will be roughly linear in x? (i.e. can we introduce a partial LVT as an experiment and increase, decrease or remove it according to wether it brings the benefits that Georgists claim it will?
evidence points to incremental lvt = incremental gains.
most georgists are practical and are perfectly fine with incremental implimentation.
and yeah the international aspect of LVT seems a bit tough - but if the LVT encourages land speculators to simply buy land abroad, that land doesn't become less valuable - *somebody* has to own it. so LVT is agnostic on people 'fleeing' the country - land isn't capital!
I don't think so, but you could write a book review anyway. Maybe there will be another contest next year, or you could post it to LessWrong or Reddit.
> The two main things Malthus got wrong were failing to anticipate 1) advances in food production technology like the Green Revolution, and 2) that humans can control their own fertility rates.
Well, 1) is debatable (and IIRC wrong), and 2) is plain wrong - AFAIK Malthus was the one (though probably not the first ?) that pushed hard for the education of women in order to curb fertility rates - which now we know is working ! (This includes him founding schools to educate girls !) There's a reason why late 19th century feminists called themselves "malthusians"...
He had some weird ideas about contraception (that "don't do it" would work in practice, for a couple living together), but then there's only so far that an Anglican priest at the time could conceive of...
I'll note that you have NOT proved your stated "strong form of Malthusianism" wrong, and also that you seem to equivocate between whatever Malthus supposedly said or wrote (and which Malthus ? People can and do admit they were wrong...) and between an inform strawman of "Malthusians" (not the abovementioned feminists I assume ?) - are you sure that your "strong form of Malthusianism" actually corresponds to the claims ?
Malthus(ians) being a favorite punching bag these days, you should be very careful to cede to the temptation to add a few cheap shots of your own, we've recently seen how this happened with Galen(ists) and Aristot(e)l(icians) :
As a parallel : I could also say, for instance, that Darwin(ists) were evil and factually wrong because Darwin's ideas were used by Nazis and Darwin failed to predict DNA/epigenetics/whatever (I'm sure that more examples can be dredged up by citing strawmens of Darwin's work or citations taken out of context).
[Formatting note: appendix links are broken. Also sorry if this comment is overly long and repetitive.]
While I'm sure this is a good introduction for people who haven't heard of this idea before, I went into this with a lot of questions (ranging from my ignorant confusions to unanswered criticisms) about Georgism and LVT, and unfortunately this didn't answer any of them.
I *do* like the idea of Georgism in theory. My hangups:
1. How do you actually calculate the Land Value Tax, in a literal sense?
I always hear from people selling Georgism that tax assessors do it already. But I know nothing about accounting and whatnot; how does that actually happen in practice? Also, why is it done, aren't property and land both taxed the same right now? How do we know that these assessments are accurate, especially if it doesn't currently matter all that much? Even if it currently assesses it accurately, surely if property taxes go to 0% and land value taxes go to 90%, every landowner will suddenly hire a bunch of lawyers dedicated to disguising value from land as value from improvements? And of course one of the big points is that this all has to apply to *all* economic land, not just actual physical land (more on that later).
One solution that I appreciate just because of how different and clever it is is Harberger taxation. (It's an idea used for everything in Weyl's radical exchange system (which I think of as capitalism minus private property), but for Georgism we do it just for land.) The idea is that you self-assess the value of the unimproved land and pay the tax on that, with the catch being that you have to be willing to sell the land at that price to any buyer.
Clever, right? But I don't understand how it works in practice. How can middle-class homeowners reasonably be expected to manage that burden? If they set a price too low, they lose everything, right? After all, what happens if some smart developer actually buys up the land beneath my parents' home? They don't own the actual home, but doesn't owning the land give you the right to tear down and rebuild any structures on it? (If not, then how on Earth does the land have any value?) In practice, how does it work today when land is owned by one entity and the building by another (if that does happen today in practice)?
I suppose the best solution would be that, when my parents bought the house and land in the first place, they would have had the opportunity to pay an extra fee to take the land off the open market temporarily. How big is that fee, how long can the off-market period be, how do you assess the land value in the meantime (you can't just go at what it was worth when it was sold, right? It could radically change, and smart speculators will take advantage of that). Since we're talking about such a massive tax here, I think these questions aren't just nitpicking, but actually matter a lot!
2. What about making new land?
You say that e.g. turning water into land just counts as an improvement. But doesn't it change the analysis if no one currently owns the "land"? (This isn't super relevant right now for physical land, but it could become so if sea-steading or spacefaring ever get off the ground (and also see next point).) The big selling point of Georgism is that the supply of land is fixed, and therefore a land tax doesn't reduce incentives to make new land. But doesn't the presence of a land-value tax disincentivize you from going out to virgin land and bringing it into the market? (I'm actually not sure how this worked in practice for physical land; do people have to pay the government for permission to do this or something?) This isn't necessarily a knockdown argument against Georgism, since property taxes have this disincentive too, but if I'm right on this, it seems important to admit that it's a case where Georgism would introduce disincentives. (Also, the tax is pretty darn high, so maybe it'd be worse than the status quo on this metric?)
Maybe you could say the unimproved value of the land is 0 since it was off the market, and the entirety of the value is in improvements. But then in Elonville, Mars, won't there be greedy landlords paying $0 in land taxes? How _exactly_ does the gradual transition where the "title to the improvements become blended with the title to the land" work in practice?
This is more relevant in light of the next point:
3. What is land, tho?
You do say that land includes all of nature's bounty, but in many places throughout the article you do seem to be implicitly assuming we're talking about physical land. (Everyone writing about economics seems to slip into this habit, passing back and forth between the two definitions without mention. It's an understandable mistake and I do it too; this is the second-worst piece of terminology I'm aware of in any field (the first also being from econ and related to this, namely "economic rent").) With some of the graphs and numbers that people use in these discussions, I'm not always sure if we're talking about economic land in general or actual physical land.
But yeah, anyway, you say that oil *isn't* land, but crude oil still underground is land, isn't it? The act of drilling down and pumping it up presumably being an improvement. Same for all other natural resources. Does every natural resource really have someone tasked with assessing its unimproved value and do they do it well? That can't actually be true, because sometimes like with oil we don't even know the land is *there*.
You say planting a tree would somehow gradually transition from being an improvement to being part of the land, but I'm unclear on how that works. Consider the trees in a swath of forest owned by a timber company, regularly chopped down and replanted. I assume they are improvements since we aren't supposed to be able to "make new land" and we wouldn't want to disincentive planting the trees. So is land actually only the *non-renewable* parts of Nature's bounty? I'm unclear on this point, and on how gray areas would be resolved in practice. Gray areas seem to matter a ton, since in the pure Georgist case it's the difference between a 0% tax and a 100% tax.
When someone buys a diamond ring, do they need to keep paying a tax on the unimproved value of the diamond? Same for literally anything else that requires natural resources to create — do we consider the land to have merely transferred ownership, or "used up" and thus no longer taxable? (If the former, again, how do we actually asses this stuff? If there a Harberger tax on *everything* that had (nonrenewable?) natural resources go into it? If it's the latter, I think that noise in the background is tax attorney's salivating?)
Doesn't it take effort and resources to identify valuable unimproved land? Consider again oil — sure, if there was a global map of all petroleum, an LVT would introduce no disincentives. But doesn't it introduce a disincentive to *find the oil in the first place*? The higher the LVT, the more difficult it would be to recoup one's prospecting costs. This seems to me to apply less to physical land, but Caplan argues it still does at least to some extent, since real estate people have to do research to find out what spots are valuable. In fact, isn't that like the main thing they do?
Or, do we consider recently-discovered petroleum to have a land value of ~$0? I.e., to we consider *the labor put in to identify a land's value* as an improvement, and therefore not subject to LVT? I guess this would be good since then we don't introduce disincentives, but again I am unclear if this will reintroduce the problems of privately owned land (maybe not, since competitors are incentivzed to search for high-value land?), unclear on how you actually draw the line in practice, and very unclear on how the apparent transition from "it's an improvement" to "it's land" is supposed to go. Again, I don't think we can brush these concerns under the rug "we assess things' value now!" because the imposition of a massive LVT would pretty drastically increase the demand for land lawyers.
I think that's all my questions (though I vaguely feel like I'm forgetting something and may have added more in a comment below (why doesn't Substack have an edit button D:)). I really like the idea of Georgism and an LVT, and I hope that some Georgist comes along and gives 100% satsifactory answers to all my questions. If so, I'll go from tentatively supporting some kind of LVT as better than many other kinds of taxes, to being a full on Perfect Tax Georgist.
Oh, and a couple more things. These are more (relatively confident) disagreements with the post rather than questions about Georgism:
* I don't think it's actually the case anymore that mainstream economists don't differentiate between land and capital? At least, my bog-standard intro to econ textbook talked about four factors of production: labor, capital, land, and entrepreneurial ability. (As an aside, it mentioned that some people instead consider entrepreneurial ability to be a subset of labor.)
* The stuff about where workers get paid from doesn't make much sense to me and also seems to be completely irrelevant, for the reasons Scott said earlier. Workers get paid out of whatever revenue the company takes in, whether that's from capital or sales or whatever else.
* I think the Georgist explanation of recessions is wrong, or at least missing the key points. Given the efficient market hypothesis (which doesn't apply everywhere, but should apply to the short-to-medium-term value of stocks, which collapse in a recession), it doesn't seem to make much sense for the business cycle to actually be a very predictable timeline based on land values shifting. (If everyone knows the value of an asset is going to drop, shouldn't it have already dropped? George came before the whole "Rational Expectations" idea, so I don't blame him for not seeing this, but still.)
What makes MUCH more sense to me is the more common position, the market monetarist neoclassical/new Kenyesian fusion (or whatever it's called at this point). Recessions are caused by unpredicted real or monetary shocks to the economy, especially monetary shocks. In particular, when financial markets suffer some problem that causes a bunch of money to evaporate, central banks have a bad habit of not printing enough money to keep NGDP on a level growth path — and, thanks to the zero lower bound on nominal interest rates and downward nominal wage rigidity, that causes the whole economy enters a deflationary spiral. (Basically, I think Sumner is absolutely right about everything related to money and recessions; he recommends Yudkowsky piece as the best lay-person's intro to the idea: https://www.lesswrong.com/posts/tAThqgpJwSueqhvKM/frequently-asked-questions-for-central-banks-undershooting.)
In sum, even if land rents go up enough to hurt the economy's growth rate, I'm not convinced that shouldn't actually cause widespread unemployment and recession *unless* NGDP growth drops off (which is preventable by the central bank). This obviously isn't a knockdown argument against Georgism; the part about not introducing distortions and fighting rent-seeking is (in theory) pretty great without it literally solving recessions.
(*Last paragraph should read "I'm not convinced that *should* actually cause [...]". Sorry again for making four entire comments for what should have been one; I'm very used to compulsively hitting the edit button.)
one solution to the 'discovery' problem comes from the IP/patent side: the government should offer prizes for discovering new resources, ideas, etc, but then those ideas become part of the public commons. this is straightforward to imagine with medicine, but the principles apply elsewhere. obviously other reforms would be some kind of self-assessed tax on patents, mining rights, etc, like we see in spectrum: auction the rights, or have them taxed at a self-assessed level, if anyone wants to buy you have to sell at the assessed value. that might not work with all forms of economic land, but for non-physical assets it could help.
there's a lot of answers to your (good!) questions but i don't have time right now to dive in. one way to 'rethink' georgism that might help is to replace the word 'economic land' with 'privilege'. Georgism looks for those sources of wealth that are derived from exclusion, monopoly, limited competition, are enforced by the government, don't increase total wealth. basically it sets out to aggressively protect what you have earned (georgists opposed income taxes) and aggressively prevent private capture of what can't be "earned".
For historical comparison, you may be interested in what the Georgist contemporary and (socialist) market anarchist Benjamin Tucker called the "Four Monopolies":
1. Money (i.e. the legal privilege to mint money & engage in banking)
Sorry — cold you elaborate in a little more detail on how that would work? I'm a bit slow.
In the oil example, is the knowledge of where the oil is considered an improvement, or is it just a discovery that the unimproved value is higher than previously thought? I think you're saying it'd be the latter, and so the oil WOULD be subject to a high LVT — but then the government pays the discover a fee to undo the disincentive. (Do I have you right?) Crucially, I don't really understand where the government gets the size of that fee from. Is it just, like, the increase in value of the oil, since I guess that's the value of the discovery? But then, how would that be different from doing *neither* LVT *nor* the discovery fee (in which case Caplan is right and you can't get the benefits of LVT for certain types of land)?
I skimmed a bit while reading that article (lots of semantic/terminological squabbles and disagreements over what George *really* meant), so I'm sorry if I missed something, but I didn't see anything in that article resolving my core issues. It says we consider the knowledge of where oil is to be an improvement and a capital good, but then where *precisely* do we go from there? (Do we just accept that natural resources will be untaxed if it took effort to find it? In which case it seems like it practically agrees with Caplan, because then that means we can't get the alleged benefits of LVT for natural resources that require discovery.) The closest I see is "The land patent duration should be long enough for typical entrepreneurs to be incentivized to innovate" in section 8, which isn't quite the level of precision I'm looking for. (By the way, for anyone else reading this who can't access the article both easily and legally, it is in fact on Sci-Hub.)
______________________________
As for the philosophical argument (land ownership is privilege, it can't be morally "earned", etc) — I do get that, and find it a valuable addendum to the usual way I think about property. I'm grateful to Georgism for giving me that precise shift in perspective.
But in terms of policy I find the pure philosophical argument on its own to be only marginally compelling and marginally relevant. (Which is why I hardly discussed it.) Like, okay, morally, the square meters beneath us is the bounty of Nature and ought to belong to everyone, and anyone who currently owns it under the current system just got lucky. So then, what next? We get a Georgist government, they rewrite all the laws and the Constitution to specify that land really belongs to everyone but the government is allowing private entities to administer it, whatever. A philosophical victory, but who cares about that part? I don't think most people care whether the government has a piece of paper saying that everybody collectively owns the land.
What people DO care about is getting cheap products from private enterprise and getting money from the government. It is Georgism's claimed stellar performance on *those* metrics that make it so tempting to me, and what my questions are aimed at clarifying. The abstract discussion of "privilege" and whether or not something was "rightly earned" is interesting, but ultimately not the core of what I care about, and definitely aren't enough to get me over the hangups I've laid out.
[Sorry again for this long comment; I need to be more concise.]
>Is it just, like, the increase in value of the oil, since I guess that's the value of the discovery? But then, how would that be different from doing *neither* LVT *nor* the discovery fee (in which case Caplan is right and you can't get the benefits of LVT for certain types of land)?
The state has infinite bargaining power; leaving aside waste, it'd presumably just be a bit more than the (risk-normalised) costs of the exploration.
Oh okay gotcha, duh, that makes more sense than what I said, shoulda thought of that.
But that does seem to introduce another problem — if the state is covering the entire costs of exploration, then they have no incentive to keep their costs low, right? Will the state say, "Okay, you guys _clearly_ wasted a ton of money on this, we're only covering half the cost" or something? (I'm pretty unclear on how "negotiation" between private companies and governments work in practice right now, since as you say we can think of the state as having infinite bargaining power — but, also, the state has little incentive to care about cost. I can't imagine the system works perfectly based on how long highway construction projects take.)
So yeah, basically, I still struggle to see how you can avoid deadweight loss if you try to impose a Georgist tax on oil (or anything else where discovery costs matter).
(I don't know if the best solution is to swallow the deadweight losses or try and lower LVT for land with high discovery costs — I guess it depends on the actual numbers.)
I'm probably missing something since I am no expert on economics or Georgism, but wouldn't the value of prospecting be that you buy the land for the cheap unimproved useless land price, then sell it for the expensive land-with-oil price. Same as today, except the tax on the land goes up a lot as soon as it is being used for oil drilling because the land value is now higher.
if I'm understanding what your question/criticism is (if not please tell me):
Prospecting would still have value; oil would still get drilled. It's just that it seems the incentive to do so would be lower than it would be in a pure free market — the higher the land value tax, the more difficult it is to recoup your prospecting costs. It'd be a less profitable venture. And so you get less oil at a higher cost (and less of everything made with (nonrenewable?) natural resources with discovery costs).
Note that if the location and unimproved value of all the oil is publically known, you *wouldn't* have that disincentive with an LVT! (Drilling the oil presumably counts as an improvement, and that *added* value wouldn't be taxed.) That's one of the big selling points of the Georgist pitch — although most taxes have deadweight losses, an LVT shouldn't because the supply can't go down. Again, my issue with that selling point is that, when you have non-negligible discovery costs, it seems like "the supply can't go down" is misleading even if it's true in the literal sense.
As I understand it, the idea of the "unimproved value of land" is that it'd be whatever the competitive market price of said unimproved land is. (I think.)
The issue with the "unimproved" value of oil is, a tax on it (and any land with discovery costs) seems to introduce the usual taxation deadweight losses that Georgism is supposed to avoid. This is because, the higher the Land-Value-Tax, the harder it is for the owners to recoup their prospecting costs. So, do we just accept that the Georgist pitch of "fixed supply, so no disincentives!" doesn't apply, and just go ahead and eat those deadweight losses in the name of fighting land privilege? (Not *necessarily* worse than the status quo, since current taxes have high deadweight losses too, but still, it weakens the pitch.)
Or, one idea is to consider the discovery of oil to be an *improvement* (like a form of intellectual property) and therefore not subject to the LVT. Only the value of the oil *without knowing it's there* would be taxed. In that case, my issue is that it seems to concede the whole point — in order to avoid taxation distortions, the Land Value Tax on oil would be reduced to, like, the value of the equivalent volume of rock.
(Upon reflection (I really, *really* wish Substack had an edit button), I think I partially retract something I said in part 1. I said that, if you let landowners pay a fee to the government to take the land off the market, you can't just place the value of the land at what it was sold at because the land value could change and "smart speculators will take advantage of that". But in actuality, I suppose that, if the land's value will predictably rise in the future, it will be bid up *now* in accordance with that, and thanks to Georgism the land market will be very competitive. Still, even if would be difficult for "smart speculators [to] take advantage of that", the land value could still fluctuate a lot (unpredictably up or down, zero on net in expectation), and the value that the land is being taxed at could diverge a lot from the actual value. That'd be bad, so you're still back to square 1 in accurately assessing the value of a piece of *off-market* land that the owners are heavily incentivized to make look lower than it is.)
3.) What is land? That's what bothers me. (As a side comment, I live on 30 acres of land, 1/2 fields that we've let go back to shrubs and trees. This to the lament of local farmer friends who see a loss of what was good haying land. Trees can be like weeds, a negative to 'value'.) Farmers around here make a tidy sum leasing land for windmills. Is all that lease money gone to taxes? Or will we have special carve outs if you are using your land for 'good' stuff? Windmills vs gas fracking leases.
Probably, yes. Unless I'm misunderstanding, you're not creating any economic value by leasing the land, you're just giving someone else permission to make value on it (the windmills), so the value you're getting from the lease should be approximately that which the taxation would take (assuming that there isn't another way to make more value off of it that would drive the land value up relative to what you're leasing).
Thanks, Windmills seem like the cleanest example. But I'm forced to use my land to it's maximum extent, or sell it to someone else who will. I'm sorry, but it sounds crazy in this day and age. If I don't want to frack the natural gas under my land, so I can save it for my kids or grand kids, maybe. I can't do that without paying taxes on it for years and years?
Under this system, yes. The whole goal is to remove land as a valid way to store wealth, because it steals value from everything else.
Though in practice I think this is mostly aimed at constructible land and in particular land in cities. Land that doesn't fit these has a much lower value and presumably then also a much lower tax.
Yes, this seems "unfair"... but is the current situation "fair" for the non-owning workers that are forced to work to pay rent or even capitalists that are forced to keep up with the changes in the market or go broke ?
But yeah, georgists seem to have a blind spot for the portion of land/nature/privilege that *is* going to be destroyed if "used" ?
This is a very good point. I'm hesitant to start introducing new categories to save an ideology, since that way madness lies, but is one of the upgrades we'd need to make to George's thought now that we're on the other side of the Endless Frontier/Spaceship Earth transition to add the concept of _wilderness_, land that has to be put outside the human economy on a permanent basis? I see the tendency of this system to disincentivize urban sprawl and reward density as potentially being quite helpful in this regard.
I've done a little thinking, and I'm not convinced there is a big problem in making new land - there isn't actually anything in the theory that forbids land values from changing over time. In fact, the whole point of the theory is that land prices increase astronomically, and this has nothing to do with its intrinsic natural attributes, but because of the positive externalities of all the other human investment near it. I think this is also how land valuation separately from capital value would be assessed in seasteads or on Mars, by George. The land (remember, not capital!) value starts at near zero, and as they become built up, the land value increases.
The weird bit is that in a Georgian economy, a customer would still pay rent which is indicative of the pre-tax full capital value of the land - but because the landowner would always be subject to a land tax, the amount anyone would pay to purchase the land is reduced. You can't buy the revenue stream without the liability stream attached. This also goes some way towards answering your question about how land valuation would actually take place - the rent it commands is indicative of it.
I would definitely be astounded if there weren't some amount of lawyering about this, but the baseline would likely be set on a city or state/country level with a process for objections. This might not be terrible compared to current effort to hide income from taxation? I'm not sure.
But you can't "make new land" - the quantity of land/nature/privilege can only go down, per the laws of physics.
Or would IPv4 addresses count as land/nature/privilege - or would they be as infrastructure, which according to georgists should then be "internationally nationalized" ?
What is not clear to me is how georgists propose to deal with the land/nature/privilege that isn't owned by anyone yet ? For instance, George's example of rays of light - or does he consider them owned by anyone owning the land that they shine on ? (Especially since owned land/nature/privilege is only a microscopic part of all of the land/nature/privilege in the universe ..?)
Obviously the best way to assess land value is to make it so that you have to specify a price at which you will be willing to sell your land to any taker, but the buyer has to raze any buildings on that land to the ground so they are only getting the unimproved value. /s?
(this actually sounds like a good way to allocate the airwaves. *googles 'Glen Weyl Georgism'* Yup that seems to be one of his proposals)
fun note to add: george's 'social problems' is always how i recommend people get into george from a social justice angle, he gets more in the weeds on the morality of the tax there. 'progress & poverty' definitely seems more fit for the Astral codex audience, it's a lotta econ. Glen Weyl's "radical markets", "the high cost of free parking," "the railroad and the city" and pikkety's "capital" (when understood that his thesis, in practice, is actually about land values https://www.vox.com/2015/4/1/8320937/this-26-year-old-grad-student-didnt-really-debunk-piketty-but-what-he) all get into more modern takes and evidence that could lead one to the principles george also describes. i love the EVE online example - economic rents can be generated in *so many* ways, but at the heart is the idea of *profiting from exclusion* or lack of competition.
It's funny, I received by mail Piketty's latest *Capital and Ideology* (2019) mere hours before this review was posted, now it looks like that I'll have to read *Progress & Poverty* first ! (Better to see the evolution of ideas about inequality.)
My read of Weyl, and of Robin Hanson's defense of Weyl/Harberger type taxation, is that it is more radically rent-confiscationist than Georgist taxation: essentially it forces you to put *everything you own* to its highest-valued economic use, not just land, or pay for the privilege of not doing so. I find the logical consequences of this morally repugnant, but I can see how it might in principle have a stronger efficiency-promoting effect than "classic" Georgism. In general the review would have been stronger if it had dramatically shortened its explication of Georgism to make room for critiques of Georgism, successors to Georgism like Weylism, and the reviewer's own conclusions after reviewing all these. As it stands, the piece is more a cliffs'-notes than a review.
I have a question about the graph of worldwide extreme poverty. Looking at the overall trend line, it appears that extreme poverty would be wiped out around 2026, and even just looking at the most recent trendline around 2015 it seems like the number in extreme poverty would be about half of what they're projecting for 2030.
The obvious answer on the graph is that they expect extreme poverty in Africa to go up slightly in the near future and then stay completely steady for 10-15 years. That notion seems hard to justify, given the trends in all other places around the world.
Does anyone have more information on why Africa might be an outlier, and how reliable the predictions are? They are even expecting southern Asia (India, Bangladesh, etc.) to have Europe/North America levels of extreme poverty (read, very very low) by 2030, but for Africa to be worse than now?
One thing that bothers me a bit in this review: first, the Land is defined as "all natural materials, forces, and opportunities", and examples are given: "That means that a field or a meadow is "land", as is a mountain. But so are the fish in the sea, the clouds in the sky, veins of gold in the earth's crust, and the oil deep under ground."
However, anywhere else it seems like only actual plots of ground are discussed. This bothers me, though I can't quite articulate why. How much does an oil field worth? A lot - for an oil company. Not very much - for a farmer who uses the land above it as a pasture (for simplicity, let's assume oil company actually needs his plot to work the field). Will he find himself suddenly paying much higher LVT if the oil is discovered? He's clearly not using the land
to the full extent now that it became more valuable, so it seems in this model he must be penalized for that. I feel there must be a lot more complications, if you apply the given definition of land to all natural resources.
Another thing that bother me if the government, which usually owns a lot of land, should pay LVT on it to itself. This would provide the government with initiative to sell all land it owns and not actively uses to private entities. Sounds rational, but to me it looks like a fast way to dismantle national parks system, for one thing (though I guess you can make such places exempt).
for georgism 101 starting with ground rent is the easy part. and yes - the government should have to pay LVT, but yeah you still might have society choose to protect national parks.
stiglitz's work tells us that public improvements (parks, subways, etc) increase the value of land - living near a train station you'll see rents usually go up. so if the government re-captures this as a LVT, it creates a virtuous cycle!
Ground rents are the easiest thing to talk about with georgism. next is monopoly, then stuff like spectrum rights (the gov auctioning spectrum is georgist-esque, and was inspired by a georgist economists' suggestions), IP/patents, etc. Georgism can be incrementally implemented, and it would be best to start with the low-hanging fruit of location value, then work our way to the thornier problems. Even just solving the location value issue would dramatically change so many things that it's worth talking about at length, alone.
I don't understand why georgists assume that land/nature/privilege are fixed in quantity - while they clearly aren't. And why would we care about quantity anyway when the value can fluctuate wildly from mere information or available tools suddenly making new land/nature/privilege available for destructive extraction ?
Government paying LTV creates initiatives for various pieces of it to dispose of "hot" land, to keep it off their budgets. I have no idea how bad it would be, though. It would be nice to see a big experiment somewhere.
This creates an interesting situation - if resources belong to the government (as in most countries), then the government suddenly has to pay more or sell oil under the farmer? Another exception could be made, of course, for natural resources that cannot be developed right now for whatever reasons, but this leads down a dangerous path where exceptions outweigh general use...
Also, simplistic approach dictates that government should sell all discovered oil fields without keeping anything in reserve. This seems dubious.
I don't know how it works in USA, but in Russia even local tax authority office pays payroll taxes (to itself; also, by one account I heard, it's often late and has to pay penalties, too). If we exempt government from LVT, it would break the whole system - government will become the biggest and worst landlord (the only one who can hold on to Land indefinitely).
Well, yeah, tiering taxes this way (also various level of government from local to national) can have useful properties I guess ?
----
And technically government is *already* the biggest landlord - it effectively "owns" *everything* inside national borders (see eminent domain or the like - Экспроприация in Russia).
Speaking as a former landlord, as interesting as this may sound in an abstract sense it fails to square with my reality. My reality was profitable, but required a great deal of risk and effort and not just the "improve the property" effort mentioned in the example. I find the conflation of landlords and land speculators.... odd? Disturbing? Unfair? Not sure any of those words precisely fit but gesture I think at the desired frame of reference.
the example was clear: a 'good' landlord can absolutely add value, and part of what we are charged as 'rent' is the return on labor. but the vast majority of what you charged was probably based on location. the 'risk' wasn't the same as other kinds of assets, as we've discovered in COVID as landlords demand their 'risk' be covered by the government when people can't pay rent.
george held no special dislike for land-owners per se- that's why he said 'lets take the kernel, and leave the shell', but the fact of economics pointed out from Adam Smith to Pikkety is that land ownership *in and of itself* is not valuable of wealth-generating.
Your profit was disproportionate to your risk and effort, no matter how hard it felt to be 'inside' the system.
Except that's wrong. It was very risky, and in fact I was forced to sell at a loss that wiped out a couple years-worth of profits. My risk was *definitely* not disproportionately small to my profits. Effort is more subjective, but it was not for nothing. Again, my issue is that the thinking, either of the author of the review or the author of the book, conflates the idea of landlords and land speculators when it's convenient and then splits them apart when it's not. I wasn't holding that land unproductively hoping it would increase in value, I was running a business on it. But where is the line drawn? I paid a property manager to handle a fair bit of the minutiae, does that make me an evil absentee landlord cf the Potato Famine? At what point on the curve do you go from good landlord to bad?
Your risk was not higher than had you spent that same money on actual wealth-creating investments. less risk =/= guarantee of success. Most landlords have the mentality that they shouldn't bear any risk of loss, and then when they do occasionally lose, get upset. You were both land speculator and business owner. The fact that you paid a property manager proves that you didn't want to do the work of 'value-adding', you just wanted to have the benefit of owning a piece of paper that said 'this land mine.'
the spectrum isn't really important to georgism- it's not about judging you. but part of the rent you charged was derived not from your work or risk, but from the commons of the community around the land you owned. that's what should be taxed, and then you can compete to provide great services and what not.
but those taxes don't go nowhere- george supported a ubi! so it's not like people are left out to dry, the whole idea is that collecting economic rent should be sufficient for people to have the basics.
the business you ran you should not be taxed on, but the underlying land should have been. georgists would slash your income taxes, business fees, etc, but make you pay for what you didn't create, but profit from.
I disagree: I would have had much less risk although possibly lower returns if I'd bought gold (and it seems to me gold is a waaaay better example of "land" than literal land) or stock, but whatever, doesn't matter. The underlying general problem remains: if it's barely profitable (or in many cases *un*profitable) to be a landlord *now*, under the current regime, and that is a necessary service (not everyone wants to or is capable of being a homeowner), then in the proposed arrangement that reduces further still the profitability of that enterprise what incentivizes people to be landlords?
Nothing about an LVT prevents you from pricing in your risk. The only thing limiting the rents you can charge is the competition in the market. Presumably other landlords know about these risks and will also price them in. If your rental business is, for whatever reason, riskier in a way that doesn't proved excess value, then you _should_ go out of business.
Gold ore/veins are land. Processed gold (coins, bars, ingots etc.) is wealth, because it is the result of human labor applied to land to satisfy desires.
Imagine, for a moment, a box. At the end of each day, the box must contain $100, or it will disappear. At the start of each day, the box contains a random amount of money whose amount is evenly distributed between $1-$1000.
It's perfectly possible to lose money owning this box. It's really easy to lose money owning this box if you purchased it for its expected value for 20 years.
And if the box randomly stops working for a year, it's possible to be forced to sell the box at a massive loss.
Yeah I mean clearly this would screw over anyone who paid for land and did not receive windfall appreciation, because in that case you paid the full value for whatever the land is generating in rents and you're not making any special amount of money. The only one this tax appropriately hits is people who own land which had randomly and unpredictable increased in value, which in fairness is a lot of people. But it would also bankrupt a lot of perfectly nice people who are doing nothing wrong and making no spectacular amount of money.
I think LVT is a fine idea in the abstract, but you would have to compensate people for the price they paid for the land originally, that's the only reasonable way to do it. And indeed that might be necessary for it to be constitutional.
I think this is something George just gets wrong--he seems to suggest it's easy to make money by buying land. But in an efficient market, it won't be any easier than via any other type of investment. The difference is that if you do a really good job and beat the market and successfully pick the land that will increase in value, nobody else benefits.
(Insofar as your landlord profits were a result of doing a good job picking land that would gain value, then you probably did work hard for them but they didn't help society. Insofar as they were the result of basically anything else, they were totally valid returns on labor)
It seems like there are two major problems I can see with a land value tax.
1) There is a major tragedy of the commons problem. If I own a lake which is naturally stocked with fish, I can choose to either sustainably fish it, or immediately catch all the fish in the lake. If all of the future "natural" value is taxed away, what incentive is there for long term productivity?
2) In urban/suburban areas, the unimproved value of the land is heavily dependent on the people and land improvements surrounding it. Currently if developers try and gentrify a neighborhood there are two powerful competing interests; landowners who want to increase the value of the land, and renters who don't want to be priced out. A land value tax would mean that landowners no longer have any incentive to gentrify. The obvious political equilibrium is that any development which could increase taxes is preemptively banned.
In addition, the unimproved value of land in developed areas is not a well defined concept. For instance if I put a development block of 100 houses in the middle of nowhere then obviously the unimproved value is simply the value of that land as farmland. If instead I want to build a house next to 99 other houses in a development then assessing the natural value is much harder. The mathematically pure (no deadweight loss) method is to still assess it as farmland, but extracting 100% of Manhattan's farmland value has no impact on speculation or rents.
"There is a major tragedy of the commons problem. If I own a lake which is naturally stocked with fish, I can choose to either sustainably fish it, or immediately catch all the fish in the lake. If all of the future "natural" value is taxed away, what incentive is there for long term productivity?"
- What incentive is there in owning a company for 5% of its value every year, as opposed to selling it for 100% of its value right now?
"In urban/suburban areas, the unimproved value of the land is heavily dependent on the people and land improvements surrounding it. Currently if developers try and gentrify a neighborhood there are two powerful competing interests; landowners who want to increase the value of the land, and renters who don't want to be priced out. A land value tax would mean that landowners no longer have any incentive to gentrify. The obvious political equilibrium is that any development which could increase taxes is preemptively banned."
- I think you have this radically backwards. Landowners in the current tax scheme get taxed on the improved value of their land; the current tax scheme discourages improving the land. The only landowners who "want" to increase the value of their land are those who want to sell in the near future; if you don't plan to sell it in the immediate future, it's in your best interest not to improve anything unless those improvements pay for themselves and their taxes. For the purposes of owning land, rather than improvements, as an investment, a slum is in many respects a better investment than a nice apartment building.
"In addition, the unimproved value of land in developed areas is not a well defined concept. For instance if I put a development block of 100 houses in the middle of nowhere then obviously the unimproved value is simply the value of that land as farmland. If instead I want to build a house next to 99 other houses in a development then assessing the natural value is much harder. The mathematically pure (no deadweight loss) method is to still assess it as farmland, but extracting 100% of Manhattan's farmland value has no impact on speculation or rents."
- You don't need a mathematically pure method. Here's one way to do it: Everybody declares the unimproved value of their land, and can update it once a year at tax assessment time. They're taxed on that value. Anyone else can buy out the current owner for the unimproved value plus the cost of relocating or reconstructing those improvements somewhere else.
"- What incentive is there in owning a company for 5% of its value every year, as opposed to selling it for 100% of its value right now?"
Even if I sell it the future owner has the same long term incentives as me.
Let's suppose we apply your algorithm for computing the land's unimproved value to our hypothetical lake. Suppose there are two possible uses for it.
1) Sustainable fishing giving $10,000 a year forever.
2) One time exploitation for $100,000 and then no production ever.
If everybody plans to fish sustainably, I need to pay $10,000 a year in taxes. If one year I defect (or some other buyer defects) they pay $20,000 in taxes for the year, extract $100,000 in rent and then reassess the value at $0 and make an $80,000 profit.
In ordinary circumstances this would reduce the purchase price of the land. But with an 100% LVT the purchase price of unimproved land should be consistently close to $0.
" I think you have this radically backwards. Landowners in the current tax scheme get taxed on the improved value of their land; the current tax scheme discourages improving the land"
In the current system I am taxed on improvements that I make to the land, which disincentivizes "me" from making improvements.
In the proposed system I am indirectly tax on improvements that other people make to the land, which incentivizes me to prevent other people from making improvements on the land.
Suppose I live in a single family house in Silicon Valley and I would like to stay there. In the current system, if my land is rezoned for apartment buildings I am not directly affected. In the proposed system, the rezoning is catastrophic for me. I am immediately forced to sell my property and move. Why would I ever allow that if I had any political power?
"If everybody plans to fish sustainably, I need to pay $10,000 a year in taxes."
- Given you have stated that this is the annual return of sustainable fishing, that is the value of the unimproved land, plus labor mixed in. Indeed, if you're being taxed for the full economic value of the unimproved land, plus your labor, it makes no sense to own land at all.
Pretty much all your conclusions flow from the basic issue that you're not assigning any value to labor itself, in your valuation of the land, which is why you conclude that with 100% LVT the value of land should be close to $0. If the value of the land is $0, then $0 will be collected in taxes, which means it's worth owning the land.
The thing you're looking for is the equilibrium pricing, which will happen to approximate the marginal value of the land, which is, in fact, greater than $0. Assuming a fishery that makes $10,000 in profit after labor and expenses, the taxes will be somewhere between $0 and $10,000, unless there's some more valuable purpose to which the land could be put.
"Suppose I live in a single family house in Silicon Valley and I would like to stay there. In the current system, if my land is rezoned for apartment buildings I am not directly affected. In the proposed system, the rezoning is catastrophic for me. I am immediately forced to sell my property and move. Why would I ever allow that if I had any political power?"
- First - zoning?
Second, because if the improvements price you out of the land and mean you will need to sell, you'll still make a profit, since the taxes will reflect the marginal value of the land, which must have increased since you purchased it.
That is, you can still profit off land; you can even do some short-term speculation. Long-term speculation and land rent, however, become unprofitable enterprises.
Second, because if the improvements price you out of the land and mean you will need to sell, you'll still make a profit, since the taxes will reflect the marginal value of the land, which must have increased since you purchased it.
That is, you can still profit off land; you can even do some short-term speculation. Long-term speculation and land rent, however, become unprofitable enterprises."
Sure I'll make a profit, but what if I don't want a profit? What if I prefer to stay living in my less valuable home? As a homo economicus I can sell my house and move somewhere else, but that's not always pleasant.
So politically some form of "zoning" will be used to keep that unpleasant thing from happening. That zoning might be formal zoning restrictions by the city. It might be bullshit building codes which just happen to ban any more economically valuable usage. It might even be unexplainable localized spontaneous combustions of new developments.
What, exactly, do you want to happen in this scenario?
The economic incentives are aligned, such that everybody's economic incentives point in the same direction in this situation; frankly, that's basically a miracle. If your objection comes down to "But people might not act in their economic best interests", well, it isn't a new problem, and it isn't clear to me that any system should, in fact, force people to act in their economic best interests.
The fact that it isn't catastrophic for the people involved - that they can even pocket some money after the fact - looks to me like a net improvement over what we have now, in which eminent domain would be used to seize the houses at below market value.
"It's in your best interest not to improve anything unless those improvements pay for themselves and their taxes."
This is always going to be the case, regardless of tax scheme. The issue with the LVT is that it seems to amplify the commons problem. If I put in a park next to my house or a parking lot next to my store, the neighbors benefit (and pay slightly more LVT), yet I pay the LVT for the land with improvement itself. Everyone benefits, yet I pay the most for it.
The way around this seems like it might be multiple layers of government-as-Home Owners Association, where the people affected by the increase in LVT pool to pay for the improvements that benefit them collectively.
If I install a stadium that increases the surrounding land value in the current scheme, I pay taxes on the full value of the stadium.
In the LVT scheme, strictly speaking, building the stadium should not increase the unimproved value of the land the stadium is on at all; now, there might be a bit of a recursive effect whereby I increase the land value around me, people build stuff there which increases my land value, which increases the taxes I pay. But it certainly isn't obvious that I'm paying "the most", particularly compared to the current scheme.
Also, as mentioned above, if this does happen, I can sell the stadium and land it is on, because I can, in fact, profit from increases in the unimproved value of land - since by definition it's the amount of money somebody will pay for that land, unless there's also a 100% land value gains tax. (I think there are good reasons not to want this, even if it does enable short-term land speculation, mainly to do with aligning incentives.)
[The following is speculation; if I'm wrong, please correct me]
The stadium directly earns you money. The parking lot or park does not.
Any establishment in a retail cluster of separate establishments (rather than a centrally managed mall) that skimps on providing adequate parking gets a substantial tax savings by allowing customers to freeload off of other businesses that paid for adequate parking. Free parking becomes a significant expense in a LVT environment. For that matter, any land use that doesn't bring in money for the owner becomes a significant expense.
Pretend I am a business owner with a retail business in an area with a lot of retail businesses and my establishment has the same land footage for the building and its parking lot. Under the current tax system, most of my taxes (and all of my revenues) are coming from the building; I might be a little annoyed at people using my parking spaces to shop nearby, but it's not a major loss. Under a LVT only system, the parking lot is half my taxes. I can try to enforce a 'employees and customers only' rule, but that costs me in enforcement.
That's not to say that there aren't ways around this. Urban environments where parking itself is a business don't need to worry about this since nobody there expects individual businesses to provide their own parking, although one can expect prices to go up since more of the cost of parking garages is the valuable urban land they occupy when compared to the buildings around them.
If the land could be of more value to society as another building or business, shouldn't that be what we incentivize? Do we, as a society, actually want to subsidize unproductive uses of land?
Well, yes, we do. We want parks, for instance.
Do we want parking lots in the same way that we want parks? And if we do, who should pay for it?
I don't see how that last bit can work. First the cost of moving/reconstructing improvements will often vastly exceed the cost of the land. Second not all improvements can be moved. Say I've cleared the trees, improved the drainage and fertilized my land to be more productive... it's hard to undo that. Or maybe I've added some ponds or an orchard.
You raise excellent points. Thank you for your comment.
>There is a major tragedy of the commons problem. [lake example]
I'm not sure this is a tragedy of the commons problem. It seems like it would still be here even if a single owner owned the lake.
>In addition, the unimproved value of land in developed areas is not a well defined concept.
True, but it doesn't seem impossible. Existing property tax is done without an exact knowledge of how much a property is worth. That might seem like a strange claim, given that records of real estate transactions exist, but many of the homes being taxed have not changed hands in over 10 years. Given a small year-on-year change, that means a prior sale price can be wildly off from the true market value of a property. In practice, you need to estimate the value of a property from sales of similar houses.
You could look at sales of property, and try to guess what percentage of the value of the property was due to land, and what percentage was due to improvements. In some cases, like the parking lot in Boston which sold for $40 million, the entire value is the land.
Alright, I think this is an absolutely fantastic review, but maybe leaves some stuff unexplained - I assume because the book in question left these things unexplained.
So this is coming at Georgist reform from an entirely different direction than I, personally, came across the set of ideas, and I think it is helpful to come at the reforms from a different direction. Namely, Georgist taxes aren't just taxing rent - that's one way of thinking about what is happening, but not the only way.
If you consider property rights, they are, fundamentally, an exclusive right; ownership of land amounts almost entirely to the exclusive right to use that land. I can build something there, but I don't have to; what ownership means is that somebody else -can't- build something there. Theories of value and natural rights property ownership hit a rather hard limit in the case of land, because land is the unconverted value remaining. So Georgist taxes are taxing the fact that property rights are really just excluding anybody else from using this land; the Citizen's Dividend is paid to everybody else because "everybody else" is whose rights have been limited by the assignment of property rights.
Consider land in its natural state; nobody owns anything. Okay, now imagine somebody builds a farm. We'd like them to be able to enjoy the products of their labor, so we assign them the rights to the farm. Property rights go unjustifiably further than this - if a passing surveyor discovers coal a hundred meters under their farm, who owns the coal? The surveyor who discovered it, or the farmer who put no labor into discovering it, and whose labor goes no deeper than the first half meter or so of the soil?
Georgist taxes in this case don't tax the farm, they tax everything else, and in particular the claim to mineral rights that have nothing to do with the farm itself. They tax the right of exclusivity.
And as others observe, the price of exclusivity could get quite burdersome, when, say, you're talking about a single family dwelling in the middle of Manhattan. I would say it's actually kind of an open question what we want to do here; it isn't obvious to me, either that everybody else gets to demolish the home (as the right to the house is, I think, quite justifiable), nor that the homeowner gets to have a house in the middle of downtown - as the right to have the house in that location is not as justifiable, given what everybody else is giving up in exchange for that house to be there - certainly I don't think the hundreds of people who could be housed in a building that could be constructed in that lot should have their own interests ignored. The cost of exclusivity is, in fact, quite burdensome on society for that case.
I'm all for eliminating land rents, which is good and well, but Georgist reforms have a lot more going for them than just doing that.
---
There's some confusion about why it's important that labor costs come out of production rather than capital; the insistence here is about establishing some clarity in definitions. George wants to define capital in a particular way, as a labor enhancing good or technology. If we wrote an equation, it is something like Productivity = Labor x Capital. The point of the definition is to be able to write something like this equation. Wages aren't part of capital because wages don't multiply the value of labor.
Is this distinction important? It depends on what you're thinking about, and what problems you're facing. Treating money as capital is an abstraction of a process by which money can be converted to capital goods by purchasing them. We can easily construct scenarios in which this abstraction fails horribly; if I sell my farm, take the money with me on a flight, and crash in the desert a thousand miles from anyone else with a suitcase full of that money, I can't buy a farm in the desert and survive on the food and water there. The abstraction can be a useful one, but only in the contexts where it is appropriate.
George is insisting that we separate the abstraction of money-as-capital, from the idea of capital itself; the fact that the wages I'm paying laborers is fungible in a certain sense with capital goods doesn't make that money a capital good.
(Also, the valuation of a company that builds ships is, in an ideal sense, going to vary with the expected returns of that company; the value of a half-completed ship should certainly be priced into the value of the company.)
---
As for Google versus farmers, I think an important thing to note is that I think Georgist land reform could potentially lower the taxes farmers pay, given that currently they are taxed on the value of the farm, whereas Georgist taxes will be taxing them on the marginal value of the land that farm is on. .5% of the value of a farm could easily exceed 100% of the marginal value of the land, particularly given that the value of land in a Georgist scheme will be a fraction of what it is in the current scheme. Another consideration is that Georgist taxes would ideally tax the "land" of intellectual property, as well. Overall I expect a Georgist tax scheme to favor farmers over Google.
good points! Georgism is about exclusion and making markets work - land ownership is, at it's core, a violent way to accumulate wealth-somewhere down the line, someone took the land by force. if you point at the moon and say 'who owns that' and the answer is 'no one' (or 'all of us'), then why shouldn't that be true for what nature provides on earth? does one human have more right to a plot of land because they got there first? ridiculous, and counter-productive.
“Laissez faire (in its full true meaning) opens the way to the realization of the noble dreams of socialism.”
I didn't include "consumed land" because it's not necessarily multiplicative - we differentiate between extensive and intensive land usage precisely because value doesn't scale linearly with area (and to the extent that it does, that productivity enhancement is already included in capital) - and because not all uses of land are consumptive. Which is to say, it doesn't impact productivity. I'd include it in a Cost equation, and/or a more comprehensive Profit equation.
Wait, why would you measure georgist "land/nature/privilege" in area ? While I guess that's an easy approximation, it quickly breaks down : it's meaningless to speak about the "area" of unextracted oil or the "area" of IPv4 addresses !
Also, I'd say that useful joules are quite multiplicative (though obviously it's still an approximation). (However I guess that we also get back into the issue that useful joules are a subjective notion..? OTOH so are capital and labor, so I guess approximations like that can't be avoided ?)
----
And what do you mean about "extensive" vs "intensive" land usage ? I'm only aware of this term in agriculture, and it's a spectrum, not just two extremes...
Doesn't a correctly valued 100% land-tax encourage a silly amount of re- development? Wouldn't we be building things and tearing them down every few years just to ensure that at all times the land is being used in the most efficient (economically valuable) way? (Although I guess we wouldn't actually do so, since no one would build a nontrivial structure in the first place, and so more land would just stay vacant.)
A property tax (on both land and improvements, not necessarily at the same rate) can raise as much revenue but gives a tunable control to balance inventives for redevelopment against recognition of the economic value in keeping existing structures in place (even if they weren't be very best use of the land were we starting from a blank slate, which we will rarely be.)
=most georgists support incremental phase-in with compensation or protections for the most ridiculous situations, or at LEAST make the LVT revenue-neutral by cutting income taxes and raising a UBI as you implement it. but even today in some of the best cities in the world (where land is most valuable, and zoning restrictions aren't absurd) like tokyo, there *is* a ton of re-development and change, all the time! in area where land isn't so valuable, change doesn't happen so rapidly.
Thanks, but I still don't get it. My concern has nothing to do with phase-in; I'm assuming it's up and running "well".
If the best use of some vacant land is, e.g., a large factory costing tens of millions of dollars in improvements with a pay-back period of 15 years, my understanding is that a good land tax (under every valuation scheme I've found discussed on-line) would be exactly right to make this seem _just_ economically feasible for me (and not really so for any less valuable use, so people with similar plans to mine are the only real developer candidates).
But why would anyone actually go ahead with this if there's going to be a re-valuation in a few years time which *will* (if valued correctly) push me into loss if there's any theoretically better use of the land then (assuming it were to be vacant, which it's not). I wouldn't do that under such high risk, so the land will just sit vacant all along; no factory (or whatever).
There's surely a tradeoff between redevelopment to better uses vs using existing capital well. Both sides are important. And if society wants to control this tradeoff, it will need some policy 'knob' to turn. I don't see where that knob is with a land-value tax. Nor do ad-hoc protections for the "most" ridiculous situations seem to the point of what seems like a systematic problem.
No (about the tax% being the knob). First, that controls two things at the same time: revenue and [mumble]. Society shouldn't need to decrease tax revenue to grant existing developments more stability - those are completely different things!.
Second, even ignoring that, it's "obviously" the wrong control. It lowers the cost of holding bare land just as much as it does land with hugely expensive buildings. But you probably would _want_ 100% land tax on bare land, but something else to give ok-but-not-anymore-the-very-best capital investments some security.
Taxing land AND improvements (though perhaps not at the same rate) seems to give a starting handle on this. We can control revenue (through our overall take) and - rather imperfectly but better than nothing - independently honor the value of existing improvements. But that's a property tax, not a Georgist land tax, so it's out of bounds???
Also, please suppose in my example that the factory is NOT uncompetitive. Suppose it would be the very very best use of the land at the time I built it, it just takes a while to pay back as to all nontrivial capital goods. And the even when the land tax valuers decide that it's no longer the very best used any more of the land (were it to be vacant), perhaps it's a still very good, valuable, productive assets (to it's owners and to society). Just that tearing it down for an office block would earn 10% more or something after assuming the factory just 'vanishes' and that everyone who was financing it is left empty handed from now on.
And the answer can't just be 'it sucks to be the factory builder,
even if it's otherwise profitable a few years further on, it's no longer optimal' since, in equilibrium, who is actually going to build?
Relative shifts in land-use-value happen all the time. If you want me to be concrete, imagine a large office-based employee moved its headquarters to your city, leased a bunch of existing office space, and now there's a bit of shortage ... so office prices have gone up.
This happens, let us say, only a mere few years after you built your factory - it's in no way even near obsolete. But your land tax goes up TODAY (or whenever it is next reassessed) to reflect the fact that if the land were vacant people would prefer to have an office building than even a brand new factory. (Maybe there's vacant plot of land identical to yours, so the tax assessors use the market to really be confident that the land you are using is now worth more). But ... you never budgeted for that. So this fine productive factory is now a money-loser. Not because it's obsolete!
Maybe were we part company, is that (by my understanding, may be wrong) you don't get to stick with the land tax amount appropriate to it's original use until the time you decide; it has to be frequently adjusted to reflect hypothetical best use then (at assessment time). That's not an optional feature. If it were, Carl Fredricksens wouldn't get priced out of his home by a land tax (note that the review included a lot of handwaving about how it might be best for the old dear anyway, while slightly obscuring that yes, yes, he does get taxed out of his home and that's the point).
Although maybe sympathy will inspire a 'special case' to protect Carl. There surely won't be one to protect my newish, performing exactly as planned, factory. I don't want to tear it down, but at this stage, society probably shouldn't want me to either (well, not necessarily so.)
I enjoyed this very much! Currently I'd put this at about #1 or #2 with On The Natural Faculties and both well ahead of Order Without Law. I enjoyed OWL as well but the competition is fierce
TL,DR: Review good, Georgism makes sense, but "radically more liberal high density zoning" seems simpler, better and easier to implement than a LTV.
Longer version:
This review is great, we can boil Georgism down to "everyone needs land to earn a living, you can't make more land, therefore the price of land (that everyone needs!) will increase too much as landlords receive unearned "positive externalities" from the community developments around them."
I think this is basically right, but modern technology makes one tiny part an issue: you don't necessarily need new **marginal** actual land to earn a living, you need a living/working space, which with low technology (i.e. stone or wood buildings) can be very limited, but with modern skyscrapers (and, key feature, liberal density zoning rules!), it is not. - in the "Up" example, Carl's high rise neighbors could give up trying to build his land and instead put 10 new floors on top of their building (or maybe underground levels!), or subdivide, or whatever other thing you can do to increase density. Almost no place on earth is actually so dense that a few dozen massive skyscrapers wouldn't provide more living/working space than anyone could possibly want (with resulting effects on actual "rent")
It seems to me you CAN create new "living/working space" via density. So the logical opposite counterpart of "Land Value Tax" would be "Living/Working Space Supply Increase", or more commonly called: YIMBY or increased density or more loose zoning. It has advantages over LVT in that the system (zoning) already exists, it just needs to be liberalized/modernized. No taxes change for normal homeowners. Certainly, NIMBY style people will oppose it, but how much do you think they'd opposite getting a huge tax bill for (in their opinion) no good reason? Basically the entire Georgist issue is "community developments increase the value of property without property owners having to do anything" but radically liberalized zoning would only let property owners who *built valuable, high density improvements* on their land reap those value increases. - i.e. what we want - With a far less radical restructuring plan.
With radically less density zoning, when an area gentrifies, the evil slumlords' property value never goes up because his next door neighbor builds a 100 story apartment and absorbs all the demand for new housing. We achieve exactly what we want: landlords who want to reap the community development rents have to improve their property (via density) in order to actually reap it, while slumlords who do nothing do not.
I think I understand what you're proposing, but that would create what I will call arbitrarily large density for a given area. As one of several examples of why that might be a problem, consider traffic. In an area with insufficient public transportation, adding lots of new people will result in huge amounts of congestion. Part of the actual purpose of zoning laws is to control how much is built around existing infrastructure. Other similar considerations are sewers, clean water, electricity, etc.
sure, but I think that is also an issue you'd have with LVT, because density (indeed "density" of people, services, businesses and amenities is precisely the "positive externality" thing that George is saying is increasing the value of the land) is what landlords would turn to to offset the LVT. But density fixes both of your issues: if density increases enough, you need less (car) traffic, as it is replaced with much-smaller-footprint foot traffic. And "infrastructure" is only "too little" with respect to the tax base it services - if density goes up, so does the tax base. And dense population increases are easier to service with infrastructure than sparse ones - i.e. you can provide infrastructure to 100 families in a high rise for a cheaper per person cost than providing the same to 100 families in 100 single family homes in a suburb.
Yes, definitely on the margin, that first 100 story high rise that goes in will likely strain the existing infrastructure/roads, but cities around the world have, over the past 100 years, successfully (some more than others) dealt with large density/population increases and the challenge to their infrastructure. I recommend following the lead of the successful ones, and ensuring that your tax rates are properly set so that if 100 families move into that apartment, it provides at least enough tax dollars to upgrade the roads/sewers.
On the first approximation, yes, I'd say that the single family homes are much less destructive to build and operate. (Depends on what kind of infrastructure we're talking about though.) Also note that the quality of life in a high-rise is probably worse.
I just want to add that Leo Tolstoy, probably one of the most influential humans ever, spent his last few days talking to strangers in trains, telling them how Georgism would solve all of Russia's problems.
"I know of nothing better calculated to make the blood boil than" the goalpost-shifting between saying on the one hand that land is wholly fixed in supply, from which all the wonderful properties of the land value tax derive, and saying on the other hand that long-term improvements become part of the "unimproved value" of the land, thus most of the land's "unimproved" value also derives from improvements, but then immediately pretending that this isn't the case.
"But it will be said: There are improvements which in time become indistinguishable from the land itself! Very well; then the title to the improvements become blended with the title to the land."
The paragraph preceding this gives examples, but immediately dismisses them as "edge cases"; elsewhere, "the amount of land "created" in this way is pretty darn negligible", which is not at all the case, as visible from the very examples the author listed.
Why does this matter? It matters because you get less of what you tax, especially if you tax it 85-100%. This disincentivizes two things: one, never mind improving the land, simple stewardship of it (example given by the author: erosion prevention). Two, provision of transportation. When the author says "Workers priced out of living close by have to spend more time and money commuting longer distances to work", they don't mention that (with the exception of those who walk to work), this takes place on built infrastructure on which service runs: buses, trains, etc.
"An empty lot in the middle of nowhere is worthless, but an otherwise identical empty lot in the middle of New York city is priceless." If I should be able to build a near-instantaneous teleport gate between the two, then people will pay equal money for them; if the transportation I build consumes some time (headways as well as speed) and/or money, they will pay that much less, but people's willingness to pay depends on their access to a potentially quite large (region-sized) labor market.
Henry George may be excused for not realizing the latter point, since in his time a large fraction of people did walk to work, but for a contemporary author explicitly mentioning commuting, this is a major oversight. This is especially strange when they lay out the law of rent and elsewhere think about reducing the cost of housing: building or improving transportation to as-yet-unserved or underserved land is one of the obvious ways to reduce land rents where they are high (in their worked example, improving field C would reduce the rents of fields A and B). Describing without endorsing, this exact process happened in the US during the Cold War; networks of suburban motorways temporarily created a glut of undeveloped land within commuting time limits from preexisting cities, thus land prices fell and people moved to the suburbs; since afterward the rate at which undeveloped land comes into the market (i.e. the rate at which land is supplied) declined, prices moved up once more. Also note that this process happened both with other technologies and in other places; the term "commuter" comes from 19th century railroad suburbs, streetcar suburbs were a thing (contemporary urbanists love them), and similar rail-based suburbs sprang up in pretty much all countries that are competent enough to build railways.
Because the people who build railways do so because they get the money this creates in terms of the increased land values of the newly-connected areas? Or is that a positive externality which, in the currently framework, benefits those who happen to own the land that is now connected, which rarely if ever happens to be the same entity as is constructing the railway?
Historically this kind of thing happened extensively in the US as well, as an alternate scheme for compensating railroad companies building towards frontiers; it's the modern context I'm more interested in.
(1) I have a question regarding the marginal rent of land- in two places above the author characterizes George's view of the margin of production as "the difference between how much you can produce from a particular piece of land (Lot A or B) compared to the *least* productive alternative (Lot C)." -- but given traditional understanding of marginal economics (as well as basic common sense), shouldn't the margin of production be the difference between how much you can produce from a particular piece of land compared to the *most* productive alternative (i.e., if my land has 100 utils, vacant or unappropriated lot C has 60 utils, and vacant or unappropriated lost D has 30 utils, shouldn't the margin of production be 40 rather than 70? -- it seems like the trouble with "the worst land available" as a reference to margin of production is that I can always point to a place in outer space of no reasonable utility as a reference point and say that every margin of production is simply the highest and best use of land relative to 0 utils.
Now, perhaps this is indeed the Georgist view (i.e., the hypothetical maximum utility of the land is just its margin of production, and what you should tax it on), but seems weird to characterize that as a "margin" in that instance. So am I missing something, or is the review mistaken as to the comparative plot being the least instead of the most valuable alternative?
(2) Loved the review - I have a few outstanding concerns about Georgism's emprical tax assessments as well as some frustrations regarding its implications for incumbent landowners (basically, if Amazon builds its new HQ next door to me this forces my taxes up involuntarily through no act I could reasonably control, and while in theory the tangible gain in exchange-value is meant to compensate me for any decrease in use-value (either because I can't afford the new taxes or because I don't want to live in Amazonville) I can see problems with it in practice -- but I kind of suspect that at a very fundamental level, Georgism is basically right about things.
> Another effect George asserts is that once land is no longer monopolized, labor is no longer forced into one-sided competition, so wages start to go up.
What's the explanation for this? I re-read but still missed it.
I can envision a quasi-Marxist argument that labor and capital are both being exploited by the landlords, and that therefore reducing the power of the landlords should increase the return to labor+capital. But that's a distinct argument from being "forced into one-sided competition".
Is it just the implication that more economic activity would be happening, giving workers more options?
Why on earth would the farmer choosing to work on Lot B consent to such a high rent? The explanation is the Landlord sees that the farmer's only other option is working on the unowned Lot C, so he can charge an amount in rent right up to the difference.
But why should the farmer accept that? Why not say, "Look, I can see you're screwing me over here. I'll let you take a nice fat slice of rent, but you HAVE to give me a lot more than a measly 10 utils or I'll walk." Maybe farmer might be bluffing, but the landlord won't collect rent unless he makes a deal so in this situation he might accept.
This works up until the point that a few more farmers show up and anyone who wants to earn their daily bread has to compete amongst themselves for the privilege of working on private land. Without coordination, they bid themselves down right to the margin of production. That's because they have no leverage, but the Landlord does (and the Landlords are much better at coordinating, too). However, Landlords can't pull this off until land is 1) monopolized (it's all privately owned) and 2) the population is sufficient enough that the laborers' leverage is destroyed.
When land is held in common, laborer's wages don't come from someone paying them, it comes from them just applying their labor & capital to nature and making as much as they can produce.
Maybe I am misunderstanding how the LVT is applied, because the way I'm trying to apply it, it looks the same as the landlord in that example. The land values of the lots look to be Lot A = 90, Lot B = 90, Lot C = 0. That is, A&B are better land than C in a way given by nature, not by human effort to improve them. The farmer is therefore indifferent to whether he works the better land or the worse land? That seems weird and undesirable.
One difference maybe is that with the LVT the community as a whole captures the extra value, instead of the landlord capturing it personally.
The owner of the land has won a bid to own the land; they are willing to pay the most to own that land. The bid they put in must be less than the land is worth to them, but more (or equal) to the value the next lowest bidder placed on the land.
That is the marginal value. The profit to the farmer exists in the difference between the marginal value of the land, and the value they can extract from the land. If they are willing to pay more, that must mean they expect to extract a compensatingly greater amount of value.
(Which is to say, the farmer isn't going to pay $100 for a farm that provides a profit of $100 per year in a LVT scheme, because then they wouldn't get any profit - it would all get paid in taxes. The amount they are willing to pay is going to price in everything, including their labor, such that the farmer may only be willing to pay $50 for the land; this would be the LVT value that is taxed, leaving the farmer with $50 to pay for everything including the farmer's own time)
George's theories were independently rediscovered by Irish economist/farmer Raymond Crotty, whose supreme court case made it obligatory for Ireland to have a referendum to change their relationship to the EU. As a naive but educated young farmer, Crotty had thought he would invest in capital, only to discover purchasing more land is what the more sensible/experienced farmers did with their money. He wrote the book "When Histories Collide" in part about that.
I think George was write about taxing the unimproved value of land (I would put Georgist taxes right after Pigovian taxes as the two things to be taxed before consumption, much less income). However, I'm not convinced about cycles. It would seem to be a constant factor. Monetary policy seems to explain recent business cycles, while "real" factors can explain older ones. The US was rather weird in its banking system back then.
I'm pretty sure George would say that the "land" is the watts (or equivalently, the steradians), not the joules. Technically, the wattage of the Sun is increasing, but not by that much.
This review is pretty good and really well researched, but I feel it takes a huge dip when he redefines capital, and it doesn't recover until the final part of the first book. Everything else is great, so good work!
By George that was a good review. Thank you. The idea of 'land' seems useful, but (as pointed out by many) confused (or confusing). Radio spectrum as land, is good. Nature's bounty (fish, lumber, oil, minerals) is less good. And even the 'natural worth of land' is confusing. I live on 30 acres of half field half woods. To the lament of our farmer neighbors, we've let the fields turn back into shrubs and trees. This has reduced the value of the land for haying/ farming. Do my land taxes go down? I also get the sense that a land tax forces land owners to 'use' their land for the upmost short term return. This seems to be the wrong incentive for limited resources. (Get the oil out now to stop paying taxes on it.) Am I taxed on all the potential uses for my land? Must I lease my land for cattle, gas fracking, and windmills, because I'm taxed as if I should be doing all those things?
Indeed. I now live on and own 5 acres land that got clearcut a century ago and was farmland 50 years ago, and now is mixed forest again. To any Georgist who sneers at my forest and asserts I should be taxed out of the ass for it, fuck you.
You've improved the land so that it provides a private good (presumably you like it much more now and enjoy it) and a public good (insert a pile of papers here about the value of forests, clean air, green space, etc.). The tax is calculated as 100% of the best possible use of the bare land. If we count your work as improvements, then you would not be taxed on it at all. If your work is treated as having increased the inherent land value because of the aforementioned pile of scholarly articles, then the conversation shifts to how Georgism would treat public goods and externalities when they are provided by a private party (you).
Well, it's not just "bare land", he's specifically talking about that forest, and a lot of land/nature/privilege rather than his own labor went into these trees in the form of sunlight, carbon from the air, and various elements from the soil, and it's this part that georgists want to tax at near 100% ?
This underscores the political problem with georgism : people like Mark Atwood undeservedly (?) (and very strongly !) feel that they have a right to most (?) of the value of those trees.
Specifically, I have the right to the value of those trees STANDING UP. Taxing of "letting the forest grow back" so I can enjoy the shade, quiet, and privacy seems counterproductive in the face of people screaming about "carbon" and "deforestation".
Yeah, this works both ways - if carbon dioxide is considered a pollutant (so "negative land/nature/privilege" ?), then you should get money for helping to fix it !
I may be missing the point here, but is it really the case that we can’t just reduce rent prices by aggressively increasing supply? Sure, land is a finite resource, but we can build vertically thanks to the wonders of the elevator. Also I read somewhere that before deregulation of the airlines, planes used to be much more spacious, but it turns out that people are willing to forgo a lot of comfort by being packed into a metal tin like sardines, in exchange for a drastically cheaper plane ticket that gets them to their destination (I.e. comfort in exchange for location). It seems like many people exhibit the same preference when it comes to rent, and will choose a tiny apartment in the city over a spacious place in the middle of nowhere. But are we really at the limits of resource utilisation here? If you were able to bypass all the NIMBYs and zoning laws and build several giant skyscrapers full of tiny Tokyo-style capsule apartments in an in-demand location (say, central London) what would happen? I imagine there would be a lot of people who would be willing to live in such accommodations - you could always rent a workspace elsewhere if you need it (of course, this is another form of real estate, but it can be used much more flexibly and thus efficiently than renting a bed, and not everyone needs it) and for leisure activities people can now use very portable smartphones and laptops, as well as all the delights of the city. Possessions can be stored elsewhere where it’s cheaper (in lockers where they can be stored tightly) or people can go without them entirely.
I realise this all sounds very much like the “rectangle fetishism” that Scott skewered in his review of Seeing Like A State, but I believe there’s a real demand for such housing, if nothing else because the rent is so damn high that some people *must* be willing to exchange a lot of comfort in order for more disposable income.
I had always assumed that the only reason this wouldn’t work is because we have dumb crony capitalist regulations (which are designed to protect the interests of people who currently own property at the expense of buyers) prevent it from happening. But was my libertarian instinct naive? If we were to build a bunch of places like this, would super-rich investors just buy them and keep them empty, the same way they speculate on other finite resources, like gold or dogecoin or Andy Warhol paintings? And if this is the case, why does anyone ever get to live anywhere? What’s to stop all tenants everywhere being evicted from their property tomorrow if some billionaires realise it’s a good investment?
I’m significantly dumber than the average ACX commenter, so perhaps someone smarter than me can explain why the government (in the socialist version of this scenario) or a private developer (in the libertarian-paradise version) can’t just aggressively build shit until costs come down due to competition? Or can we? I’m confused.
The quantity of land/nature/privilege can only decrease (thermodynamics), however its value is subjective, so can also increase.
You seem to assume that denser living is necessarily cheaper, but denser living also tends to require the destruction of a lot more land/nature/privilege + wealth, both to make the buildings, and to operate them, and the reduction in the quantities of land/nature/privilege + wealth is going to impact their values.
However, YMMV about the transportation infrastructure, so, as usual, there's some golden middle that the system will stabilize in ?
Air transportation is a great example BTW : we went from less to more packed aircraft as the value of oil went from ~$20/barrel in the 20th century to ~$50-$100/barrel in the 21rst. (And note that the quantity of oil extracted per year mostly still went up, at least so far.)
This is not missing the point - it is exactly the point. The land is limited, but the living space is capital, which is limited only by the amount of labor dedicated to it.
Under a property tax, someone who replaces a parking lot with an apartment tower will see the value of their property rise (land + asphalt < land + tower) and thus pay more taxes. So if current conditions only support a 10 story tower, but they think conditions in a few years will fill up a 20 story tower, they'll leave the land empty and pay low tax until they can profit later.
Under a land value tax, the person who replaces the parking lot with the apartment tower *won't* see their taxes rise, so they'll have no reason to wait - they can either build the 10 story tower now and fill it up, and lose out on future revenue, or build the 20 story tower now and rent it out cheap until it fills up in a few years, but either way, the city no longer has a blighted hole in the middle.
> Without land value tax you get situations where somebody can anticipate that an empty lot will become valuable in the future, buy it, HODL forever, lobby against future development that would depress their property values, and now you have the Bay Area's housing crisis.
There's something askew about this review when we are expected to know what HODL means without any explanation.
But come on, is this even close to the truth? Are Bay Area house price issues _significantly_ driven by people who are holding land back that could (within current zoning!) develop it more intensively? Because in another world, I thought we were worried about gentrification where that is possible and zoning restrictions at other times? People are get pilloried for tearcing down a laundromat to build a high rise apartment. I'm sure the answer is "_to some degree_ people are just sitting on developable land", but is it to a large degree and is this WHY we have a housing crisis here?
And people who lobby "against future development that would depress their property values?" How does this fit the narrative at all? There's still zoning, and if my neighbour wants to build a slum next to me I might fight it. Is the argument
somehow that 'land value tax' implies 'the political process will relax zoning
restrictions'. If so, please connect the dots. If not, could you explain how the economic pressure to relax zoning restrictions becomes different (or less) under a land value tax?
I know that when I read this it was a surprise; I had mistakenly assumed a rather stronger statement than the literal meaning of "not all of them are this long".
That's 2 of 3 so far that have exceeded 100% of Scott's reviews (his longest - including the apology for length - was 11k; Order without Law was 14k and this was 18k).
Too long for me, even though it was well written and mostly enjoyable. The 'By Georges' nearly worked, but after I'd found one irritating, the rest were quite painful to read.
I had never heard of Georgism before I read this so I found it to be an excellent summary of the main points of his ideas, with constructive examples. Yes, it was long and it really wasn't a review, but it has given me the impetus to read further on the subject. Current taxations are ridiculous. Any set of rules which requires people to read over 1000 pages needs to be thrown away and rethought from first principles. Why do we tax? Because we need money for the state. So what should the state do? Defence, yes; policing, yes; infrastructure, yes but free of lobbying; healthcare, definitely yes but what is covered and what isn't. So much of what we endure from the state needs to be examined critically on the basis of "if we were starting from scratch what would we do differently (by implication better) than we do now". Unfortunately, most of the answers would make the party proposing them unelectable. We live in the age of bread and circuses.
J G Ballard wrote a short story of a couple living in a villa with a beautiful garden filled with roses. All is tranquil but they can hear, in the far distance, the sound of a mob approaching them. When the noise gets too loud meaning the mob is close, they pick a rose from the garden and the mob recedes. But eventually the roses will run out and the mob will destroy them. We are nearly out of roses.
What is wrong with lobbying? People in wheelchairs lobbied for the ADA. People who like to skydive lobbied for and protect the laws that limit the FAA's ability to ban their sport. The laws that require that your food ship with an ingredients label is because of lobbying.
If you are going to sneer at "lobbying", I'm going to insist you unpack that.
I wasn't sneering, I was expressing an opinion. Where does good lobbying end and bad lobbying begin? You cite two good examples - I'm not sure about the third. How often do you read the labels on food packages? I know that I don't. I assume that the food standards authorities have rules on what can be used. I buy almost all of my food fresh in the local market.
From my perspective as a Brit: Washington is awash with lobbyists, most of whom are employed by large companies, or sector representative bodies such as defence industries, who work to influence government to act in ways beneficial to their clients, but maybe not to the citizens who should be the government's priority. Look at the healthcare mess.
It is the same in Brussels. Lobbyists from manor corporations make sure that the barriers to entry into their markets are set to discourage new competitors. The EU is a protectionist state and the rules are skewed in favour of the incumbents.
Due to an ongoing lobbying scandal in the UK people are calling for the rules on lobbyists to be tightened, but only in ways which don't affect their friends; e.g. Labour and the Unions.
We have a name for "bad lobbying" : corruption. It's a real shame that corruption has been legalized in the recent decades.
Food packaging is kind of an unfortunate example : the various labels and "nutritional quality" color/letter ratings are at least a step in the right direction, don't you think ?
I agree that corruption is now widespread; but in the West it is nowhere near as bad as in some Asian countries. I have lived in the Philippines and the Provincial governorships are family businesses. Term limits don't work; Mr. X serves his term, then Mrs. X gets elected, then Mr. X Jr. The Marcoses are a primes example. The Customs Bureau and City Halls are packed with rent seekers.
I think that food labelling was lobbied for by liberals thinking that other people (less educated, poor) can't make good choices without being "guided". I don't think it makes a blind bit of difference to people's habits. The traffic light system on packaging helps manufacturers to sell their products by making them just green enough. People think that green = good, whereas it just means "well, according to some standards we think are good, it's OK".
A pernicious example of lobbying is where Government gives money to "Charities" which then lobby government to implement legislation that the government wanted to do but needed to have "citizen support" for the measure. The UK has a lot of that.
"A pernicious example of lobbying is where Government gives money to "Charities" which then lobby government to implement legislation that the government wanted to do but needed to have "citizen support" for the measure. The UK has a lot of that."
I have to agree with you on that. I utterly despise those.
My state in the US is awash in wannabe. The absolute #1 reason why they hate that WA doesnt have an income tax is that means there isnt enough money to give huge grants to these stupid little parasites with their stupid non-STEM aggreived-people-studies degrees.
The "progressives" in WA famously killed a proposed and probably effective carbon-reduction bill, specifically and soley because it was going to move a lot of money around and yet give zero of those dollars to those parasites.
Standards exist because that way instead of everyone having to be (or pay) an expert, which would be very inefficient, you can have only a few specialized and highly qualified experts assessing a small, randomly-chosen sample of goods for their quality for everyone.
*MOST* lobbyests in DC and in each of the state capitals work for much smaller "special interest" groups, such as skydivers, ADA-needers, advocates of home schooling (yet another "lobbying organization I am a member of", small restaurant associations, etc.
You look at a few specific lobbyests with yuge giant clients, and tar them all.
And I don't even blame the yuge giant orgs. They long long ago learned they have to pay the lobby danegeld, or else be destroyed. There is a strong evoluntionary pressure against letting yourself be destroyed.
The fundamental lesson that all the tech companies learned from "DOJ vs Microsoft" was the fedgov can show up at any time and say "nice biznez yaz gots here, pity if somethin' happen t' it!" Up until that case, the tech industry generally didnt spent money on lobbyests, much to the annoyance of the politicians, who consider it unseemly and unfair that there was this big rich giant industry on the other coast, and they were not regularly showing up on bended knee and with big bags of money.
I don't blame them either. I think the rules need to be changed to do away with them. But to do it properly you need to rethink what government is for. Nobody is yet ready for that.
Like, as a description of Georgism, it works. As a recap of the book, it works. There's a lot of good lines. But as a review, I think it fails.
One of the things almost any book review has - and that Scott's have very well - is 'what is the argument against this book?' I generally can't tell, when Scott is reviewing a book, whether he agrees with it or not. "The Seven Principles For Making Marriage Work" is my favorite case of a review where he first presents the argument as overwhelming, then says "actually this is nonsense" and refutes it even harder.
What are the actual arguments against Georgeism? The first one that comes to my mind is that it's useless - the value of land in Manhattan is purely from everyone else having land in Manhattan, so if you fix the land tax at the level of 'what that land would be if it wasn't Manhattan', it's negligible, but if you fix it at 'what the land would be if it was a blank lot in the middle of Manhattan,' then if you don't adjust rents in the future you've just massively encouraged everyone in Manhattan found a duplicate of New York elsewhere and move else there, and if you do, you've just significantly reduced the incentive to build in New York, because you're capturing a lot of the benefit of new construction. It also pretty thoroughly discourages the Irvine Company (or anyone else who might want to) from building another city - their profits come from capturing the value of suddenly-more-valuable land, and there's an 85% tax on that.
I don't think this debunks Georgeism. I'm not even convinced that this little argument would stand up under fire. (If I move into giving-fire mode, I can see a *lot* of holes in it.) But in order for this review to be anything more than a summary of the book, it needs to acknowledge that there are real arguments against the book and talk about them, where 'they' are whatever the best arguments are. And I'm sorry, but I don't think it does that.
(Better example than Manhattan: when I google for an empty lot in Las Vegas, I find numbers like $800k as the low end. If you tax every empty acre of desert in Nevada at a sane tax for $800k, you're crazy; if you tax an acre of Las Vegas at the actual value of an empty acre of desert in Nevada, the tax is useless. How do you find your numbers?)
As far as I understood, you find the numbers by deducing from the current rent the value of labor * capital - used wealth - destroyed land/nature/privilege, and the whole point of georgism is that this equation should tend to 0 ?
Let's imagine a robot hotel that uses no labor, only capital and land - that is, it was built by someone who paid laborers to do it, but at this point its owner spends money on electricity and spare parts, and collects money from renting hotel rooms.
How, exactly, do you measure how much of the income comes from capital investment (such that, by taxing it, people are incentivized not to build) and how much of the income comes from land value (such that, by taxing it, no incentives are placed in any direction?) Maybe if you had a vacant lot with exactly the same neighbors in exactly the same location you could get it, but anything else is going to be 'a tax assessor's semi-arbitrary guess.'
Ressources would be destroyed land/nature/privilege + destroyed wealth. Non-destroyed land/nature/privilege is either not present on the chart or assumed to be part of capital.)
The vacant lot is one way to figure it out, I guess that another way is exactly the same robot hotel in a different location ? Combine both, and you start to get a good idea of the current value ?
Also, I hear from my accountant friends that assessing the value of improvements is a "solved" issue. I'm not so certain of it myself, as I don't find the way that, for instance, depreciation of the value of machines (for instance computers) that is currently calculated, is particularly accurate... (IIRC it's just a % of the initial value per year ?)
P.S.: Any relation to David Friedman ? (I'm surprised that he's not all over this thread !)
Also, I see that you're a fan of Total War, what do you think of Shadow Empire ?
My point about the vacant lot is that it *isn't* a way to figure it out. There may be no vacant lot within ten blocks; there may be no other robot hotel, or the only other one may be four stories instead of eight (are stories 5-8 less valuable because of the time costs of riding the escalator, more valuable because of the better view, less valuable because they produce/take competition from stories 1-4, more valuable because people like staying in a hotel with a lot of other people, less valuable because of your greater chance of death from earthquake, more valuable because...?).
It may be that there is a way to deduce it; it may be that your accountant friends are right; there are a lot of clever people out there, coming up with clever ideas that I don't know about. But I don't see how you can do better than a tax arbitrator's best guess, and I don't trust that to estimate a 100% (or even 85%) tax.
(Response to P.S.:)
I am David Friedman's younger son Bill, actually. :) I don't know why he isn't on the thread, other than that he spends a lot of time on the forum these days. I do, however, disagree with him on a number of issues, and I'm not qualified to speak for him where we do agree, so you shouldn't take me as speaking for anyone but me.
And I have never played Shadow Empire. I think it's on my Steam wishlist?
The question is, how accurate do we need to get and how accurate can we actually get ? Theory can't give an answer here, we need experimentation !
P.S.: Oh cool, when can we expect Milton Friedman's grandson/granddaughter too in here ? ;p
Shadow Empire is pretty amazing if you're into that sort of game, it's basically Alpha Centauri (with a pinch of Crusader Kings) but with even more wargame in it !
See also Sword of the Stars 1 (not 2 !) if you're more into real-time combat (with pause !), it has often been called "Total War in space".
It seems like most practical LVTs are focused on land. But Georgian 'Land' isnt just land, its any natural resource. What would it look like to tax some other ones?
For example, how would you assess the unimproved value of electromagnetic spectra? The amounts paid for them depend hugely on how theyre auctioned and planned to be used - is this difference strictly an improvement?
Auctioning spectrum for government revenue is a tax on economic land, as long as the auction doesn't just happen once for all time. A company will pay more at auction if they believe their return on the use of the economic land would be higher than someone else's, which should therefore lead to no deadweight loss in the auction. Spectrum auctions were introduced to the gov by William Vickery, a georgist.
So, I have direct experience (pretty extensively) of property taxation as it actually exists today. We already divide property values into parts (usually land, improvement, and abatement). This is value, not rent, but you could presumably make a decent formula to guess the relationship between rents and value. This is what we effectively do: taking a percentage of of the value. Some places even take a greater percentage of land than improvements, which is at least quasi-Georgist. You could presumably make it fully Georgist by upping the land portion of the tax.
Here's the thing: the values are set by assessors. Here's how it works. Assessor shows up and says, "Lo, I have a degree in real estate and I declare this house is worth $100 in land, $100 in improvement based on comparable properties and trends in various real estate sales." If the taxpayer doesn't like it, they can challenge the assessment in court. The higher property taxes go, the more aggressive people debate valuations in court. And what happens, realistically, is that people mightily resist re-evaluations upward. This leads to long term chronic undervaluation. Which is hugely popular: popular enough to win plebiscites and elections on.
Undervaluation does not have an effective limit. Nor does the distortion of dirt to improvement rent. When you look at places with high land taxes you get huge valuation distortion. Hungary and China both had land taxes and subsequently huge amounts of land was chronically undervalued or even disappeared altogether. In jurisdictions with differential rates, land rents tend to push lower or higher depending not on objective measures but the government in power being pro-landowner or anti-landowner.
So, in summary, land valuation is a difficult process without significant objective standards. Adding another complication is likely to cause further issues. And on top of it all, property taxes are hugely unpopular and I don't think homeowners care if it's on their land or their improvements. Further, it has significant potential for evasion and historically has caused evasion when it gets high. And to add it all up, it's politically unfeasible and hard to maintain popular support for.
Further, the idea that land taxes don't affect prices is a fairy tale. Remember someone who owns and occupies land, or uses it for industry, effectively consumes the rent they produce. Inserting the government to tax it is thus effectively adding in additional rent but to the government. If you effectively increase the costs of land then you raise the prices on land intensive industries. Including food. This threat, of increased food prices, plus hurting homeowners was a criticism of Georgism in its own time. One that Georgists never really addressed to my knowledge. Or rather, they addressed it by insisting it wouldn't because those rents were already priced into food. But empirically this wasn't true: getting rid of land taxes empirically made food cheaper where implemented.
This is because Georgists ignore a simple, inconvenient fact: land's supply is highly inelastic but not as inelastic as they claim. And land use is very elastic. If you raise the price of owning land, less people will own land. This is again something we see in places with punishing land taxes: people simply surrender the land to the government. The idea that you can tax something without raising its price is not empirically the case, model or otherwise. I'm not even sure it's theoretically sound.
"land valuation is a difficult process without significant objective standards" - this goes for ALL valuation, doesn't it ? I guess the issue with land is that it's highly illiquid ?
It is but in the case of transactions, such as income or sales taxes, the costs are entirely born by the participants. The pricing mechanism is usually considered the best way to resolve the issue and those taxes take advantage of it. In this case, the government is imposing a valuation by guessing theoretical sales price for reasons of extracting tax revenue, which creates an entirely different dynamic.
Governments have gotten around this in the most important places for lvt (cities) by observing the sales price of say, parking lots ($40mil in downtown Boston, btw).
I'm skeptical that if our government legitimately understood and was trying to implement a lvt that it would be insurmountable. Glen Weyl suggests a self-assessed tax, but that has issues to.
The question is: is the cost of solving the valuation problem higher than the cost of the status quo? I'm skeptical, and real world lvt experiments have indicated that it's not at all a pipe dream.
This dismissiveness is one of the most frustrating things about people trying to impose the theories of 19th century philosophers into my economic world.
I am actually involved in this process. I've worked on software several governments use to value real estate and collect the relevant taxes. I have been in conferences with every assessor in some of the largest states in the US. I have literally valued land vs improvements on real houses and thus triggered taxes on actual, living citizen's property on that basis. And I am telling you it is complex and difficult and the Georgist version would be more complex and difficult.
And your reply is that you're skeptical because... well, you decline to actually provide a reason why you're skeptical. You bring up one example: using a comparison to parking lots. And the idea of self-assessment. We can talk about that if you want. Both these methods aren't used for reasons I can get into if you want. But they have deep flaws, which you seem aware of because you mention it.
Of course the government could impose additional taxes on real estate. Real estate is extremely easy to tax which is why it's much more historically common than any other tax. But it would be distortionary in ways Georgists don't want to admit and it would have serious valuation issues.
Do you have reason for your skepticism? Share them. As it stands, you are dismissing objections from someone with more direct experience of land taxes and more empirical examples than you have. Which is par for the course politically but really very shoddy argumentation.
@erusian - that's actually very interesting. Could you elaborate on the difficulties of land evaluation you experience in your work? What are the flaws of the various forms of assesments?
If you raise the cost of owning land, you lower the price of purchasing land. The effect is strictly proportional. Just as much people will own land, probably more since they don't have to fight an inflated bubble.
Less value extracted in rent means a more productive economy overall, just as confiscating money from robbers doesn't result in a lower GDP, but less robbing. If Georgism has an effect on food prices, it's a downward one. The theory itself is sound and apparent from supply/demand graphs.
It's true that if the tax is set above productivity land will fall idle, but that would be a failure of assessment and implementation, not theory.
A good effort, but to nitpick a stylistic issue, the anachronism is annoying. When reviewing an old book it would be better to place it in historical context. History is interesting so tell us more about what life was like *back then*. There is some of that, but also too much about what George would think of Bitcoin, JPEG's, and so on. That kind of thing should have been moved to the interludes from the future.
It's not like we're fooled by obvious anachronism, but it's sloppy and suggests that the author might be sloppy in less-obvious places about what George believed versus what the reviewer believes.
If the first canoe takes 6 months to build, the fish don’t start arriving until the 7th month. And the canoe may continue to exist, and improve fishing, for 20 years, with only tiny amounts of labor to keep it in good repair. And perhaps the number of fish caught may not go up by a perfectly egalitarian 1/3rd, but may cause the number of fish caught to double. Does the canoe maker get no fish for 6 months? If s/h/it isn’t paid out of saved (dried) fish (wealth), they starve to death. Does the canoe maker get fish for 20 years, the length of time the canoe lasts, or only for 6 months, the length of time it took them to build the canoe? Does the canoe maker get a perfectly egalitarian 1/3rd of the increased haul of fish, or do they get all the extra fish that are caught using the canoe? Seems like per George, the ‘wages’ of selling the canoe should be approximately equal to what the canoe is worth to the fishers, which means the canoe maker lives on their own capital of dried fish for 6 months then rents the canoe out for a continuing revenue stream of half the fish, for 20 years. Or some frugal 3rd party, saves up six months of dried fish, and hires the canoe maker to build the canoe, for their opportunity cost (number of fish they would get fishing or digging for those 6 months) and then rents the canoe out for the continuing revenue stream.
I have to confess this is the first time I was exposed to Georgism and I find it very attractive. I would just like to make sure I understand the central tenet of LVT:
1. Suppose there are two identical houses, one in Pudonk the other in San Francisco. The houses have the same size, amenities and so on. The one in Pudonk can charge yearly rent of $10,000; the one in SF can charge $100,000. It follows then that the LVT for the house in SF is _at least_ $90,000 or more accurately at least $90,000 + LVT in Pudonk?
2. The exact value of LVT depends on the house being the most effective use of land in the given area; if an office building in the neighboring lot in SF can charge $200,000 a year, then my LVT would be higher?
If true, it has some interesting corollaries:
a) LVT cannot decrease rent paid by the tenant to the landlord. If the house in SF is the most effective use of land, the rent stays $100,000 but the landlord will now only capture 10% of the rent. However, if the land could be used more effectively, the landlord will have to increase the rent.
b) The process of establishing the optimal use, i.e. maximum possible rent, is very difficult to do exactly: the rent in the same neighborhood can vary a lot depending on things like proximity to busy roads, views offered from windows, good/bad neighbors and so on. The property taxes in my country are based on price maps that are very broad and very inaccurate, but because the actual tax rate is very low, nobody contests the valuation. Making accurate assessments would be time consuming and expensive and also subjective. I get the point of Harberger taxation mentioned elsewhere in comments, but IMO it stacks the deck against the current owner.
c) It would seem to follow that the rent in office block in Pudonk - that is otherwise completely equivalent to the one San Francisco - is _at most_ $110,000 (that would imply that the correct LVT is still $90,000 + LVT in Pudonk).
Can somebody with better understanding of Georgism and economics confirm or deny these conclusions? Thank you.
> LVT cannot decrease rent paid by the tenant to the landlord
This is all speculative of course, but I think the answer to this would be as follows.
If the SF landlord only gets to keep $10K after putting in, say, $8K of improvements during the year, then he should be ready to sell to anyone offering the NPV equivalent of $2K or more per year. Say, $15K dollars.
Can the new landlord keep charging $100K in yearly rent based on an investment of $15K? He can try, but it seems likely that he'll be undercut by quite a bit all the other landlords down the street who think that a 20% ROR is plenty.
This *does* show that in order to be politically viable and not horribly unfair, there would need to be some kind of phase-in, such that the original landlord doesn't have to take quite as massive a loss on his original investment.
Even with phase-in, how would a new landlord pay LVT of $90,000 if he does not charge more than that in rent? And if the LVT is less - it drops to the level of Pudonk - what would be the mechanism for deciding who gets to live in San Francisco and who does in Pudonk? I would assume that everything else being equal - the rent, the amenities, etc. - people would prefer to live in SF given the overall higher number of opportunities.
It may be argued that the present rent is exorbitant and that LTV will allow us to discover the "just" rent. This might be true but it would still mean that the rent would appear high relative to the investment because much of it would go to pay the tax.
The landlord would have to provide some kind of service to compete with those around him, or offer way more housing on the same plot of land (which is a good thing in most places where that pressure would exist). For example, looking at the land values of Palo alto is comparable to the land values of Brooklyn. But the population density is far lower, leading to calis maddening housing crisis and suburban millionaires.
This is exactly the line of thinking I’ve gotten hung up on with Georgeism. I *think* the answer is that it wouldn’t change the fact that it’s expensive AF to live in San Francisco, but that your money would get invested in the community rather than enriching landlords.
This seems good on net but not the panacea that George promises. But it’s entirely possible I’m missing something.
Thinking about it, there are some other consequences:
d) If Assertion 1 is true, we could set uniform maximum "fair" rent and tax the difference between that and actual rent; such tax would be _at most_ equal and probably lower than LVT. If the tax rate is less than 100% it would still encourage landlords to charge higher rent in more desirable places. This is similar to rent control but approaches it from different angle: instead of setting maximum rent (and creating black market where people pay rent in cash or services), it confiscates large part of the rent that's due to the location.
e) Being landlord is more difficult in more desirable cities: If I pay 90% of rent as LVT, I need to rent out 9 properties just to pay LVT on my own property (if I live in the same location). By contrast, landlord in a place where LVT is just 50% of the total rent needs to rent out just one property similar to his own.
f) The Assertion 1 rests on the assumption that price of improvement of land is the same in Pudonk and San Francisco. This may be true for raw materials, but it's probably not true for labor. A laborer in SF pays higher rent than the one in Pudonk, therefore has to charge higher rate for his services. As maintenance of real estate is labor-intensive, it would be fair to assume that most of the landlord's operational expenses are wages. If wages in a city are proportional to rent in that city (as they broadly have to be) we can see that the expenses of SF landlord will be ten times that of the Pudonk landlord. Now LVT - if I understand it correctly - should be equal to the _interest_ on the value of the land, that is profit the landlord makes after paying all expenses. It would the follow that LVT in San Francisco and Pudonk are actually very similar. This directly contradicts Assertion 1 and would also defeat the purpose of LVT.
Good job on the book review. Unfortunately, I’m having a really hard time understanding how this would be meaningfully different that a regular property tax.
It’s easy for a simple residential application, I buy a one-acre unimproved lot in the middle of nowhere that has a Land Value Tax (LVT) of $10/month. I build a house on it and the LVT doesn’t change right? It stays at $10/month because that’s the value of the land, and my structure doesn’t change that, and it doesn’t matter if I put a trailer on it, or build a McMansion with a swimming pool in the backyard or a giant mansion with an indoor pool and private movie theater, the LVT stays at $10/month, right?
But what about Walter? Walter made a lot of money as an artist and buys 30,500 acres in Florida. This land is mostly swamp, has more than its fair share of very unfriendly insects and gets terribly hot in the summertime so the unimproved LVT is $10/month per acre. Walter then drains a few acres and builds a large beautiful amazing amusement park there using his previous art as the theme. It’s an incredible success, everyone want to visit his park.
What would George say? Does his LVT stay at $10/month per acre? That’s the value of the unimproved land. That can’t be right, can it? After all, land next to an incredibly popular amusement park is so valuable that Walter can rent a piece of land the size of an automobile for $20/day. It’s so valuable that he builds a hotel next door and can charge 10X the nearest competitor because his is the only one where you can walk to the park.
I think one easy answer is that the land under the amusement park itself keeps the LVT at $10, but the surrounding unimproved land gets a new higher rate, say 10X or $100/acre/month. That seems unsporting though, after all, Walter has bigger dreams and plans to add more hotels and four other differently themed amusement parks in the surrounding area with interconnected transportation. Walter wants to pay for it with the profits from his first park, but if he has to pay a much higher LVT on that land he can’t do it. If he sells the land, someone who has cash ready will come in and build hotels and restaurants right next door and Walter can’t charge as much for a hotel room or parking and can’t build interconnecting transportation through those other people’s new buildings and his dreams end.
Is this really what George wants? After all, keeping the surrounding land unimproved is just collecting unearned rents. If this is the answer, when does the LVT change, wouldn’t it go up on all the property as soon as the building permit was approved? After all, that was the speculators reasoning for buying up land near where the railway was going to be built. If not when the permit is approved, does it go up as soon as the first island of rides is built? Does it wait to go up until the first customer comes through the gate? Can Walter lock in the low LVT by building a sea of empty shanty towns across his 30,500 acres then tearing down a few to build the amusement park?
Of course, after everything is built in that area including a competing amusement park, doesn’t Walters LVT on his park go up, since the land near a bunch of hotels in a popular vacation area is worth much more than swamp land? I think in practical use an LVT will be indistinguishable from a standard property tax, it will just call itself an increase in the value of the land instead of arbitrarily assigning some portion to the land and some to the structures.
I find this review extremely compelling - are there any strong, academic-ish critiques out there of Georgism that I can read to calm down my ideological excitement?
One damper I will put on it- a LVT is a great idea, but two claims often associated with Georgism are less defensible:
1. A land value tax can be the only tax. Of course, this could be done, but only if we were willing to shrink the state to a fraction of its current size.
2. All manner of economic ills are traceable to the absence of an LVT. There are places with an LVT and they haven't solved all the problems.
Nevertheless, the basic logic behind taxing the unimproved value of land is unimpeachable. The only people who know the details and still contest it either have skin in the game (are landowners) or are in the grip of an ethical or political system opposed to taxes generally. It's probably about as close to a consensus as you can get in economics, on the right and the left.
Well, it looks like they are giving the solution to that issue : information about the land should be considered part of the infrastructure (in which case it should be most local government-owned ?) and/or capital.
This still doesn't answer the issue of georgists seemingly assuming that the quantity of land/nature/privilege is fixed, while by the laws of physics it can only go down (its value can still go up due to scarcity) - see the oil example again.
BTW, this goes back to the question of information : remember that the lack of information used to be called "entropy" - I'm wondering though about the transition from the meso level of physical devices to the macro level that includes human knowledge about oil fields ?
P.S.: According to the comments, governments already run a mostly georgist system for mineral exploration and exploitation ?
(Though Mark Wadsworth's example is unfortunate : before peak conventional US oil in 1970, western companies were pretty much in control of Saudi Arabian oil. Also, he seems to misunderstand what georgists mean by "land" ?)
This is great stuff but... not exactly a review? It reads more like a SSC-style FAQ structured along the lines of the book. There's not much discussion of how the book itself reads or critical treatment of its claims. I'm sympathetic to Georgism but if I weren't I'd probably find this annoying, like someone was trying to convert me to their way of thinking and disguising it as a book review. On the other hand the writing is lots of fun and the argument is very clearly presented, so I liked reading it a lot.
Ok, question: on the basis of this model, could books count as capital?
They are the product of someone's labour, and taken from nature. It is arguable that their value as books might not be high, but the value of the knowledge within them could be. And in that case, using the knowledge contained within books to generate wealth for oneself would count as a capital use of the books. This would indicate that certain things can have capital value that isn't tied into the value that someone might pay for them - if they were too ignorant to know why a history book was of value, for example.
Second question: the author points out that clothing isn't capital, since it's a necessary thing regardless. What about if the clothing (or anything necessary and not explicitly capital) is leveraged to produce wealth? Say a designer suit that indirectly results in a better impression at a business meeting and an offer of... etc. We can imagine even consumables in this category, since things like makeup or skincare products can enhance one's appearance and generate 'social/cultural capital' which can afford access to real wealth.
Yes. A book is wealth, and if you use it to get more wealth, it's capital. But this isn't an inherent magical property of the book, per the review, it's the intention of the human using it that makes it capital.
Second question:
Yes. The review even gives the example of steel-toed work boots. George's point in P&P seems to be that things a laborer needs to have just to stay alive whether they do any work or not shouldn't be classified as labor, but any articles of wealth they need to perform their job *are* capital. So *work-related* clothes like uniforms or a nice suit would presumably be considered capital because their purpose is to aid in the acquisition of wealth. The same could presumably go towards food you have to consume above and beyond your daily bread because of your job --- take a Sumo wrestler as an extreme example, or a hungry cowboy or farmhand needing to eat a big meal after a day's hard labor.
Right, so the important thing is the intention. I'm just interested in those cases where you may posses something that's technically classified as wealth, of greater or lesser value, and that seems to be basically useless or a net loss, but that may become 'capital' under this definition.
Much seems to depend upon the application of the thing, rather than its inherent properties. Money is a claim on wealth, but it (or the wealth it represents) becomes capital if I apply it in certain ways. Similarly, even something that should be the opposite of wealth, say something you must consume, can become capital if used properly.
On that basis, it might be suggested that capital uses of wealth *in general* are predicated upon the knowledge and ability of the possessor to transform material goods into capital-generating objects. And that would suggest that social and cultural capital may be *even more* important than material capital eventually, unless I'm mistaken somehow.
Would Georgism apply on other planets? Or would land on Mars be considered capital? If it is considered capital, that might produce a landlord-dominated society on other planets.
OTOH, it might make sense to treat new planets in the same way we treat intellectual property. The developer would own it for a limited time and then it would become public domain.
Land on Mars is Land. It's currently not very accessible to us and thus not particularly valuable, but there may come a day that technology allows us to access it, and then it would be just like Land on Earth. The review talks about this regarding "latent potential" in land. If there's a mineral-rich mountain but the nearby population has neither the technological ability or social sophistication to make any use of it, the mountain is worthless; but there comes a day when that changes and then it suddenly spikes in value.
The same thing a newly minted $1 dollar coin is a claim on --- anyone who has $1 of valuable goods in a very liquid market willing to trade for it. Dollars, like Bitcoin, are fungible so they don't necessarily represent a claim on any particular individual's wealth until a trade offer is made and accepted.
With Bitcoin in particular there's also the physical cost of mining. I'm willing to commit the time and resources of my local mining rig and some amount of energy (which indirectly also commits some amount of fuel from my local power plant) in order to mine some bitcoin into existence. I am effectively trading those resources to bring a Bitcoin into existence, and this gives Bitcoin a "cost" and is part of why it's steadily increasing in value.
Now, per George the true value of a thing is not the cost it takes to make it but the price someone is willing to pay. The cost of mining sets a price floor so long as the speculative value of Bitcoin holds up -- miners wouldn't mine at cost $X if speculators weren't willing to offer at least $X+1.
So ultimately it's speculators willing to trade valuable things for Bitcoin that gives it wealth.
"The same thing a newly minted $1 dollar coin is a claim on --- anyone who has $1 of valuable goods in a very liquid market willing to trade for it. "
By that reasoning, if I pick an apple off of an apple tree, is that apple now a "claim" on anyone I can find who wants to exchange it for other valuable goods in a liquid apple market? If not, what is the difference between the mined bitcoin and the picked apple that makes the first "a claim on wealth" and the second "wealth"?
You can eat the apple the person you sell it to can eat the apple. At no point are bitcoins (or physical coins) useful objects in and of themselves. Money just circulates in the liquid markets, unlike apples, which quickly move in one direction from people with orchards to hungry people.
So is the principle then "if something has value but is not useful in and of itself, then it must instead be a *claim* on value"? If so, then I still do not understand what a newly mined bitcoin is a claim on. Seems to me that claims (in the financial sense) must be claims *on* or *to* something. I do not understand how the creation of a new bitcoin somehow grants the new owner a right to third party's property upon its creation. What am I missing?
It's a claim on wealth in the same way a regular dollar is a claim on wealth. It's a thing that is only valuable because people are willing to trade for it, but it doesn't have an intrinsic value in and of itself. I have a dollar, which means (in a liquid market) I am able at a moment's notice able to claim one dollar's worth of goods or services from a variety of people willing to trade with me (e.g. amazon.com, facebook marketplace, a vending machine, etc).
One bitcoin is a claim on any of the liquid wealth that anyone interested in bitcoin is willing to exchange for it right now. Should there arise a situation where suddenly no one is willing to exchange any article of real wealth for any amount of Bitcoin, Bitcoin will cease to be a claim on wealth.
Certain other financial interests have claims that are more limited in scope (such as puts, calls, a title to a specific person's debt, etc).
This is a polemic disguised as a book review. It doesn't even attempt to criticize the argument of the book or put it in context. Honestly I'm a bit annoyed at Scott for publishing it.
I kinda feel the same way. I got excited when I saw the post — I think Georgism is super interesting, but I have a lot of obvious questions/criticisms (which I lad out in a long comment earlier), and Scott always delves into so much detail and analysis that I was expecting all of that and more to be discussed. Unfortunately it wasn't, it was just the basic Georgist pitch I've heard a hundred times (plus some outdated oddities stemming from this being a 150 y/o book).
Maybe I'm just spoiled by Scott's reviews, but I wanted to see the counterarguments and countercounterarguments and countercountercounterarguments!
Honestly, it's been 140 years. We can throw theory around all day but we really need is just to see to what degree any of this has been tried and what we can learn from it. I'll start collecting notes and articles and see if I have enough time to put something together in the next month or two.
Apologies if I missed this in the review or discussion, but, by George, why would a LVT affect wages or returns to capital? Why would shifting the rents from a landlord to a government make a difference to the Mathlthusian wages trap? Certainly there would be secondary benefits to laborers & capitalists (UBI, reduction/elimination of other taxes).
But my reading of the review was that George claims the LVT would directly increase wages, and I don't see the link. Excepting places like SF with bad development policies currently, why would rents be any lower under LVT than our current system?
My guess is that, like capital, land/nature/privilege "naturally" tend to get concentrated in fewer hands, and a LVT would be a strong force acting against this kind of inequality-boosting trend, that also (supposedly) has relatively few downsides ?
(It's certainly better than waiting until revolution breaks out and a lot of people are killed, and a lot of wealth and land/nature/privilege is destroyed !)
Competition among tenants on monopolized land will leave Lot C (with a productive margin of 10) as the only alternative, thus the landlord can freely raise rent all the way up to the productive margin. So even though the tenant's productivity on this land is 100, the landlord's leverage allows them to extract 90 and the tenant has no choice but to bear it, because another tenant will take the offer if they won't.
The argument is that the LVT will cut out a significant portion of the rent without allowing the landlord to pass on the tax to the tenant. Because land supply is fixed, according to George, the landlord can't say "well I'll just produce less land this season," the way an oil producer can produce less oil on their marginal wells when a tax is levied on it. Since the providers of land (landlords) can't change their supply in response to a tax on it, and because price is governed by supply and demand, the landlords are not able to raise the rent in response and must eat it.
The difference with property tax, is it's a mixed tax on land and improvements. Imagine just an "improvement" tax for simplicity's sake. We just tax your house and whatever else you build on your land. This tax can be passed off because if you raise the cost of building a house by 10, any house that was profitable only at a threshold of X-10 will no longer be built. This decreases the supply, and thus increases the price of the remaining houses, and the increase is supposedly very close to the amount of the tax.
Thus, LVT reduces rent, but only unimproved rent. Since LVT is not levied on improvements, a landlord can freely charge rent for access to improvements, but this is fair because they have to do some work or spend some capital to produce those.
And when rent is reduced, more of the result of the laborer's productivity (wages) is allowed to go to the laborer.
Thank you for the reply. In that example, why would the tenant's rent be any different than 90 under a LVT? Sure, the landlord's income will be reduced by the amount of the tax - none will get passed on to the tenant. But it seems to me that the same market that drives the rent up to 90 now will still drive it up to 90 with a LVT. Some/most/all of the 90 will be captured by the government instead of the landlord, but isn't the rent still the rent?
Ah yes, good point. Yes that is correct. The government collects it instead of the landlord.
It's the second order effect that reduces the rent. George asserts that the majority of land values are artificially inflated by speculation. Once LVT is applied as a "lose-it-or-use-it" fee that scales with the value of the land, there's no point in speculating because you can no longer buy a plot of land and just hold it at no cost. This removes speculators from the market, lowering the demand for land, and thus lowering the price of the land, which lowers the ground rent.
So at 100% LVT the government effectively charges the tenant (ground) rent instead of the landlord, but the second order effect is to drive out speculation, lowering rent, and leaving more room for workers to retain wages.
Thanks for the review. I had heard of Georgism, but I didn't know much about Henry George himself.
If you look at Houston or Dallas, it's clear that we can have affordable housing without massive subsidies or land-value taxes. We just have to give up on greenbelts and urban growth boundaries. Housing has become expensive in certain areas because its supply in those areas has been artificially limited by the government. For example, only 18% of the San Francisco Bay area has been developed. The rest is off limits to development because of urban growth boundaries.
Georgism was a lot more relevant back in the old days when wealth was more closely associated with land. That hasn't really been true for a while in the west. If you confiscated all of Jeff Bezos' land holding, I'm sure he'd be annoyed, but he would be able to buy them back by using with the real source of his wealth -- his technology company.
Arguably the price increases in college degrees and medical expenses have hit the middle class a lot harder than the price increases in homes in certain metro areas. After all, moving to a part of the country with lower home prices is always an option -- there's no such workaround to avoid college and medical expenses.
Property tax is not land value tax, but it does have some crude approximations of its effects. California by contrast has much lower property tax, especially for those guarded by Prop 13
Interesting, thank you. Yeah, if true, those are some really poorly done statistics !
Why though are they "hiding" the information about the 3 middle quintiles ?
Weren't those hit the most ?
Otherwise, the growing discontent might be explained by the US getting poorer by capita? The lowest quintile is going to suffer more because of it (much less discretionary spending !), even if inequality stays steady.
> Where's the line between "improvements" and "ground rent?" In most cases it's pretty straightforward to separately assess the value of a plot from the value of what sits on it (modern property tax assessors do this already),
That link does not actually support that claim in any way. This is the primary practical obstacle to Neo-Georgism Now, so this is a very important omission.
100% land is owned by the public, which is represented by the state (henceforth, “the public”, “the people”, “the community”, “The State” are synonyms). Individuals and business can only rent land from the State and must pay annual LVT, i.e: I can “have the right to rent a plot of land” but never own a land. The State calculate LVT consider the below factors:
- Usage purpose (The State predefines for each plot of land), i.e: agricultural land has super low LVT.
- Location advantage, i.e: residental land in dense city has much higher LVT.
- Speculation, i.e: If you only have 1 plot of land for your own living, the LVT is super low, so people like Carl is safe. LVT and selling-tax is higher if you have multiple lands.
- If the community develop the landscape (i.e: from rural to dense city), The State increases the LVT accordingly.
Summary: It’s costly to HODL land, with a caveat: LVT is low, Speculation still ravel. Reasons:
1. Higher tax = more corruptions
2. More detail LVT (different land lot has different tax) = more loopholes
3. Higher LVT = The State has to pay a lot more to take back the land for public construction
4. Taller buildings = same land but a lot more space to rent out
5. Dense construction: If LVT is too high, people will leave no space open, all land will have some buildings on it
6. Shophouse = Owner live in one floor and rent-out the rest, thus only pay minimal LVT
7. Inequality: Megamalls and super apartment complex sit next to mediocre office and next to slum. Which LVT is fair?
8. Timeliness: LVT take a few years to change because it’s hard to determine how much “the community develop the landscape” without market signal because everyone tries to hide the real price of land resell/rental price. It’s super common to fake price on contracts to reduce the tax payable.
Independence in 1945 > The State confiscated everything from landlords and apply collective farming > Remove collective farming from 1981 > Allow individuals to rent land from The State for up to 20 years since 1988, then further expand in 1993.
Everyone including The State agree that LVT is too low and "we should make the LVT closer to market", but as I said above, there are many obstacles. Basically, LVT is almost useless as it's too low, everyone is more than happy to buy empty land, then either
1) Resell quickly (LVT is time-based)
2) Negotiate a favourable LVT incentive because local government is poor and need someone to build infrastructure for them. Cronyism also say hello.
"Land value taxation is currently implemented throughout Denmark, Estonia, Lithuania, Russia, Singapore, and Taiwan; it has also been applied to smaller extents in subregions of Australia, Mexico (Mexicali), and the United States (e.g., Pennsylvania)."
So are these places indeed enjoying more affordable housing, more efficient use of land, lower rents, more investment and innovation, lower non-land-value taxes, etc.?
An interesting potential consequence occurs to me. If LVT were working well, and a power-hungry government wanted more tax but was not quite willing to go to war to get more land would be incentivized to expand outward into space to get more "land" / natural resources for its populace...
Does one of the links give a good explanation of how we can clearly and fairly compute the land value? Ideally something that doesn't require benevolent bureaucrats. Is there for instance some way we can use a market mechanism?
I've seen some discussion of that online, I forget where. But yeah, there are modernized versions of the theory where a theoretical auction is held and the land owner must pay taxes according to the price set by the auction winner or else sell to the auction winner. Hopefully you can find a much better explanation with a bit of googling, or maybe someone will chime in here to correct my sketchy summary.
I've seen a related method for pricing *property* taxes: I name whatever valuation I like on my property, but *must* accept any offer to buy at that valuation. Some basic game theory implies good behavior here (I think.) It's largely equivalent if the gov't gets to name whatever valuation they like but commits to buying it from me at that price.
But I don't think this works for LVTs! I can't sell you my land without also effectively selling my apartment building / gas station.
Probably the best book review I've read on poverty and progress by Henry George. It's thorough and accurately describes his economic theory. It takes a little bit long to get to the important distinctions between land value tax and property tax and how it affects rent on privilege but that is indeed the way that Henry George's book is organized the. He does save his solutions for the last part. If you're not familiar wish henri-georges economic theory and solutions and don't feel like reading a huge book oh, this is good place to start.
This is also a book review so expect some complaining about points of inadequacies in the book Style. Not really relevant to the quality of his theory but probably relevant to why his theory isn't more popular. Personally I like the book but I can see it being off-putting to a lot of people.
One final note. If you think you understand the major economics Theory as well and you're not familiar with Henry George, there are probably several important economic theories that you're missing out on including his. There ain't just capitalism and communism.
A great review. Even as a pretty committed "Georgist" it took me the best part of two decades to summon up the courage to read P&P as I feared a dry, technical, old-fashioned linguistically, dirge of "Victoriana". When I did get round to giving it a go, it is truly a beautiful book, and could see easily why it would have appealed to so many back then. I've always meant to sit down and pick out key phrases and paragraphs to quote for people: now I don't have to, as I can refer to this review! :) Thanks.
I'm almost convinced of a 100% LVT so for sure at 25% or so It’s no regrets. Obviously with compensation.
Two things I need help on.
How is the unimproved rent actually calculated?
LVT does a great job at capturing value from government investment and societal network effects. But what happens to private investment such as a development with private roads etc?
> wages, instead of being drawn from capital, are in reality drawn from the product of the labor for which they are paid.
This is true in the sense that labor is not wealth-constrained by capital, but it is still **liquidity-constrained** by capital which is the key point I think George misses by assuming liquidity is free and all forms of wealth are equally preferred. Labor is still limited by capital because it relies on capital to trade the illiquid fruits of its labor for money. If that liquidity market dries up, labor can no longer function even if it can create wealth without capital.
Workers create the wealth that pay out their wages through the product of their labor. However, not all forms of wealth are equivalent for all parties.
> George points out that as laborers labor, they progressively add value to whatever they're producing. Take the case of a shipwright building ships for an employer – even if the boss can't sell a half-finished ship, it still holds value (for one, it costs less to finish a half-finished ship then no ship at all). And with every stroke of the laborer's work, the employer who owns the shipyard gets an incremental increase in his stock of capital.
The wealth that is present in the fruit of labor may not be exchangable for other valuable goods and services. A shipwright cannot directly sell his contribution towards a half-built ship to the baker in exchange for bread. A shipwright needs to convert the wealth created by his labor into a more liquid form. This is where capital comes in. A capitalist funding the ship company owns the fruit of the workers' labor and in exchange provides them a consistent monthly wage in money (a highly liquid pointer to wealth which can be exchanged for real wealth in the worker's preferred forms: food, clothing, etc). Thus one can conceive of this as a liquidity swap. Workers **discount** their highly illiquid wealth (fruit of labor) for highly liquid money which is much preferred for making payments. Deep-pocketed Capitalists trade highly liquid money for illiquid wealth (ownership of fruit of labor) **at a premium**, thus they make a profit by offering this liquidity service to labor.
Consider the case where capital didn't exist. Each worker would have to make payments directly with the fruits of their labor. This is already implausible in the case of finished goods, but even more impossible in the case of a half-finished ship to which many workers have contributed! Capital doesn't matter only if you assume a theoretically ideal barter economy where transactors are willing to accept payment in any form of wealth. This can never be true in the real world. Liquidity matters.
Thus, we can see how Labor does get constrained by Capital. It **isn't** because capital pays out the wages of labor in wealth-term. It is because capital supplies liquidity for labor's wealth. If Capital stops making that trade, then Labor cannot function even if they want to.
A crew of shipwrights with access to natural resources can still create wealth by building a ship without any access to capital. Yet however much wealth they create, they cannot exchange it for their maintenance without capital providing a liquidity market.
George's focus is on wealth, and assumes exchanging one form of wealth for another is free which is why I think he ignores the critical role of labor in production. I like Georgism a lot, I wonder how much of the policy proposals rest on the assumption that capital is a nice-to-have component of production.
Capital can simply cease to provide this service if they themselves are liquidity constrained during a recession. In the case where capitalists are financially squeezed and are struggling to make payments, they may no longer wish to trade their liquid assets for illiquid ones no matter how steep the premium is. In this case, wages (in terms of money) drops or stop altogether (layoffs). Investment drops as well.
Thus a recession can be triggered by cash outflows surpassing cash inflows. In this case liquidity dries up. Labor is ready to work but unable, because they are not willing to create wealth without access to a liquidity market. And capital is also sitting idle, because it is not willing to be locked up in illiquid assets.
This answers George's proposed paradox of the economic recession with speculation in the capital/funding markets rather than speculation in land markets (though I imagine this can be an important factor as well).
What are some practical proposals for limiting the exposure of the avg homeowner who's not renting out their home? Otherwise, this seems to be a pretty big source of potential opposition to the LVT?
Also, what do you think common work-arounds would be on the part of landlords? I doubt they'd go quietly if something like this was implemented.
The mythical LVT cannot exist, because no satisfactory definition of ground rent exists. For example, it isn't even additive: the ground rent of an entire city may differ from the sums of individual lots, as each one has a city around it, yet the whole city doesn't! So for example this would just incentivize new city creation in which a single shell corporation owns the entire city, making the ground rent very low.
Wealth/Property taxes give a real way to fight rent collection, and especially NIMBYism. Property value, unlike ground rent, has a clear definition for example given by an auction. Taking the view from a previous post about city regulations justified to libertarians by treating the city as a corporation which owns the entire city, a highly NIMBY city would have to pay large property taxes as a whole, since they'd have to bid against developers who would relax the restrictions. Of course, if they're willing to do this, there's no problem, and no reason to force them to change.
The key reason for wealth taxes comes from the simple fact that you own very little without the government's local monopoly on coercion. Henry George correctly notices that the landowner does nothing, but in fact maintaining all private property requires effort from the state; I think compensation in proportion seems reasonable. Of course, if you want to bury gold in your backyard and not tell the state, I see nothing wrong with this either- just don't expect the state to help return it if stolen.
Ok, so I'm trying to play this out with some numbers to see if it makes sense. I actually think rents will go up, but will be a smaller portion of one's income and this will overall be a good thing. That is if the LVT can truly offset all other forms of tax.
Let's say a worker earns $1,500 a year and their overall tax burden is 1/3. So they get to keep $1,000 a year after tax.
I'm not certain what affect the reduced price of land would have. My understanding is that the value of the land would drop by a LOT. A $5,000 property might drop down in value to $2,000 to $3,000 without all that nasty speculation driving up the price.
So there will be some effect where if a landlord tries to jack up rents on me...I will now have a new marginal advantage in terms of buying as an alternative good. Instead of renting, I could choose to buy instead.
But leaving that aside initially, let's say the rent that the do-nothing landlord is able to extract from me is 30% of my income. I'd be paying up to $300 in rent a year.
If the LVT is able to displace my other taxes, then that is a boon to me of $500 a year. Instead of earning $1,500 and paying 1/3 to in taxes, I'd get to keep the entire $1,500.
The reason I'm thinking the LVT could offset more tax than I was paying in rent (perhaps only $150 of my rent was due to the land speculation) is that residential land isn't the only thing that LVT will apply towards, but only citizens will get paid, so all other types of land will pay LVT, but only people collect it.
At this point we might have a strange thing going on. The price of buying property would go down dramatically, but the rent could theoretically go up if I'm still willing to pay 30% of my income in rent. But I'd still be better off.
Before I kept $1,000 after tax and then paid 30% in rent to pay $300, which left me with $700 for me to use throughout the year.
But if I now retain the full $1,500 I earn, and I'd be willing to pay up to 30% for a $450 a year rent. Then I'd have $1,050 left over for me to use. So even with a somewhat higher rent, I would retain an additional $1,050 - $700 = $350 a year. So I'd be $350 a year better off under the Georgist plan even if my rent to income ratio stayed the same.
But then the lower land price come into play. If I can buy that same property whereby I'd pay a mortgage plus LVT of less than $450 a year....then I would select an alternative good of buying instead of renting.
Before at say $5,000 in land value with no LVT and super high speculation on the property, perhaps the cost to buy it would have been $500 a year. And this was in comparison to my prior $300 a year in rent. So I would select renting over buying due to the costs of a loan.
But now that the land is only worth $3,000 with a mortgage plus LVT of only $300 a year. I would not choose to pay $450 in rent to some nasty do nothing landlord when I could just buy a property for $300 a year in total costs. The do-nothing landownership class can't simply extract 30% of my income because they feel like it. The reduced value of the property due to the removal of speculation works out in my favour.
So there would be some marginal cost difference playing out between the value of the housing (not the land) and the competition for rent, etc. which would work out in the favour of the worker.
I don't know what it'd be exactly, but if we say it plays to the middle ground, then rents and property prices would settle down midway between the $450 which is a 'reasonable' 30% of my income and the $300 which I could get by buying a house instead. That demand from so many renters turning into owners would drive up demand a bit, reversing a part of the decline in property prices.
i.e. we'd increase the market size and demand for the house part of the property now that the land value had been removed from the equation, all due to the overall costs of owning land going down and increasing the pool of people who could potentially afford to buy a house.
So perhaps we'd see a new equilibrium for rent/buying around the $375 mark which is the average of $450 and $300. The reduced land values gives the worker more negotiation power as he/she is more likely to be able to buy property instead of renting or their peers might do this. One cannot simply say that 30% of one's income must go to rent.
So the worker could choose to rent a larger property or save more money instead since they have more options. Those savings could go into starting a business or consumption or improving their own wage potential through education or training.
To be fair the whole 'monopoly' aspect of landlords owning the land is in itself a core aspect of what is wrong in the pre-Georgist world. In a free market all players have roughly equal negotiation power and the more one-sided it is, the higher the extraction by violent non-producer landlords is, with the extreme case being slavery or even fully abusive slavery to work people to death seeing them as disposable if there is an abundance of new slaves to be had.
Overall I see this as a positive and it would encourage workers, capital investment, and innovation in the economy. Even though we might end up slightly increasing rents in the process, we'd increase income even more by removing other taxes.
Think of the LVT in other areas too such as in telecommunications where the telcos pay nothing or next to nothing to access the common bandwidth. This could apply to the internet as well and other domains where landlords are using and profiting from things they did not create.
Truly the dead money tied up forever in land which acts as a blackhole sucking in productive energy from workers into non-productive consumption and hoarding by landlords is a highly unfair and inefficient system which tends towards serfdom in the same way our modern banking system tends towards the banks eventually owning everything or the way a marble tends towards the bottom end of a see-saw which has one side all the way up and the other side all the way down.
The worker would go from $700 a year in useful income after tax and rent to a situation where they'd have $1,500 - $0 tax - $375 rent = $1,125 a year. This is a $425 increase for the worker and it would be derived from the common value the community creates. Thereby returning a dividend to each person in the Georgist model while improving conditions for everyone - well everyone except the do-nothing landlord and existing property owners.
Truly this avoids the heap of manure which kills the land and from which nothing grows to a system of spreading it out so that each person might create additional prosperity and velocity of money within the community.
Instead of each dollar going on a trip like this:
Land - Labor - Capital - Wages - Rent - Landlord forever.... a linear process.
We could have a better cycle of money flowing over and over again through the community.
Land - labor - capital - wages- cafe - capital - wages - cobbler - capital - wages - rent - landlord - building repair - capital - wages - etc.
This engenders an enduring cyclical process where money never ends up dead and useless in some do-nothing landlord's pile of cash. They will HAVE to improve the property, perform some labour themselves or the LVT will siphon it away from them over time. Forcibly putting it into the hands of the community again, the ones who generate all of the increased value of the land.
No one has a natural right to steal from the community's creation to hoard it and do nothing with the money except find new ways to steal even more through the creation of a slumlord property empire which makes everything worse for everyone else. That's just theft and has no moral grounds to be tolerated by everyone else who outnumber the landlord.
The main challenge would be....how do you politically enact something which will remove huge amounts of value from existing landowners? They typically have almost 100% pure corruption and control of the ruling classes or are in fact the ruling class themselves where rulers and landlords are the same person. Show me a president, a senator, an MP, or a house member who does not own land or is not behold to donations/bribes from those who do own lots and lots of land?
Georgism does justify Colonialism, doesn't it? If insufficiently-productive individuals become unable to pay increasing ground taxes as many more more-productive individuals move in next door, and so will have to change their ways or give up their land, then why doesn't the same apply to insufficiently-productive peoples confronted by other, more-productive, peoples?
Nothing the author says on this point gainsays this: (1) "many Native Americans already had a roughly Georgist understanding of land"—that turns out to be a concession, not a response; (2) "it was precisely the colonialists' conception of land as private property that was the mechanism by which the indigenous population was expelled and their lands seized"—true, but all that means that is that the colonialists should have been Georgists, which (given the first point) the indigenous population would have been in no position to object to; (3) "The English first practiced this on their own people"—true, but irrelevant to colonialism; (4) "As a practical matter though, if you want to impose a Georgist policy, that only applies to territory your state has authority over"—Why would it only apply to property relations within states? The Georgist argument will be the same, whether we are talking individual land owners, or collective land owners, just applied from a much larger perspective. And what is so impractical about it?
I disagree that Bitcoin under the model is not wealth. If anything it’s a truer form of wealth than any money because it’s not an iou it’s a true existing digital good physically produced by the expenditure of human capital through mining
My critique in 11 parts. I agree with the conclusion of a land value tax, despite many flaws in George's argument.
1: "Though neither wages nor interest anywhere increase as material progress goes on"
This is very, very, very, falsified by subsequent developments. And even in George's day it was already false. Industrialization creating poverty was an illusion -- it just made poverty more visible by concentrating it in cities next to educated elites who could write about it. >90% of farmers voluntarily went to the cities in a century. If people didn't subjectively consider industrialized city life vastly superior to the old subsistence farming, that mass migration wouldn't have happened.
The book is based on this this gigantic false premise that economic and technological progress INCREASED poverty, when in reality it DECREASED poverty by a lot. 800 million people were lifted out of poverty by China's laissez-faire reforms and technological development over the last few decades. By George, this would be impossible, because the landlords would have taken all the surplus as increased rent.
But it still has some redeeming values which I'll get to later.
2: "where the value of land is highest, civilization exhibits the greatest luxury side by side with the most piteous destitution"
(the following don't have per 10k stats, so I had to google "homeless population in X" and divide by "population in X"/10000)
Singapore: 1.8
Los Angeles County, CA: 63.7
San Francisco, CA: 91
Jacksonville, FL: 20.8
Oklahoma City: 24.5
Empirically, it seems like rich countries/cities only get high homelessness when they are both (1) very diverse and (2) run by baizuo (a chinese word meaning "white left" https://en.wikipedia.org/wiki/Baizuo). When either of those conditions doesn't hold, a developed country/city doesn't get homelessness over 25/10k. When both of those conditions hold, it usually does. Denmark and Ireland may seem like counterexamples but aren't really. Denmark is a bit less diverse than Sweden, and a bit less woke. Ireland is a lot less diverse than the UK and a bit less woke. Both are a lot less diverse than Jacksonville or OKC.
3: The claim that rents increase enough to gobble up all productivity improvements seems falsified by these charts of San Francisco incomes versus San Francisco rents:
Since 1989, median household income went up by $7500/month, but average rent went up by only $3000/month. Even after adjusting both figures for inflation and taxes, workers would come out way ahead of where they were in 1989.
4: "In fact speculators often keep it out of use, because this forces people to use less valuable land instead, pushing the margin of production down even further, forcing land values up, and now The Rent Is Too Damn High."
This implies speculators sacrificing their individual self interest for good of all speculators, and is therefore dubious. Any individual speculator would make more money renting out his land, because that wouldn't have much of an effect on land values in general. Also, at any point, someone with a more-productive-than-expected use for the land can buy the land from the speculator and put it to use. If the land had instead already put to use by the first person who had any use for it, maybe the transaction costs would be higher because they'd have to tear down something to build the more productive thing.
5: I was put off by the beginning of the review where he beats peculiar definitions to death to (seemingly) rhetorically devalue capital accumulation without doing any empirical work. But when I got down to this, I sorta saw the cat: "Mr. Slumlord puts in as little work as he can get away with and invests as little capital into maintenance as will keep the state off his back. His return is almost entirely rent. And the only reason he can charge rent in the first place is because of the valuable location – value the community produced, not him....The problem with our current system is that when anyone in the community builds improvements, it makes adjoining land more valuable, and then those adjoining landlords jack up the rent. This makes things worse for everybody but the landlords. George's insight is that extra value from my improvement "spills over" from my land and is soaked up by the ground rent of your land."
6: "even though higher earners are responsible for withholding the vast majority of tax money in fraud."
It's not so dramatic. The latest paper showed only a modest difference in the rate of income underreporting between bottom and top income brackets (like 7% vs 20%), and its methodology was based on audits which are basically incapable of detecting cash that never enters a bank or buys something huge, so it's probably understating underreporting on the low end where people get cash from tips/wages/drugs and directly spend it on petty purchases which will never show up in audits. https://www.nber.org/system/files/working_papers/w28542/w28542.pdf
7: The total land value of US land is estimated to be 23 trillion (https://www.usatoday.com/story/money/2019/05/08/the-most-and-least-valuable-states/39442329/), and a normal rent-to-value ratio is 8%/year, so LVT would raise 1.84 trillion if land values didn't immediately crash. Total taxes collected by the US last year were almost double that, 3.32 trillion. So clearly the story is not quite as extreme as landlords gobbling up all the surplus value creation everywhere. The state's monopoly on violence can do that too. In a sense you have two landlords extracting rent: your regular landlord, and the state. On average the latter is extracting almost twice as much rent. Both of their claims arise from the land you happen to reside on.
8. "Land in Times Square will still be a lot more valuable than land in Podunk, Saskatchewan, but both will approach the same price as the LVT rate gets closer to 100%. "
If this is true, then what incentive does the person who owns less-productive land in Manhattan have to sell it to someone who will put the land to a more-productive use?
9. I like everything about UBI, except: If people don't have to first demonstrate the ability to produce something of value before they reproduce, then after a few centuries dysgenics collapses the system, unless there's some AI/biotech eschaton. Biotech solution is iffy due to political/cultural opposition to it and difficulties of scaling.
10. "The absolute size of the human population is still growing, but this is just due to inertia; the human population will peak somewhere between 9 and 10 billion in the 2060's, and then decline from there."
It's still kind of an open question whether subsaharan Africa will ever have not-above-replacement fertility. Their IQs are probably not yet high enough to develop their economy enough to have a complete demographic transition. If we are betting even money on when Earth's population will stop growing, I'll take the over 2065. If we are betting even money on when sub-Saharan Africa will have not-above-replacement fertility, I'll take over 2200. Maybe their IQs rise as long as they're still in a Malthusian condition, so that they'll eventually reach a threshold IQ to industrialize. Seems unlikely for any intervention by foreign biotech to have enough scale to make much difference.
11. George's take on the Irish potato famine seems basically correct except he doesn't seem to note that the rich countries were much more industrialized than India, China, and Ireland, and that is what enabled them to support a higher population density.
I retract #8 which was based on a misunderstanding about LVT being based on market prices instead of imputed value. Since LVT is based on imputed value, then the market prices can be equal but the higher-value land will still have a higher tax which will incentivise a sale by any owner who doesn't take full advantage of the high-value land.
It seems that we need a better word than "justly" in sentences like the following.
> If you're ploughing a field and I lend you a tractor which makes you ten times as productive, I can justly claim more compensation for that than if I lend you a mule that only makes you twice as productive.
More compensation can be claimed by the lender, because the borrower is willing pay more, because the tractor has more value to them. It is not a matter of "justice".
Perhaps the meaning would be better conveyed by flipping the framing from "the lender can justly claim more compensation" to "the borrower is willing to pay more".
I have a few large quibbles with the Georgist proposal. Looks like this platform will force me to break them up, but here goes.
1) What you tax, you have less of.
You cannot have less land.
But if what is being taxed here is "Land / NATURE VALUE / Privilege," you CAN have less "Nature Value"! A few have alluded to this above, but it seems like a much bigger problem than discussed.
This proposal might concentrate sprawl some, yes. That would be great. But it would *definitely* put development pressure on undeveloped land.
Undeveloped land is what makes the ecosystem function. It filters polluted water and recharges the water table. It prevents mudslides. It sequesters carbon. It builds topsoil. It supports biodiversity. I can't even count all the "public goods" undeveloped land creates. Do I have a problem with it all being in the hands of the super rich? Yes! That is a problem! Am I really inclined to divide the world into "human system" and "ecosystem where humans never go"? No, that's a fallacy; it's all ecosystem, including us. Also, when all wilderness belongs to the wealthy, we peons are not allowed to set foot in it anyway. But to heavily incentivize development is going to leave us with a vast concrete apocalypse. We are already staring down the barrel of ecological catastrophe. Maybe we *shouldn't* "improve" everything our eyes can see.
Here in Vermont, we have something called the Current Use program. It is more or less the opposite of Georgism: If you own a chunk of land and you either set it aside for conservation or use it to generate land-based employment (farming, forestry), you get a property tax break. If you later develop it, there's a hefty penalty. Does this primarily benefit the wealthy? Yes, it does. Are we short on affordable housing? We very much are. (Though I would be inclined to blame poor zoning and building codes for that first and foremost.) Nevertheless, I, a lower class person, moved to Vermont specifically because the ecosystem was still mostly intact. Is that privilege? Yes, partly, though I give up a lot of "wealth" (monetary income) to make it work. But I'm not seeing how wiping a good thing out to level the playing field is going to help the world.
You could partly fix this by paying landowners to maintain ecosystem services, as a valuable commons not presently regarded in our economic system. A carbon tax and dividend paid out according partly to tree cover, for example. Mark Atwood above would do okay with that. But if you do that, Georgism penalizes the vacant parking lot, but it does NOT penalize the semi-wild thousand-acre private estate. Land still concentrates in the hands of the wealthy. I don't have a fix here and I don't see anyone else in this discussion proposing one. How would you solve this?
3) I suppose this is a subset of the points above, but again, like Civilis and peak.singularity, I worry about regarding all land only at its "highest value." Personally, I look at a vacant lot and I think "Community Garden!" Better than a parking lot, no question. Not as "valuable" as a skyscraper, though. Does all green space instantly disappear from cities? Because right now owners of parking lots vampirically feed off a tragedy of the commons, but by removing that, can anyone afford to have a park in a city at all? It raises property values around it, yes, but the park itself isn't generating cash revenue. And yet it's taxed, right? Unless you write in an exemption for ecosystem services.
4) >As long as you have land you can work and generate wages.
Right. So this is particularly dear to my heart. I homestead. I have ten acres, seven of which are steep, rocky, boggy spruce forest I can't even get the tractor into, so only three are useable. I keep a cow and grow all my own food. It's subsistence farming; I trade milk and meat for hay, so the cow pretty much pays for herself (not counting my labor), and otherwise, I generate wealth (all my own food and firewood) but I don't generate income. I have a part time job for that. My land, sans improvements, is assessed at $80K and a glance at market price for undeveloped land suggests that's about right. (I got it for half that because the guy before me wrecked the place and there were negative improvements in the form of burned-out, falling down buildings with hefty removal costs. I've mostly cleaned up the mess, by sweat equity. So we'll call it $80K, but some of that I *earned,* darn it.)
So: You're proposing I be assessed an additional $3,400K yearly in taxes.
I make about $16K with the off-farm job. The market value of the wealth I produce in food and fuel is probably about $5K. (In George's time that would have been doubled; as I said above, the agricultural market is completely wonked.) I don't receive any of it in cash income. But I would have to pay taxes in cash income. And my labor in homesteading would then generate no return at all.
Now: am I farming "inefficiently"? Of course I am; I do most of it with a shovel. But the ownership of the land gives me a freedom I wouldn't have anywhere else, because land IS the source of life. Owning land meant I could build my own cabin, for example, which would absolutely not have been *allowed* on someone else's land, not without meeting codes that would have doubled the cost or incurring liability that doesn't apply when I do it for myself, on my own place, and what landowner could have afforded to pay me back my sunk costs if I had to leave? Most towns wouldn't even allow me to park a tiny house on a trailer on leased land, not if I were to ask permission. The only way I could ever create stable shelter *for myself,* through sweat equity and never mind the "rent," was to have fee simple control over a plot of earth. It took me ten years of hard looking to find anything I could afford and secure access to it. Now that the "housing" (land) market is booming again, I suspect no one younger than me will have the opportunity at all.
So I definitely do consider land speculation and ever-concentrating ownership to be an enemy, which is why I'm taking the time to read and think about this. I'd like a fix too. But if you wind up disincentivizing the direct ownership of home and land, you're also disincentivizing sweat equity and subsistence, are you not? So what happens to everyone who lives outside of the cash economy, suddenly taxed?
Is the problem essentially that *as productive land,* my homestead is greatly overvalued, because of speculation? Well, yes, probably at least in part. I am using this land more productively than it has been used in fifty years, and more productively than all the absentee landlords around me who just bushhog the fields of their vacation retreat once in a while. But I'm not generating nearly enough wealth on this soggy boggy scratch-ankle mountain homestead to cover its taxable assessed value, and we *don't* need to pave it over and build skyscrapers. So how would you solve this?
*If you redistributed a LVT as a UBI then it might work, yes. But if you were to exclude ecosystem services from taxation, that effect is weakened (though maybe my seven acres of useless spruce swamp would get some of that exemption; right now it's valued the same as any other "acreage"). And if instead of a UBI you just used it to replace income tax ... I don't have income.
Again, direct personal production of "wealth" is not participation in "the economy" because "the economy" only values things you pay *other* people for. If you do it for yourself, you don't have cash. If you then have to pay cash for access ... Isn't this what Shay's Rebellion was about?
Georgism seems to run the risk of exacerbating our existing fallacies in what the market does, and does not, "value." That's what I'd like to see addressed.
2) This comments thread so far has been fairly dismissive of the problem of agriculture, and has tended to use "farmland" as a base value of worthlessness. I guess none of you eat.
Georgism incentivizes land to its "most valuable" use. That's not ag, according to our present market. We are already losing farmland to development at a truly alarming rate. Topsoil is THE basis of human life, not to mention civilization. There is a limited amount of arable land. Once you pave it over, it's gone for good. If you don't have it available near your urban centers, you are dependent *for life itself* on the assumption that nothing can ever possibly go wrong with shipping and trade. Now Ukraine is rubble and nearly 20% of the world's grain supply just went off the market. It's going to be bad. Maybe we should have supported more decentralized local agriculture along the way?
The suggestion is that the farmer would only wind up paying taxes equivalent to what he would pay if he were renting farmland. But farmland, unless restricted, is NOT valued at its agricultural potential, but on a different scale entirely, the "highest market value," which is in no way related to its productive capacity. Every farmer I know prays desperately that no one gets it in their heads to "improve" anything, anywhere nearby. Because if they do, land values will go up, and the farmer will instantly lose home and livelihood.
Eating is important, but our present market doesn't value it. Like devaluing the carbon absorption capacity of a functioning forest, this is a market distortion which needs to be corrected for.
Massachusetts has something called an Agricultural Preservation Restriction, not unlike Current Use but more restrictive. The state buys or accepts a donation of the development rights from the landowner. At least in theory, the land then drops in value because it can never be developed, but must be kept in agriculture. It is the only way there is any farmland left at all in the Connecticut River Valley, which is some of the richest soil on the planet, but under intense pressure for development. It is of course an expensive program for the state to run, and therefore applies only to a very limited amount of land. Also, regardless of theory, in practice, this land often still winds up being bought by the wealthy as private estates and merely leased to someone who will hay it once in a while. But at least it's still *there.*
So someone earlier said:
>Georgism would obliterate the returns on owning farmland but not on working it.
Okay, but there are two problems here.
A) Given our present disastrous state of agriculture, there pretty much *aren't* returns for working it. Farmers are "land rich and money poor"; many of them just barely break even year over year and depend for emergencies or retirement ENTIRELY on the sale of land. The overall economics of farming are completely, completely screwed up. Market forces are not working to correct this at all. It's sliding (plummeting) towards monopoly. Monopolistic markets of Cargill, Archer Daniels Midlands, Tyson, Purdue. Monopolistic suppliers of seed and inputs. Farms getting squeezed and squeezed and pushed to consolidate in fewer and fewer, bigger and bigger operations. Here in Vermont, we have lost 94% of our farms since 1945. Yes, you read that right. We're down to a few hundred and losing more daily.
Now, is part of this the direct result of land speculation? Yes! To what extent is land speculation the primary force driving farm consolidation into the hands of fewer and fewer giant players? I don't know. It's worth debating. But as proposed, you're going to hit the last remaining small family operations too, and that's NOT going to help. How would you solve this?
B) There seems to be an assumption that there's no difference between a farming operation conducted on land one owns vs. land one rents. There is a difference. Leased land is subject to the whims of the landowner. These whims are very often absurd and unreasonable. Witness all the Cliven Bundys of the world furious with having to follow government rules. But we farmers on the east coast tend to think the government gives them a *fantastic* deal, because *we* have had to try to deal with individual rich people dictating the lease terms, including daily details of how we are permitted to farm, and these are nonsensical. So very much land does just sit unused, at best bush-hogged once a year, because the conditions of the lease are not only illogical but often wildly unpredictable, IF farming opportunity is offered at all. Land under the direct ownership control of the farmer who works it is almost always better managed and better worked, and it certainly doesn't get yanked out from under them on a moment's notice, as leased land often does. If you disincentivize land ownership, I am not at all convinced you would be properly incentivizing its "improvement," as a tenant farmer's "improvements" still belong to the landowner. Let alone would you be incentivizing its stability in use.
AFAIK owning the house but not the land is already a thing ?
George's book is referenced (prominently) in this page of the UBI Master Directory.
https://docs.google.com/document/d/1q9AkxTmaaWBGkXrhjP8dnkT5mbZ06Xax-RkfxJV9BNI/edit?usp=drivesdk
>Landowners however can just sit back and collect rent. Given that land is fixed, it's way easier for landowners to collude than it is for either labor or capital (sans land) to unionize.
Where I live in the Dominican Republic land prices are sky high. Comparable to coastal California land.
The land owners just wait.
That happened here too during our Celtic Tiger boom. Property speculators mushroomed, bought up and set up land banks, then sat back and waited for the inflated price to make it worth their while. Parcels of land changed hands multiple times, at increased prices each time, with nothing being built on them because it made more money to wait a little while for the price to keep going up then sell them on.
Of course, once the bubble burst, all this land was now relatively worthless. George is right there, but like any asset, if there is demand for it price will go up. I don't see how you can fix that by a simple land tax.
land value tax means there's no value to simply selling the land for the land - you would only buy a plot of land if you have a vision for what you want to build *on* it. in the heart of NYC, that's gonna look different than in a random small town, but in both instances, there's no value to just sitting on the land: https://www.bostonglobe.com/business/2019/07/03/one-third-acre-back-bay-location-parking-but-not-for-long-price-million/qyoEyaJMBE1qg9piuf5piI/story.html
you can't have a 'bubble' if there's no way to privatize the rise/fall in underlying land demand - those losses/gains would be shared by society - which is why LVT creates a virtuous cycle where governments and people have a shared incentive to increase land value through public works (this is stiglitz's 'henry george theorem'.
An LVT means that you need to pay yearly in order to sit on the land. This hits from two ends: A future developer is willing to pay less for the land because of the additional tax burden, and waiting for the parcel to go up in price quickly becomes a losing proposition. It would turn real estate, where waiting earns money, into an asset more like a car, where buying it makes sense if you're using it, but just sitting on it means you're losing money.
Landlords already have costs to sit on land...
Yet they aren't nearly high enough to have a significant effect. That's the whole problem.
I suspect most of this locked up land is close to the beach, so they're waiting to sell out to a resort developer.
If there is land with a high price in the DR that doesn't have beach access? No idea why.
Yes. It seems to be true everywhere. I checked out some farm land in the interior. I thought, "I could afford that!" Turned out the price was per SQUARE METER.
Can you please provide some evidence?
What would an example look like?
I know nothing about the Dominican Republic per se, but I know that real estate in third world countries in general, and Ukraine in particular, is outrageously expensive, considering.
This is because real estate isn't viewed as an investment (in the sense of generating returns) as much as it is a relatively safe place to park money. Banks aren't trusted, and everyone knows that the local stock market is a mug's game. Currency and other restrictions may prevent local gentry from investing abroad or repatriating their gains, and besides, these investments aren't really understood or trusted either.
Land, houses, things one can touch and feel and that cannot be easily absconded with, that is where value is stored. In some societies, India, for instance, gold also plays a similar role. Gold has the advantage and disadvantage of being eminently portable.
A friend of mine worked as a corporate raider in Ukraine, playing various financial hide-the-sausage games with western investors. She would squirrel away her earnings in her mattress until the mattress started getting too lumpy, then buy another apartment and start the process over again.
She didn't rent out any of the places she owned, since even a cheap apartment cost some $250,000 and the rent it paid wasn't worth the hassle of chasing down renters every month, much less tenants trashing the joint or stealing the wiring.
She lived at home with her parents.
China's housing market is allegedly pretty crazy as well according to this source:
https://www.youtube.com/watch?v=jDIhTc6CJYY
That makes sense about not trusting banks. I rent a house in a nice part of Boca Chica, DR. The are building an apartment building on the lot behind my house. They started over two years ago.
It was December. First a couple of workman came and stripped every green leaf from the lot. Then they dug ditches, mixed concrete, and poured footings. Then built low concrete block walls. About 3 feet high. It looks like it will be four apartments.
They did all that work in ten days. Probably the fastest crew I have seen in this area. Then they went away. FOR A YEAR AND A HALF!
Last summer they came back and in another ten days completely finished the first floor including a very precise flat concrete floor at ceiling height.
By this time I could see by the plumbing stacks that they were not stopping at one floor. Too bad I thought. They are going to block the light from the north.
Then they went away again. It has been nine months and no new activity.
What is going on with this process? I think when they have money they build. Then they wait to accumulate more money. They are not borrowing money from a bank at the exorbitant interest rates here.
I've seen that movie before as well, even in places like Poland, which is very different and which has a different banking culture from, say, Ukraine.
My raider friend didn't owe money to any bank, FWIW. She bought her apartments for ca$h. As in "suitcases filled with bricks of green cash" like she was Tony Montana or something.
This start-stop process I described would not work with a wood frame house, but the cement blocks and concrete are resistant to the weather.
It seems odd given what happened to Ukrainian landowners within living memory. I would have thought portable wealth would be more popular? But I guess if land is all you got that's what you invest in.
I have wondered much the same thing.
The old lady I used to practice my Polish on told me in her day, it was gold that people used as a store of value, not land or Yankee Dollars.
I should have added: gold isn't hard to come by in Ukraine, but at the same time, you can drive through new housing developments that are entirely sold out, and that mostly sit empty.
Actually I'm not sure what you're referring to. Individual (not organizational) land and property ownership was resilient both to the collapse of the Soviet Union and occupation of Crimea. And even with occupied regions it's a bit of a tossup - if you owned land in the Crimea it's massively more expensive now, if you owned land in occupied Eastern Ukraine - it plummeted in value (but at least you still have it).
Additionally, in developing countries real estate is the only efficient source of collateral for loans for investment projects, bidding them up above their fundamental value, due to their high pledgability as an asset.
Not so much in Ukraine, in large part because of some of the vagaries of Ukrainian real estate law (if you change the "техосмотр" -the technical description of the real property as found on the deed, for instance, by changing the square area, you can get a corrupt judge to invalidate your mortgage and you can give your lender the middle finger).
"Banks aren't trusted"
Is this for a good reason? Do you think Ukrainians will start using any of the flashy new DeFi services?
I heard that cryptocurrencies / tokens / IPOs were pretty popular in Ukraine ? (Or maybe just in their infocom scene ?)
Sorry, this story about Ukraine is almost completely wrong (maybe, maybe it was somewhat true before the Russia-Ukraine war started in 2014). The reality is almost opposite - outside of the very top of the market, apartments are reasonably priced and generate nice return on investment. Prevailing rate seems to be around 800-1000 usd/sq.m., depending on condition and district., and 90% of the market is below $100k, I believe. For example, with $50k you can get a half-decent 1-bedroom apartment ("2-room"), and rent it out for maybe $300/month, so 7.2% p.a., not bad at all. New construction is abundant, as well. Of course, people still struggle as the average monthly income is around $400 or so.
Of course, at the very top, elite property is expensive, but there's very little being bought and sold, and owners are very very open to negotiation. I've been offered property at one of the most prestigious highrises in Kyiv for $2500/sq.m. which is like 50% of list price, guy owns several floors and is motivated to sell (won't be surprised if he's actually one of the corporate raider types who parked his money there).
forgot to add: am Ukrainian, currently living in Kyiv
Suffice it to say, very different from my experience when I lived there. You were hard pressed to find anything for less than $200K.
There was a Henry George School in Santo Domingo in the 1990s lead by Lucy Silfa. http://georgistjournal.org/2012/09/17/an-interview-with-dona-lucy-silfa/#more-396
Cool! I never would've guessed.
This is great. I'm going to create a page for Henry George in the UBI Master Directory. Probably "UBI and Georgist Philosophy". Then I will link this interview.
This is not my experience. Apart from prime beachfront land and downtown Santo Domingo, I could buy a small plot almost anywhere in the country.
Jump links to the appendix look broken, but I found Ctrl-F "Appendix-A" or whatever seems perfectly serviceable to locate the linked section, as well as to jump back to where it was referenced after you're done.
1. I still don't understand the insistence on saying that workers are paid out of production rather than capital. For one thing, it seems transparently false - the review mentions the example of workers building a ship, which might take a year, but they still get paid even before the ship is built. It argues that they are paid from the partly-built ship, but they're clearly not - they're paid out of the saved money that the person who founded the shipbuilding company brought in (or borrowed). You could even demonstrate this by having the capitalist put highlighter marks on the particular dollar bills they bring to the venture, and then you will see that the workers get paid in highlighted dollars. But also, who cares? What hinges on this totally theoretical point? I still don't feel like the review/book explained this very well.
2. Would a land value tax unfairly benefit eg Google (who maybe need a little land for their HQ and a server farm, but land is only the tiniest fraction of their costs) compared to eg farmers (who need lots of land)?
Theoretically a land value tax should have no effect on the cost of renting land. It may even reduce the cost of rent (since just holding land is now costing you money- thus unused land maybe more likely to be rented out to recoup the cost of the tax). Thus it shouldn't be unfair to either Google or the farmer.
Essentially it transfers the value gained from holding the land to the government.
I'm confused. Homeowners seem pretty against having the government raise property taxes, which I interpret as them reasonably expecting to have to pay more money to have a house. Increased property taxes on housing would hurt homeowners relative to, I don't know, homeless people. It would probably also hurt renters since the landlords would pass along some of their costs. Why would a land value tax be different?
Property taxes are very different, as the delta gain from the land improvement is not taxed.
How so? Property is reassessed at points in time. It can also be reassessed after a value-add project since permits have been issued thus notifying the local government that the value has changed.
He meant that the LVT does not tax land improvement, in contrast to how property taxes are determined.
George wants to capture the increased ‘land value’ the other landlords see when one improves their building and the others increase their rents. It is a specific example cited. In raising the LVT George ‘takes’ what isn’t due the non-improving owners.
The pragmatic use of LVT is to tax the purposeful idling or minimizing of what should be a property, sales, income... producing parcel. It is an targeted solution to an urban density problem.
You seem to be modelling it as if it were a tax that increased the costs associated with renting out land. It doesn't, it increases the cost of owning land.
Landlords cannot respond to this tax by raising rents to cover their losses. They remain in a competitive market. The marginal cost of supplying an additional unit of land hasn't changed because crucially the amount of land is fixed, and the tax is levied regardless of whether the land is rented out or not
Thus a land tax will indeed be awful for existing land owners, but renters will either do no worse or win somewhat. Future land owners will not suffer, because the land tax will be factored into the price.
This is because a land tax effectively devalues land by transferring its future earnings to the state.
The equilibrium price of land will thus remain the same in a standard neoclassical model of this market. Really it might even go down a bit, as land owners who were previously content not renting out their land need to cover the tax.
It actually works out more like an expropriation than a traditional tax.
Would this only work if the land value tax was applied everywhere, all at once?
Most land tax proposals do this in a country. Between countries, the markets are mostly separate.
The mechanism by which taxes are passed on depends on a supplier being able to change how much they supply based on the market price.
Sure, you can just say "hey I'm being taxed, so now I'm charging more for it" and *hope* people pay it, but the *economic force* that makes the market agree your offer is a worth taking is the fact that when you tax schnozzberries by a dollar per bushel, schnozzberry farmers on marginal plots that only had a profit margin of a dollar per bushel cease production. This drives down the supply, driving up the price, and so consumers are grudgingly willing to pay a dollar more per bushel even though the tax was originally levied on the supplier and not them.
With land all you can do is refuse to rent it out, but that's not the same as taking it out of production. It still exists, and you still pay land tax for holding it regardless of whether you rent it, whereas the farmer doesn't pay taxes on berries he doesn't grow. Without the ability to constrain the supply, and having to pay the tax simply for owning the land, you have no ability to affect the market price of land and thus pass on the tax to your renters. This is pretty widely recognized in modern economics and it's why folks like Friedman called Land Tax "the least bad tax."
Homeowners - yes.
Renters - no. Presumably they're already charged whatever could be squeezed out of them. Also, in the LVT-based system, if someone 'takes a stand' and demands a price which exceeds what they could pay - well, they'll be forced to move out. Which means now the owner pays the tax without making any profit. Which means they're son bankrupt and lose that land.
After some brief disruptions, the system should just stabilize. And now all rent goes to the state's budget. Which means it could, for example, remove income taxes. And do an UBI-lite with additional surplus (I'm assuming LVT > income taxes, but maybe not enough for true UBI sufficient for living off it). Which means surplus wealth of the labor increases (well... actually the corp. would just decrease wages, rly - it's quite obvious with Facebook paying less remote workers who moved out of high-cost areas... but that situation also shows Facebook was literally paying the USD by which they reduced the wages to the landowners!)
The bit with homeowners sucks through, very badly. Maybe the initial impl. should have some additional provisions just for that one time status quo changes.
Landlords can pass along the costs of property taxes because property taxes move the supply curve of property to the left, increasing price. This is not so for land value taxes - since the supply of land is fixed.
Except, by George's own definition, it's supply NOT fixed :
From the law of thermodynamics the sum of the *quantity* of land/nature/privilege + the *quantity* of wealth can only go down.
(However, their aggregate *value* can also go up, since scarcity increases the value of the item getting scarce.)
1) Higher taxes on a good reduces the price of that good. Under Georgism, existing homeowners will indeed be shafted. That's a feature, not a bug, albeit it certainly increases the difficulty of implementation.
2) Rent is not calculated by landlords seeking a given return, it is the maximum the market can bear (i.e. the maximum renters are able and willing to pay in that particular market).
2.1) Property taxes don't change a renter's ability to pay, for obvious reasons (there's no reason there should be a relationship between the job giving me a raise and property taxes).
2.1.1) At least not in the short run - in the long run one could argue that property taxes (albeit not land taxes, for reasons outlined above) discourage building more houses, as *new* projects are determined based on whether they pass a certain profitability threshold.
IANAGeorgist (lean Austrian, actually), I don't know what's what beyond the contents of this review, so please take everything I say with that in mind. That said:
1) I think it may be attempting to make a conceptual rather than literal point - that it's out of the expected value generated by the worker's labour that the wages are paid, and if that value wasn't being generated by said labour, then that labourer doesn't get hired. Just imagining the scenario as atemporal but still sequential - imagining that the labourer can take an arbitrary number of steps of labour in a single instant of time - makes it more understandable to me, and may help with the point being made at its root.
(Now, ours is the kingdom of the goddess Kali, she who is time and the devourer of time, and in her world, everything *doesn't* happen atemporally; additionally, in both worlds, losses are possible. But if this behaviour is repeated, the business entity or whatever doing this goes bust, so - short of an entire social-economic unit of people going collectively insane and losing their refpoints for what's up and down economically - this state of affairs can't continue for long. And even in cases of collective insanity, eventually people just die as their ability to produce even basic food is destroyed - witness Mao and his time, and the destruction of farmers' implements made of metal in a mad, quoxotic and insane quest to meet 'production quotas' for iron by throwing said implements into village furnaces that just... destroyed them, and produced useless iron. So the situation is eventually unstable - you either go out of business, or - if there are no brakes on this loop - your entire society goes insane and dies. But that's an aberrant case.)
2) I presume the expectation is that land value rent on farming is likely to be very, very low; and the gains from using modern agricultural technology (these gains would *not* be taxed, in the Georgist scheme, because it's the return on *capital*, NOT land) would be so enormously more significant than the land itself as a factor of what gets produced that it would basically be completely immaterial.
But all this is just a guess, please remember that IANAG.
IAAG, but I'm also a big dummy, and for what it's worth I thought that was a pretty good explanation and better than I would have done.
I agree that part of the review Scott references in 1) (and peeking at my copy of P&P to see what George says about it at length) is a bit fiddly. George's apparent hand-waving about risk as a justified return to capital feels like something I'd like to get a more involved take on too, in case the review isn't doing it justice, or George provides a better explanation outside of P&P.
My only take on 1) is that I think George is probably responding to established wisdom of his time which really sees capital as this absolutely fundamental thing that labor absolutely can't in any way shape or form function without, which the review touches on a bit later, and presumably this relentless beating to death of words and concepts is supposed to help him undermine that notion somehow.
My (possibly extremely dumb) take on 2) is that George might be less concerned with sticking it to the Googles[1] of the world then he does the EFFECT of Google moving in to Mountain view and all the landlords jacking up the rents for everybody until nobody can live there unless you work for Google. I also genuinely don't know if there's some weird ways land value taxes would actually hit Google pretty hard --- Amazon for instance actually has an enormous network of brick & mortar buildings in their distribution infrastructure that's a key part of their competitive moat. One thing's for sure -- Google's land can't send itself to Ireland and back to avoid taxation.
[1] (if they produce lots of value by hiring smart people to produce useful products without also gatekeeping access to natural resources, good for them -- though I wouldn't be surprised if George had many sharp words for them on the question of Monopolies in fields other than Land)
> (these gains would *not* be taxed, in the Georgist scheme, because it's the return on *capital*, NOT land
I don't think land value can be divorced from the possible uses it could be put to. In the city, you can see that the value of the land depends on the community around it, but in farming, isn't the value of the land dependent on the kinds of practices available to you to benefit from it?
Yeah the review goes into it. It gives the example of how you could have a some land with a "latent" resource in it that's worthless until someone discovers a use for it -- either by a community springing up, or someone just invents/discovers something new. The review also mentions a section where George addresses the possibility for the line between improvements & the "land itself" to start to blur (e.g. plant a forest on a plot and wait 20 years).
But you are still able to assess the value of the land separately from its improvements. Farmland being next to a good farm-to-market road increases its value, but the road belongs to the state and was paid for by taxes, the value the farmland gets from being next to it is not an improvement on the farm land itself. But if you plough the land and dig a well on it and build a toolshed and irrigate it and do all these other things, those are improvements and allegedly assessors are used to being able to suss these distinctions out already.
That all makes sense, it's more the idea that gains from modern agriculture would not be taken into account in land value that doesn't make sense to me. When someone invented modern acricultural techniques, that increased (unearned by the owner) the value of all acricultural land, simply by virtue of it being possible to apply them to the land. Of three kinds of land - (1) land that has had modern agriculture applied to it, (2) land that is amenable to having modern agricultural techniques applied to it, (3) land that is not amenable to having modern agricultural techniques applied it, the difference between (1) and (2) should obviously not form part of land value tax, but I the difference between (2) and (3) should. That means that at least some of the productive capability of modern agriculture would find its way into LVT.
> it's more the idea that gains from modern agriculture would not be taken into account in land value that doesn't make sense to me
Yeah I agree that the fact that *someone else* could *also* use modern agriculture on your farmland would serve to increase the unimproved value of your land. I think George says as much per the review -- improved technology increases productivity, which drives up land prices, extends the margin of production and all that.
I'm not George so I can't speak for the man, but basically his idea is not to tax capital or improvements like buildings, tractors, wells, etc, and he seems to imply that ploughing a field, planting a field, etc, all count as improvements as well (with the fuzzy boundary of some of these more organic improvements becoming indistinguishable from the land itself over time).
The potential for someone to come in and have a better use for your land then you do, which drives up its price, would be part of the base land value according to George, however, if I understand him right.
Why would you think that gains from modern agriculture wouldn't be taken into account ?
Value is relative, gains from modern agriculture make the wealth extracted from that nature to go up.
To take another, already used example : nature with oil in it would have a lot more value if it's economically viable to extract that oil than if it's not (also, once that oil is extracted it stops being nature and becomes wealth, so nature goes down).
Do you have a good link to an Austrian critique of Georgism (preferably not from Rothbard, whose arguments I tend find simplistic and terrible)? I would imagine such a critique leans heavily on time preference of workers and the need of capital to satisfy such high time preference. I agree that George is not claiming that the workers are actually paid from the proceeds of the sale, but that how much they are paid depends on how much the sale is expected to bring in. But again, this ignores the time value of money as well as the risk taken by the supplier of capital due to uncertainty.
IIRC, Eugen von Böhm-Bawerk makes approximately the argument you're making: that employers essentially front payment to the workers, expecting to be compensated for the payments (plus interests forgone) out of the revenue made by selling the product(s) made by the workers.
Henry Hazlitt has a famous book about economic fallacies, I don't recall the name, where one of the chapters is called something like "enough to buy back the product". Böhm-Bawerk's argument suggests that employees will be paid enough to pay for the product minus the interests they were essentially given for free by being paid before the product was sold.
In some sense, it's a loan in the opposite direction of time: the employer pays employees in monthly installments. The employees manufacture a giant schnozzberry. Once the schnozzberry is built, they (the employees) sell it on the market and give the employer the principal of the loan (which is the entire sales price). This is of course not what it says in anyone's employment contracts, but the flow of money, labor and berries over time is the same.
But of course, the actual loan-like thing is in the opposite direction: we all prefer money now to money later (since we can easily store it if we only want it later), and the employer hires people at wages which compensates for forgoing the expenditure of money between the time of wage payments and the (estimated) time of sale.
Google actually owns a surprising amount of land: On their balance sheet, "land and improvements" is ~50 billion out of 320 billion of total assets, or more than a seventh (IDK how much the *unimproved* land is though). Reason being, what land they do hold is likely extremely expensive per unit area compared to some pastures or farmland in the middle of nowhere. And even if it wouldn't affect them directly, a LVT would capture the increase in residential land values surrounding those tech companies, which Georgists probably see as more important.
On other tech companies:
Facebook doesn't seem to own nearly as much physical land, but it probably derives a significant portion of its revenue from network effects, which, if you squint a little, looks kinda like "land but on the internet" (physical land value = physical proximity to stuff, digital proximity to stuff = ???). Of course, it is dissimilar to land (physical or otherwise) because you can make more of it. Not actually being a Georgist, IMO it matters more that a) network effects can be taxed or regulated in similar ways, and b) taxing or regulating it competently would likely increase surplus. Same with Amazon and Twitter and Uber. Kinda similar with Netflix but clearly network effects aren't that powerful/valuable if everyone and their dog is starting a streaming service or two.
On point 1:
I feel like the issue here is that there's been a distinction between financial and economic (i.e. real, physical) capital drawn, not very clearly, and since pretty much everything can be attributed to financial capital it's more useful to talk about the future production that financial capital is attached to. But honestly I don't really care right now either.
Networks effects are kind of stretching it..?
Though the limited IPv4 addresses, weirdly, would I guess be considered to be nature (="land") by George ?
(Then IPv6 gets popular, and IPv4 nature value goes "poof" ?)
Also short, common-word *.com addresses! They're not making any more of those. I wonder what the weirdest, edgiest edge case of Georgist "land" would be...
http://sms.or.th/sms/images/pdf/Why%20Tax%20Land%20Value%20-%20Bill%20Batt.pdf gives some good presentations.
"Economic Rent, also known as ground rent or Ricardian rent, is the flow of value that explains the market price of all resources of nature. Their value is a
function of the demand people place on them, certainly not due to the
investment of labor that is made in them. Many natural resources besides land (really locations) yield rents: water, air, the electromagnetic spectrum, airport time slots, fossil fuel and mineral wealth are the most readily understood. But so are DNA and all the biota of the world, language, computer code and website domains. It is not hard to think of many parts of our market economy that command a price without any labor by human beings. These rents are a large portion of our common wealth – what was classically called “the commons.”
I was thinking, that perhaps "people capable of programming computers" is such a limited resource - this was my impression about reading about the "IQ shredders" https://www.isegoria.net/2014/07/iq-shredders/
In theory you can give birth to and bring up additional smart people, so maybe it's not exactly fitting the definition of "land", but in practice it seems that smart people busy with high paid work aren't quite keen on multiplying, so it's suggested by the article that supply of this resource is actually shrinking over time.
So increasing salaries in IT can be viewed not as "wages" for "labor", but more like "rent" for the "land", where each programmer is a land-lord of their high-IQ brain.
correct link https://web.archive.org/web/20200225035646/https://www.xenosystems.net/iq-shredders/
Programmers are not a natural resource, they are human beings. I for one find this pretty offensive.
> In theory you can give birth to and bring up additional smart people
More people means not only more supply of labor, but also more demand for consumer goods. Fertility and immigration work similarly in this respect. [They also have differences, of course.]
Ethically, Immanuel Kant would suggest that code monkey breeding farms would treat people merely as means and not (also) ends in themselves, and would object on those grounds.
More prosaically, it's plausible that workers in selective professions collect a good chunk of salary and a little bit of oligopoly rent. However, oligopoly rents tend to dwindle as the number of competitors grow (c.f. https://en.wikipedia.org/wiki/Cournot_competition, reading "firms" as "workers"). Also, the main mechanism which enables mono- and oligopolies to charge a higher price is that of restricting supply. Provided the labor unions are not given the power to force some people out of the profession in question, there is no way (e.g.) one programmer could reduce the total number of programmer labor hours supplied by other programmers. If each programmer is one among very many (say, hundreds or maybe thousands), each person's decision to work a little less has a negligible impact on the wage bargaining position of the rest.
So I would guess workers in most selective professions overwhelmingly earn wages and basically no rent, provided inflow of people into that profession is only limited by competence and willingness.
Earning lots of money just because the supply and demand curves intersect and a market clearing price that's comfortable for you is not an example of rent.
Cournot competition is not the only oligopoly model. There's also https://en.wikipedia.org/wiki/Bertrand_competition and https://en.wikipedia.org/wiki/Stackelberg_competition.
Compare also to the long-run industry supply curve on p. 397 of Intermediate Microeconomics (5th ed.) by Hal Varian: loosely speaking, it shows that the more oligopolistic an industry is, the easier it is for slightly inefficient competitors to enter—their share of the oligopoly profits cover for their inefficiency. They are also more strongly incentivized by the greater oligopoly profits. In the limit, this behaves like perfect competition. I apologize that I can't find this diagram online.
Domain names in general should be taxed as land, with the taxable base = asking price for the domain name.
This should get rid of a bunch of the ridiculous cybersquatting (yes a domain name I owned was snatched up by cybersquatters because I was too busy *having a baby* to notice the warnings that my card had expired)
Abt network effects, I'm not really sure it makes sense to try to shoehorn them into the Georgist framework. I think Georgism checks out, but a minimalistic, "single tax" idea is pointlessly restrictive.
LVT + various Pigovian taxes on luxuries & other stuff with negative externalities (so that they don't need to be illegal 'for people's own good e.g. heroin', and CO2) + some level of capital gains tax + maybe-very-minor-wealth-tax + inheritance-tax, progressive and with some reasonably high floor. That comes out the top of my head to replace all(?) other taxes (and probably still end up with a huge pile of cash to redistribute as a 'dividend' - or if not, do something else with them, or drop them in order of capital gains then wealth tax).
Network effects of Facebook are a really, really weird kind of monopoly resulting from pure inability to coordinate. The whole construct could be simply dissolved without taxing Facebook or dismantling it, actually.
I've already spoken about it online a few times, but thankfully someone elaborated on it recently. Weirdly it's Moldbug. Not sure how do links work in Substack comments, so: graymirror.substack . com/p/tech-solutions-to-the-tech-problem (just C-f "Protocol extraction" to skip the Cathedral-talk). I'll quote it below.
"One way to peacefully attack the tech behemoths is protocol extraction—analyzing and reconstructing the secret protocols that their apps use between client and server.
If these secrets were open to the world, any fool could write a Facebook client. This would set another power against Facebook: the power of the client against the server. For example, Facebook would struggle to force third-party clients to show its ads; even worse, multi-server clients would emerge and become the user’s true center of gravity, making it easy to switch servers and destroying the lock-in that is Facebook’s capital.
Obviously, these superior clients—a whole marketplace replacing a captive monopoly—would create immense consumer surplus. What Facebook has been doing is tying its monopoly in one market—social servers—to a monopoly in another—social clients. These are two separate lines of business that, if the Internet was used as the network it was supposed to be—a network of open protocols—would not be connected at all.
Obviously, this is exactly what antitrust law was meant to prevent. Obviously, the right remedy would be for a judge to order Facebook, or Congress to require all big social companies, to simply disclose the specifications for their internal APIs—and handle any packets matching these specifications, regardless of what software sent them. Congress could turn every app into an API, creating a Cambrian explosion of clients— not to mention a huge number of good American code-monkey jobs.
But of course the System will never do any such thing to itself. So that’s out, now. Still, sometimes when there’s a will there’s a way.
There is a will for one such API: the YouTube API, whose protocol is tracked by the famous youtube-dl project that—downloads YouTube videos. Even this is not easy. Still, it is physically impossible to create a protocol that cannot be reverse-engineered.
For a comparatively small amount of money, perhaps even funded anonymously, it might be possible to analyze, document and maintain the private protocols of all major social services—turning all their apps into APIs, and creating a compatibility library sound enough that a whole ecosystem of polysocial clients can stand firmly on it.
For tens of millions of dollars in code-monkey ramen (although you might want to spend at least as much on legal), you could devastate hundreds of billions of dollars in monopoly capital. Nothing personal—you’re just “commoditizing the complement.” How about it, donors? I’d maybe go with… ZCash… for this one. (Maybe the world needs a donor-advised fund that makes distributions to ZCash addresses.)
Of course, this magic library is useless if no one’s phone will let them use it. This is another good thing for donors to support: free-software phone stacks. Which will work even better if they can reverse-engineer private Google protocols…"
I'll note that decentralized alternatives to Whatsapp and Youtube already exist : Matrix and PeerTube as an example.
Matrix is particularly relevant, because that's what Gab uses now (though they decided to split themselves from the rest of the network).
But you'll notice that Parler was still created. Why ? I'd guess that because pre-Matrix Gab was not allowed on Apple Store & Google Play, and later lots of Matrix clients went to pains to specifically block Gab (more because they hated that kind of crowd than because they were forced to ?)
Gab is ActivityPub/Mastadon-fork, rather than Matrix btw (Matrix is more IM-focus than "general social media")—though it's not like there isn't a whole load of neonazi content on certain Matrix homeservers.
Network-effects-as-land is a stretch yeah, and on second thought I don't want to think of it that way any more than I want to think of intellectual property as land. Economically, they both attract rent though, and apparently George advocated for regulating "monopolies of scale" and that basically looks like what (I think) most people would be happy with.
Whoops, I indeed confused both "Ms", my bad !
----
But clearly georgists also consider intellectual "property" to be land/nature/privilege, and not to be wealth ?
peak.singularity mentioned Matrix, and I'd like to add that they do have bridges to Telegram and Facebook Messenger, among others, but the UX is not great, in part due to issues with login ("oh yes, it's very suspicious you're not logging in from an official client"). Similarly, services like nitter and bibliogram tend to end up rate limited, etc. On the other hand, I did manage to find what Henry George thought of natural monopolies the following being paragraph 11 of a platform he wrote:
"With respect to monopolies other than the monopoly on land, we hold that where free competition becomes impossible, as in telegraphs, railroads, water and gas supplies, etc., such business becomes a proper social function, which should be controlled and managed by and for the whole people concerned, through their proper governmental, local, state or national, as may be."
That's an issue with Telegram & Facebook Messenger, not Matrix.
(See also : Slack shutting down their IRC bridge.)
Also, I confused Matrix with Mastodon, but it's a great example of another federated and viable alternative.
----
George speaks about infrastructure here, which by his own definition should be considered as capital, rather than land/nature/privilege ?
I guess that he's a socialist in this way, considering that this kind of capital should be owned by the government ?
It is, and I believe many people, Georgists included, would consider it anticompetitive to a degree.
About infrastructure: A lot of it tends to already be owned by the government (roads, the post office, etc) and it's easy to see how a government can build more if it's beneficial enough to increase land rent by more than it costs. For that currently in private hands, I'd suppose it'd be most fair to have it brought back at a fair price and/or regulated to charge the marginal economic cost. Georgism seems to me as much an anti-monopoly movement as it is one specifically anti-land-monopoly, it's just that the land monopoly is the strongest: "the robber that takes all that is left", as he puts it in Protection or Free Trade.
In EU, the monopolies of mobile cariers were forced to provide access to their infrastructure to "virtual operators", so that the physical network (which causes the network effects) must be shared (at reasonable fee) with new players. I strongly believe a similar thing should be forced on Facebook (enforce that GraphAPI etc. give enough functionality to application developers that they can essentially run their own "social network" on the subgraph of the whole FB's graph), Slack (enforce that IRC bridges are again functional), Messenger (so that XMPP bridges work) etc. What do you think?
On first thought, yeah, but…
- this level of the Internet is way less standardized
- during the last years Facebook has been on the countrary clamping down on what it used to share, because some companies abused it (Cambridge Analytica, the recent phone numbers leak)
- I'm not sure that Facebook can even be 'retooled' this way : going from centralized to decentralized ?!
- the bridges kind of suck anyway, much better to have the functionality directly in the protocol, but what's even left of XMPP in Facebook Messenger ?
- Facebook (& its other companies like WhatsApp) is probably to big anyway at this point, it must be shut down
Actually, you might be onto something with these network effects :
https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty#comment-1768690
"After thinking about it, it's not just about fungibility, but about ease and durability of storage and transport :
At one end of the spectrum you have stuff like ice, oysters and strawberries, then further long the spectrum you have apples,
then in the middle (?) of the spectrum : stuff like grain and gold,
while the other end of the spectrum would be things like hawala, Internet-carried conventional banking and bitcoin."
And what does hawala, conventional banking (even with paper money) and bitcoin have in common ? They all require a network ! (And their "value" most likely rises with the usual network law, as the square of nodes ?)
Coming back to Facebook, remember Doctorow's "Whuffie" ?
(social reputation replacing money - note that that book predates Facebook by a year)
https://en.wikipedia.org/wiki/Down_and_Out_in_the_Magic_Kingdom
Also, remember how Facebook wanted to launch their own cryptocurrency ?
I read the ship thing as saying something like this:
Before anything is done, the laborer has some time T and the capitalist has some amount of capital K (which is some combination of money and shipbuilding resources I guess).
The laborer spends T and the capitalist spends some fraction of K (say aK, a < 1) to build half a ship, which is more valuable than T + aK.
But the ship is owned by the capitalist, so really all that's changed so far is that the capitalist has gained some value larger than T (since the capital transfer was just K -aK +aK). Thus, when the capitalist pays wages to the worker, you could say it's coming out of the value the capitalist and laborer generated together.
I'm not sure whether that makes any sense though, I Am Not An Economist.
Yeah that's mostly how I see it. If you are in the ship building business, then except for the first ship you build, you can see wages as coming from the sale of the ship. Your capital is all the stuff you bought to make the ships, dry docks, cranes, welding equipment. The first ship you build is a little special, and you have to borrow to make payroll.
> you have to borrow to make payroll [on the first ship]
Or save up money (or other payment forms).
Re: 1, I think George's point is that that capital didn't simply fall out of thin air or get plucked off a magic money tree. Those highlighted bank notes came from selling goods or providing a service, not by "and I reached under my mattress and there they were", before they were socked away in the bank as savings. So it all comes out of production - if the employer is paying his workers to build ships, he must be selling ships, so the money from selling ships yesterday pays today's wages. But you can't sell a ship until it's produced (well, you can build it on commission and get paid in stages until it's finally built, I guess), so it's the fruits of former production that give you that money. If the employer borrowed that money to set up a shipyard, then the money from the bank came from depositors who had saved it there from the proceeds of buying and selling.
It's the same notion about usury being a sin, where Dante includes moneylenders/bankers in the Seventh Circle of Hell (the violent) on the liminal edge where that circle transforms into the Eighth Circle (fraud). Usury is violence against nature, as it makes a sterile instrument (money) 'unnaturally' breed by interest, not by doing anything fruitful as being used for buying and selling but simply "pay me for letting you hold this money in your hand". If I lend you 100 nobbles, you can't just pay me back the 100 nobbles, you have to pay me back 120 nobbles. Where did the extra 20 nobbles come from? What is this charge for? It's an invisible cost, pulled out of the air.
I don't think that quite works that way. Sure the money paid back to the banks, the banks can pay back to the treasury, decreasing total currency in circulation. But the interest paid on the borrowed amount is not paid back to the treasury but is spent on paying workers, rent, and as profits to the owners of the bank. That money continues being circulated.
Notes on Inferno canto 17 and the usurers: https://digitaldante.columbia.edu/dante/divine-comedy/inferno/inferno-17/
As the review says, "money isn't wealth".
> If I lend you 100 nobbles, you can't just pay me back the 100 nobbles, you have to pay me back 120 nobbles. What is this charge for?
It is a charge for lending the money rather than the other guy who's willing to pay you 119.99 nobbles.
And at root (and in a world with only one borrower) it's something to compensate you for your patience: you're spending money later rather than now, and you're giving up the flexibility to spend it whenever you want, until the loan is repaid (compared to just keeping the money in your mattress).
Can I borrow your car for 5 years at no charge if I promise to repair any damages? Would you feel entitled to compensation for something you lost? Should I pay at least your bus tickets in that period?
> Where did the extra 20 nobbles come from?
The borrower.
> it makes [money] breed by interest
Setting up a loan is not the same as creating new currency. Or rather, it can be in some banking systems, but the two don't necessarily have to go together.
Coming at it another way: the money in my bank account breeds not only when I lend it out, but also when I add my monthly wages and spend less (over time) than I earn. Are labor and lending equally unnatural acts of violence against nature?
[I'm not sure I'm arguing against your or Dante or both, but I want to put this out there anyways.]
Land is defined as stuff from nature. not land as land on earth
one example of land for google I presume is the https://www.google.com/ domain name. follow the idea, I assume that google gain value from other website existing and the stance is to tax google to subsidize society at large
So with this definition the government can tax whatever they want at whatever value they define and you can't argue?
uhm 2 things, 1. this already happened
2 I am just saying that domain name is in a certain way analogous to land, I am not saying anything else
It has absolutely not happened. The government, despite all the things it taxes, is pretty constrained in what it taxes and how much.
and 2 yes my complaint is that if you start reasoning like that everything is in a certain way analogous to everything else
I am just saying I can't argue how much money is being taken from me as tax and I am a citizen of 2 countries which meant I tried 2 taxation systems.
I was under the impression that Scott asked what would be analogous to land in the case of Google, hence my respond
I guess the core question would be : "Is it not wealth and can you monopolize this thing ?"
If yes to both, then it's nature-like and *should* be taxed to near 100% by the georgist Nature Value Tax ..?
The government (in a democracy) represents the people / voters, so yes...
I would point out that although there are some parallels with domain names to practices in real estate speculation (e.g. domain name squatting) a major difference is that you can create new domain names. I guess you can't create another www.google.com, but nothing in theory stops whoever mints new domains from spinning off www.google.fart
I wonder, how does trademark law applies to www.google.fart ?
According to randos on Quora it's a legal grey area at best and google would probably wrest it from you one way or another:
https://www.quora.com/What-is-the-legality-of-purchasing-a-competitors-domain-name
Arguably, though, the total value if you integrate over the space of domain names is bounded, i.e. the set of even slightly desirable domain names is finite. So in practice I think a kind of Georgian tax on domain names could be enacted by assessing the general desirability of your domain at regular intervals, e.g. using search trends or something more sophisticated. This would mean that a squatter would suddenly have to pay a hefty tax if their domain suddenly became culturally relevant.
Yeah might be worth considering! A use it or lose it fee for this kind of thing seems like it would solve some things whether or not you go full George with it or not.
I think the use of the term "land" here is unfortunate, because what George really means, I think, is "natural resources." But then people might not include land in that category, so perhaps we should use "land and other natural resources," understanding that this includes things such as the EM spectrum and domain names.
I've settled on calling it "land/nature/privilege", until a better term is found. I guess "that which generates rent" might work too ?
2. Google does own a lot of land, and patents/IP count as economic land. Oracle should be considered a landlord as much as it is an innovator- the patent wars were pure rent-seeking. (There's a balance here to encourage innovation, prizes for IP, or taxing IP ownership like land, could help).
Part of why, imo, george's movement got out-flanked aesthetically by marxism is precisely because he didn't care about *how much* wealth a person or company had, but *how* it was acquired. That's a little less straightforward than "eat the rich," so after george died it was difficult to keep the raggedy alliance of libertarians and socialists and labor together. The government also did some straight up monopoly-busting, land redistribution, etc, to address some of the problems. All property taxes are, in part, land value taxes- they just *also* are taxes on improvement, disincentivizing improvements.
Thus: https://www.bostonglobe.com/business/2019/07/03/one-third-acre-back-bay-location-parking-but-not-for-long-price-million/qyoEyaJMBE1qg9piuf5piI/story.html
To your first point, i think the other comments have responded better than I could've.
Really glad you put this review up - I've often thought that reading between the lines, the places where you tend to see government intervention as just vs unjust roughly align with georgist principles- and to be clear, henry george popularized them in the english-speaking world in the 19th century in this form, but the ideas have been talked about everywhere for most of human history (mencius, ibn khaldun, as mentioned some indigenous conceptions of ownership). 'Legal systems very different from our own' covers one or two of these examples, I believe.
> Part of why, imo, george's movement got out-flanked aesthetically by marxism is precisely because he didn't care about *how much* wealth a person or company had, but *how* it was acquired.
While you're right about Twitter meme content, when they talk theory Marxists and Georgists make the same distinction about "how it was acquired". The difference is that George says we'd be better off minimizing rent*, and Marx says we'd be better off minimizing both rent* and interest*.
(*where "rent" and "interest" are defined in the Georgist way as in the book review above)
marxism as an aesthetic is diff than marxism as written (though there are criticisms that apply to both).
Marxism "as written" is correct. Aesthetically they have cool flags and such.
"Part of why, imo, george's movement got out-flanked aesthetically by marxism is precisely because he didn't care about *how much* wealth a person or company had, but *how* it was acquired."
Marxism makes plenty of criticism about how wealth is acquired in a capitalist system.
Re: 1) I asked a Georgist friend of mine about this and here's his reply:
> I partly agree with Scott about the importance George puts on this question. The wage-fund, was a popular idea at the time and still has spin-offs today, like the idea that artificially enriching people who are already rich is a good way to increase capital creation.
> As for the merits, George made a strong case. Any exceptions, like the one George outlined, where labor accidentally produces nothing of value, are outliers. Remind Scott to stick with George's definition of 'capital' and it will make more sense. I've worked on a ship. I've repaired a ship. It wasn't done when I finished; it was just better. The ship was better and worth more. That was 'capital' I created with every hour of my work. It was not removed from anything that the ship owner had.
Re 2, land-based agglomeration effects are HUGE in Silicon Valley; Google has enriched landlords in the Bay Area by an amount that far exceeds its market cap. So in that sense, Google needs valuable land more than most businesses, though it pays for it indirectly through higher salaries. But the key point of Georgism is that people who are able to put land to _productive_ use actually benefit since they will be able to buy the land they need for much cheaper and pay the rents out of the value they extract.
> they're paid out of the saved money that the person who founded the shipbuilding company brought in (or borrowed)
As per the article, money is not capital. If that money was earned via production, the workers are paid out of production.
The boat, on the other hand, can be used for shipping, in which case it would be functioning as capital. So to summarize, the workers are paid from production (saved money) rather than capital (the ship).
Not really transparently false any more than saying that you're "spending the Bahamas trip money" on car repairs - all money is fungible so no money belongs to anything, right? But the only reason you loan the capital to build the boat is because you anticipate the labour put into the boat will pay back the capital. In a perfect-information world with zero percent interest, the capital wouldn't be relevant, but the labour still would be. That's the point Georgists are trying to make.
1) The consensus position he wants to debate is that it there’s too little capital chasing too many laborers.
2) The positions of “farmer” and “farmland owner” are already in practice quite distinct. Georgism would obliterate the returns on owning farmland but not on working it. Setting aside corporate tax, Google pays a kind of “tax” to the landlords of Mountain View through what are nominally wages. It argues we would all be better off if Google could grow even larger with that weight off its back.
I don't think that George would be happy with Google's monopolistic practices.
1. (paid out of production rather than capital) George is fighting the idea that without capital, there is no production and no work for workers. He says this is not true: only land is required. As long as you have land you can work and generate wages.
Capital does increase efficiency, and it does make longer-term project possible or at least more practical, but in the en it is not required.
It's all in support of its ultimate conclusion: land enables production and land only should get taxed.
Regarding highlighted dollars: sure, when profit is far in the future, workers are paid in capital. But this is only an advance on the proceeds of production. If you remove production, capital wouldn't flow to the workers as wages. If you remove capital, the workers could still generate wages (e.g. by picking berries and selling them, or whatever).
Yeah, though that's really stretching it : even non-human *animals* make capital in the form of tools !
And you're not going to be able to carry a lot of berries with your hands alone...
Philosophically, our bodies are both 'land' AND 'capital' (and thus 'wealth').
"Thus, every patent reduced to an ownership claim over an expression of nature."
- https://mises.org/library/copyright-and-patent-benjamin-tuckers-periodical
By George, ideas are land. Google may hoard access to land they discovered value in [trade secrets], and Google may be granted temporary monopoly over land they discovered value in in exchange for making their discovery public [patents], but in any case Google is using a *lot* of land. Furthermore, the land *value* of the Googleplex and other properties is likely very high compared to farmland.
Thus, to your presumed point that a modernized land value tax might greatly shift the modern tax burden, that seems to entirely depend on the details of a specific proposal, the extent of its definition of "land", and the tax bill determined for modern "land". How much might Google be charged in comparison to WeWork or ExxonMobil?
As for the farmer, I think a quick search for the effective tax rate actually paid by America's largest corporations will show that the farmer already frequently pays a higher rate under the present system.
As to the fairness of who pays how much land value tax, I think the more interesting comparison would be between farmers and J. K. Rowling (as George seems to have a rather different view of copyrights than of patents). Indeed, a LVT seems like something where the farmers pay more than Rowling.
Regarding the highlighter marks: the way I read this, it seems to me like George's reply should be that, since dollar bills are not wealth, but merely a pointer to wealth, exactly which physical bills are being used to pay wages has no influence on where the actual wealth is coming from.
That being said, it also seems to me like the sort of counter-example mentioned (where wages are higher than the wealth labourers generate) should be fatal to this view, even if these examples are not sustainable (after all, they are certainly possible and might even be metastable if the person paying the wages is inefficiently juggling many different enterprises but not suffering net losses). I suppose George insists on this because it makes labourers seem less dependent on capitalists than the alternative, and he is trying to shift attention away from that particular interaction. I assume it is also possible to strengthen the position somehow with the sort of atemporal approach mentioned in another comment, but I can't see how that can ever both account for the aforementioned counter-examples and make any meaningful difference.
In accounting (?), there's a notion of a 'going concern', i.e. a profitable business/enterprise that 'should' continue to exist (and operate) indefinitely.
'Assuming' a going concern, workers are paid out of production – 'on average', e.g. from the perspective of a profitable ship builder.
Arnold Kling has a phrase/acronym that I think covers this pretty well, PSST – patterns of sustainable specialization and trade.
You're totally correct that _creating_ such a pattern requires capital and thus, in a very real sense, workers are paid from 'capital' – at least initially. And, when those patterns _cease_ to be sustainable that's also in a very real sense equivalent to a farmer 'eating their seed corn'.
"As for compensation for risk, George says that risk averages out and disappears when you take the God's eye view and sum all of society's transactions together. If I take the winning side of a bet and you take the losing side, I enjoy gain, you suffer loss, but the amount of wealth in the world hasn't actually increased as a result of our bet."
But there are many bets which don't have people on both sides, an consequently a societies total transactions and economic activities can be more or less risky in aggregate.
what bets don't have someone on the other side? those just sound like 1 vs society, or the present beneficiaries of the status quo the gambler expects to change, the 'other side' is diffuse but exists
I was actually curious about this part of the review as it seemed like a bit of a hand-wave, can you give some more detail?
I'm a small business owner and I regularly find myself in situations where you hear "Okay, I'll pay you a good reasonable wage to do this work, and then I'm going to be taking a risk on whether it pays off, if it goes big then I get my big cut as I took nothing up front, if it doesn't pay off then I basically got nothing from the project." So there's this natural sliding scale between upfront compensation and revenue share (or equity) based on the risk someone takes on. How does this fit into the framework about the Georgist notion of capital?
Any bet against nature might qualify, e.g. saving money by constructing a weaker building is effectively betting against a catastrophic weather event. My understanding us that a lot of farming is essentially betting on the weather.
Tons of bets are not zero-sum! If I'm a miner I'll make a bet on where to excavate, and if it turns out I'm wrong, I lose, and in aggregate humanity loses too. (Still, it is probably true that in aggregate the win:loss ratio of all humans together is nearly constant)
If I bet my art collection will be stolen, but actually it would not have been, I can hire security, but no benefit accrues to me from that (a fact I cannot know, so I keep paying the guards anyway). btw you might point out that the security guard benefits from the wages, but the security guard would benefit equally from doing a productive job like "factory worker", and in the latter case aggregate wealth of society becomes higher. A malfunctioning society suffering from higher risk of theft (for whatever reason) will waste more labor on security guards and suchlike. By George, of course, the malfunction can print be traced somehow to landlords.
Collectively, most of humanity has spent the last 30 years making a bet that switching to clean energy isn't worth the cost, so let's just keep burning Georgian land (oil) until we run out. The consequences of that bet, good or bad, are largely independent from what the cost of switching to clean energy would have been. (aside: of course, there were some countries and businessmen who did invest in clean energy, and so we're finally starting to see some light at the end of this tunnel) By George, this is a special case though, a case in which human actions can affect the total supply and value of land.
Yeah, though wages are a distraction here - wages are value but they aren't wealth.
However, if the alternative to being a security guard is staying jobless, then *something* is gained by the whole society by you being hired as a security guard. It isn't wealth, but it isn't *just* value - what is it ?
In that case the gain is from wealth redistribution, as the marginal dollar is much more valuable to the security guard than the wealthy art-owner. The art-owner might have used the marginal money to buy an extra or upgraded car, while the otherwise-jobless security guard would use the same money for basic things like rent, food and furniture. Mind you, in a normal no-UBI society with a poor job market (so that the guard would otherwise be jobless), the art-owner has good reason to hire security guards, as unemployment tends to cause theft (crimes of desperation).
(edit: art theft isn't a normal crime of deperation, but working for the mafia could be, the latter being the sort to do this kind of theft)
Yeah, you're onto something - this is probably also related to network effects...
So how does this work empirically? I Googled Land Value Tax experiments, and the first result is a write-up on Harrisburg in 1982 and Allentown in 1996, which fixed blight and helped protect vulnerable groups through the use of LVT. Pennsylvania lets you tax land value more than building value.
https://www.strongtowns.org/journal/2019/3/6/non-glamorous-gains-the-pennsylvania-land-tax-experiment
It's worth mentioning here that there is at least one Philadelphia City Councilor who is serious about an LVT, which could have excellent results for the southeast part of the state. (The current Philadelphia wage tax is an excellent example of "if you want less of something, tax it". Many high-income jobs and individuals have moved to the suburbs because of the wage tax.) https://www.youtube.com/watch?v=QomEl3rV2LU
IANAGeorgiat - pretty committed Austrian, in fact - and I am enormously impressed by this review, and by the conceptual elegance of Georgism.
Like many other theorists, I find his analysis of the situation into its constituents astute, but am not sold on the solution until and unless it's empirically tried thoroughly. So here is what I've updated on, and the questions that have opened up for me as a result of reading this:
1) This summary has convinced me that the Austrian account of the 'mixing of labour' theory of ownership WRT that not created by the hand of man is not complete (it is hand-wavish as the best of times), and that a greater nuance is needed there to flesh it out. Good opportunity for theoretical *and* practical work!
2) The question of the equilibrium dynamics that result from this theoretical lacuna - the equilibrium being critiqued here being that of nearly all the gains of productivity and wealth (in the Georgist sense of those terms) being captured by rent, and the resultant unjust and overall shitty results - I am now convinced is a real one.
3) George does not address some very important question - who, whom? being the biggest one. There may be ways to fairly calculate how much the various levels of aggregation - neighbourhood, town, county, larger level entity, state, country, etc (and in some sense the world? potentially applicable to question of pollution, etc, and other commons problems?) - contribute to land value, thus leading to the rippling everywhereward of positive incentives. But who can be trusted to actually do this calculation, and not be a dickwad about it? What prevents higher-level landlords, etc, and all the resultant garbage just happening at a higher level - thus making everyone the milch cow of the state instead of Ms. Nguyen?
4) The problem of identification and sentiment is real, and I'm not going to pretend it's not. Stability is power, transience is impotence, as the ever astute Sir Appleby said of the civil service and elected politicians, respectively. I damn well want to be able to buy land in a city I expect to be a nice place and continue to live there because I saw the opportunity and took a risk on it. If I'm not renting to anybody, what the fuck, man, how can you just tell me to get up and get out?! This is outrageous! I live here! My friends and community are here! My extended family lives here! Fuck you and your economic optimisation, we're human beings, not soulless automatons in the service of economic efficiency (as *YOU* conceive of it - what happens if I don't agree with you?!). Completely unaccetable.
But... the problems are real, too! What is to be done?
Here's a proposed solution that immediately suggested itself to me:
a) If you rent out your land but do not use it yourself, then you have to pay the LVT.
b) If you use the land yourself, then you do not pay the LVT while you're using it, but your capital gains tax is massive - so there's still *some* gain to speculation, but very little/modest compared to what it is now.
c) If you sometimes own/use the land and sometimes rent it out, then some combination of the above two that I haven't though of but I'm reasonably confident exists and someone may be able to elucidate as a fun intellectual puzzle?
This clearly prevents the situation where I don't actually have property rights in the land which is my property, thus forcing me off my land; yet it also ensures that the only reason I'd have to *not* move off it and move somewhere else - or even better, develop it, pay the land rent, and collect on my investment in the improvement - is because I *actually want to stay there and/or use the land*, not just because I'm usuriously/avariciously HODLing.
I presume this has already been thought of by *someone*. (If not, you may thank me for making this not inhuman and Molochically horrible!) Any Georgists care to help me with this?
Addendum: this seems a clean refinement of the Austrian theory of ownership, in that it is claiming that your ownership of something you have mixed your labour into should be qualitatively and quantitatively matched with the labour you have mixed into it - and since it is not in fact your labour that has created the land ex nihilo, it is impermissible to claim that your ownership extends to it - but it *is* in fact completely permissible to claim your ownership extends to it *in a way qualitatively and quantitatively matched with the labour you have put into it*.
This exposes a cleavage - that of 'property because labour mixed in' and 'property because it prevents disputes and resultant violence, and allows planning and action at all, and also man is a territorial animal and it's a basic instinct of his and you try to mess with this and it'll end horrifically', both of which are implicit in the Austrian analysis but not so clearly delineated.
(More about this an another top-level post; I believe it deserves independent discussion. There are also *serious* problems with Georgism's conceptual framework which I believe lead to tyranny and atrocity quite naturally in their full development/unfolding, but I think that I may be able to extract the *kernel* of the good idea from the oft moralistic and ressentiment-tinged *shell*...)
Georgism solves the first but not the second - it does not address my objection 4, which I hope the (seed of a) scheme I outlined above addresses and solves, in preventing expropriation, which is a terminal goal for me.
In general: Bravo, bravo! I have rarely if ever seen anyone actually a) show a real weakness/point of incompleteness in the Austrian categories, and then b) *refine* the conceptions it was working with, instead of just using it as a political cheap shot. Wonderful! I had become jaded by reading things which were clearly incoherent and not even rising to the level of being wrong for so long that I'd given up hope of constructive contributions from economic discourse. This was like a draught of cool water in the parched and dessicated heat of the desert of discourse today. Great good fortune to you, stranger, for this!
Re 3, the difference is that rent paid to a landlord doesn't come back to you in any meaningful way. But money paid to a state comes back to the citizens. (Not with perfect efficiency but significantly greater than the landlord)
I'd say its the opposite, the landlord at least faces some competition/incentive to add value and make more money. It's much easier for a renter to switch landlords than states.
> If I'm not renting to anybody, what the fuck, man, how can you just tell me to get up and get out?! This is outrageous! I live here!
I regret to inform you that property taxes already exist.
Yes, and that's also outrageous.
Another solution to (4):
You don't have to pay LVT on the first $750,000 of your primary residence.
Or make LVT a progressive tax, tied down to the net worth. Say, <$100K, none. >$500K, full. Some percentage at (several points) in between. $500K might be higher, dunno.
Or maybe it'd actually work to make it so that a person isn't charged a LVT on a land which is both a) owned by them, b) their primary residence. I'm not sure how enforcible is b), so maybe even "1 location of their own choosing". Where 'location' is restricted in various ways to fit only actual homeowners and not someone who owns a square kilometer of land or sth.
But it doesn't necessarily solve the problem of a family living in one place but one member just gave out property rights amongst them. Or a (criminal) landowner making an informal deal with some homeless people and giving them the property rights (enforced in ...criminal... ways)
" What prevents higher-level landlords, etc, and all the resultant garbage just happening at a higher level - thus making everyone the milch cow of the state instead of Ms. Nguyen?"
Nothing. The rents would still gobble up the value like they do now. Other than removing the speculation component from the equation - which doesn't work even if LVT is cautious, say, targeting 50% - you're paying indefinitely a huge sum of money _hoping_ land value will rapidly increase. Soon.
If you model 'the government' to which taxes flow as a third party, not a 'society' - then typical reaction is "government is stealing from these people, why are you supporting taking from them, why is their wealth a concern at all?". But that perspective reduces to nonsense given that government has power to take anything. So modelling it as a third-party enemy is pointless. All useful conversation needs to happen in the frame of "should WE tax it?".
If we approach it from that frame, it's the question of moving current system, with its sources of the budget -- to another one. Right now we tax various stuff, it goes into the budget. What if we do the LVT? Now all of the rent goes to the budget. Presumably it'd exceed income taxes. We _could_ drop them. Or not - it's a completely different question.
Assume for a second we move 50 years into the future. Now ~all owners of the land just inherited it. Should society's wealth really flow to them. What are the incentives? Why tax income, just to preserve their - ultimately based solely on status quo - property rights.
If we make "have a certain national budget" an invariant, why would we want to depress economic growth by _not_ shifting tax burden to the unavoidable sink - which extracts massive amounts of value in ways completely independent from the owner merit?
Rents can't be avoided if land is 'free'. If it's communal, you can't use it to build fixed structures on it - otherwise they're effectively not yours. If it's managed by the command economy.... well, it's just bad at allocating it properly. LVT seems like a sanest idea yet. Land is still allocated by market forces, but wealth isn't gobbled up by the - ultimately - feudal lords.
Also - recently I sort-of came up with a similar thing without hearing about LVT but couldn't figure out how to deal with common ownership of land while letting people actually... live. Now that I think of it, separating structure-value (improvement) from the land seems definitively doable to some extent. Details would be iffy, but suppose someone owns a piece of land with skyscraper plopped up on it.
All that is necessary to do is calculating the cost of building said skycraper - building the building - on a nearby, empty piece of government-owned land. Add some safety margin. Look into the documentation of an actual skyscraper.
Determining value of land seems a bit harder, but it could involve looking into the transactions of renters, for example. Not like state doesn't track renters and landlords.
AFAIK separating land ownership from structure-value ownership is already not that uncommon ?
The value of the land is the market price for the property minus the cost to recreate the building and other improvements.
The issue of the commons that you raise might actually have some very interesting implications. If the government now has a more direct financial stake in the wellbeing of the land then policing negative externalities becomes a way higher priority. If a company dumps toxic waste in a river and spoils the adjacent farmland, it is destroying the revenue base of the government.
Climate change is set to reduce a whole lot of land value and the resulting revenue projections in a hypothetical LVT state would align its priorities with mitigating it.
Anchor links (to appendices) are once again broken, linking to a different page entirely. Please replace them with relative links. (Or to this same page, which should work, although relative is of course better.)
Just a really great article!
Best mind-shifting thing I’ve read in a while. Thanks for the great write-up.
While I find Georgism tempting, my problem with it is that, essentially, exclusion of rival uses for land is an externality, thus LVT is a Pigouvian tax, and "Coase plus Pigou is too much of a good thing" (http://www.daviddfriedman.com/Laws_Order_draft/laws_order_ch_4.htm). The issue, as I see it, is not that land is enclosed, but that that enclosure was accomplished by force (as in TFA's Henry VIII example) meaning that the market never had a chance to compensate the victims.
Whereas in a Friedmanite ancap utopia, I only recognise your title to some land because my protection agency has made a contract with your protection agency which includes some kind of land registry. Which *maybe* means that if an LVT works as well as advertised, then one would get written into those contracts, on a bilateral basis? This went in an unexpected direction...
>...exclusion of rival uses for land is an externality...
No, it's opportunity cost; distinct concepts.
It's both. From the perspective of society as a whole, it's an opportunity cost; but from the perspective of the individual using the land, the cost is borne by the other people who wanted to use it, which means it's an externality. (I mean, yes there's also the internal opportunity cost of the different potential uses a single person might have for that land, but precisely because that's not an externality it doesn't pose any problems of political economy.)
Great review! So what are some good arguments against Georgism? The link "If the Land Tax Is Such A Good Idea, Why Isn’t It Being Implemented?" doesn't really answer the question IMO, it reads more like a guide for how to argue for Georgism at the local level. Why aren't land taxes common and popular?
they were *extremely* popular while george was alive and roughly up until 40-years after. but the political structures at that time in countries like the UK where Churchill supported a 'People's budget' funded by a LVT included landowners in explicit power - the house of lords! Who could strike down LVTs. Georgism as a philosophy also lives in a weird space where it doesn't have as many punchy boogeymen as marxists, so it was out-competed by the left.
Georgist ideas were very influential on Sun Yat-Sen and wolf ladejinsky, who then impacted asian politics with some real-world tests on some of these principles.
In america, half of FDR's cabinet were georgists, but the LVT movement already 'failed', outcompeted by the income tax movement as the primary new funding mechanism. They tried to 'spread the manure' by encouraging suburbanization, which for a time worked as 'new land' to help laborers. But eventually, as pikkety points out, the bill comes due, and rents started picking up again, and ofc with the 07 crisis, we started building heaping mounds of speculation on land.
I would say the idea is once again gaining popularity. Georgists insist that the discipline of economics intentionally and systemically shut out the 3-factor model of production, but I think it was more stupidity than malice - suburbanization gobbled up the effects of land rents and things seemed to be going well for a few key decades, and marxism gobbled up the idea of political activism in the economics profession, it wasn't 'cool' to be a georgist after he died in most of the world.
Marxism doesn't have "punchy boogeymen", it has a completely rational and sensible analysis.
Can't it be both?
I don't think laying out the problems of society in a rational and very detailed manner should count as a "boogeyman". Marxist writings are very incisive.
I think you might be conflating Marxism, the economic analysis lens, and Marxism as it exists as a political tribe with political enemies.
As a political tribe the Marxists are correct and pick their political enemies wisely.
Oh god, here we go...
Hey, at least in *this* discussion Marx is actually relevant !
The pragmatic answer is because owners of land are politically and economically extremely influential, so their preferences take precedence over the common good
It seems like at least in built-out suburbia where houses have similar values, property taxes sufficiently approximate land taxes already, other than a few odd vacant lots, so turning it into a proper land tax would make little difference? Very high property taxes tend to be unpopular for the usual reasons. Saying "oh, it's a land tax now" isn't going to make higher property taxes popular, and neither is saying "plus, the point of this is to crash real estate prices."
Also, the main barrier to change is now zoning laws. Fixing this might allow single-family houses to be replaced by duplexes, triplexes, and so on, which would be a very good thing and some loosening up is happening already. But it's not clear we need higher property taxes to force the issue by getting a bunch of home owners to sell because the property tax is too damn high.
The spirit of land taxes might be preserved by not assessing new duplexes, apartment buildings, and so on at a higher rate than a regular house? Sort of a YIMBY discount. This won't appeal to people who want to stick it to the landlords, though. And, possibly there could be a gradual adjustment leaving property taxes at around the same rate on average for existing homeowners, but technically based on land value.
I'm still having trouble picturing how a land value tax is supposed to work.
If someone just doesn't pay, do you seize the land? That's how property taxes work. But if you seize the land and not the buildings on it, what happens? Or, if you don't seize the land, how do you collect?
If the tax exceeds what anyone reasonably expects to collect in rent or use-value, can they renounce ownership? What happens to the land then? Or does it become a hot-potato?
Is the tax based on the rent the land does receive? The rent it could receive? The rent, minus that part which is secretly the super's wages? The sales price? All these things seem gamable.
If an owner-occupier can defer the tax until sale or death, does this include a corporation? Because they can defer indefinitely, or be bankrupt when the time finally comes. For that matter, do we expect individuals to be able to pay when the tax finally comes due?
No need to be complicated here I think. Its just a tax like any other from an enforcement perspective.
There is a need to be complicated. How does the state collect the tax, and what happens if someone doesn't pay?
If there are no consequences to not paying, then why pay?
A lot of silliness would not show up if people had to consider how to implement the ideas they come up with.
The same way that property taxes are levied currently. The state sends you a bill; if you don't pay it, the consequence is that the state seizes it to pay your bill.
A private analogue of this is unpaid mortgages being seized by the bank via foreclosure. If you can't pay your monthly mortgage payment, you are forced to sell the property to someone who can.
I agree that in the edge case, the tax rate is so high that the expected value of the land is negative (no valuable non-taxed improvements, tax rate set incorrectly), and no one will buy it. Then you may need a mechanism to renounce ownership short of losing all your other assets via bankruptcy. This is why an 85% tax rate rather than 100% is suggested, but there's also a clear feedback mechanism where if the tax rate is inappropriate, everyone renounces/declares bankruptcy, and the locality recalibrates their tax rate.
But the point here is that this is a fundamental recalibration of land ownership as valuable only in so far as you have a productive outlet in mind for the land, so if you aren't using the land for an appropriate amount of labor/capital production, then it *should* be negative value (think depreciating/expensive-to-upkeep car, not appreciating urban plot).
But the land is "common", so it can't be seized. The only thing the state could seize would be any improvements - which apparently George is against.
So I'm really not sure how this would work.
The land isn't truly collectivized, it's still owned by a person -- the state is instead taxing 100% of the land-based rent. The point is to make owning raw land unattractive from a speculation/rent-seeking perspective, it is still valuable from a "Having a place to invest capital/labor" perspective.
The state could seize it from that person, then resell it to an entrepreneur who is willing to pay the tax rate in order to develop the land and profit from the improvements/labor they put in.
The state in this case would also be seizing any improvements on the land, but if they were valuable enough to matter, the owner could sell out to escape the tax burden instead of being seized (as gentrified residential-neighborhood owners currently might do when property taxes increase).
No, there really is <B>no</B> need whatsoever to be complicated.
What happens when you owe the government money for any other reason? It makes you pay the debt, one way or another.
That Georgism does not do <i>general</i> expropriation of improvements like Marxist collectivization doesn't mean it prohibits ordinary means of debt collection. Ordinary debt collection includes liens, seizures of assets, and garnishment of wages.
To add to this: how does the government collect if someone refuses to pay taxes on their labor income? Confiscate that person's labor??
One presumes there is a currently existing solution to this; you suggested some means. Using those means seems like the obvious idea to me.
The review mentioned that we already assess both the underlying value of the land as well as the value of improvements. This would be a tax based on the underlying value only. It's not the value of rent obtained, but for a well functioning assessment system, it would be pretty close to the value of the land without improvements if we were taxing 100%. Also as mentioned, many Georgists apparently say 85% would be a better number. So if the land's value, absent improvements, is able to extract $X in rent, the tax would be $X*0.85. If the landlord is able to provide improvements beyond $X (meaning, beyond the base value of the land's rent value, for instance by building better housing on it), then the landlord could collect much higher rent and make a tidy profit above the taxes.
The real kicker here is that the land would have to be productively used and could not sit idle. The main effect would be to reduce or remove speculation as a portion of the cost of land. A lesser but still significant effect would be to eliminate long standing rent charges when no additional value is being added (slum lords barely maintaining an apartment building but still charging steadily increasing rents).
>If someone just doesn't pay, do you seize the land? That's how property taxes work. But if you seize the land and not the buildings on it, what happens? Or, if you don't seize the land, how do you collect?
It doesn't have to work the way property taxes work. The assets they seize might not be the same as the assets being taxed. So maybe they would seize land and buildings together, or maybe some other asset.
Also, at least in spherical cow world, you should always have enough money to pay the tax, since what's being taxed is the money you earn above and beyond your wages and the return from your capital.
"Also, at least in spherical cow world, you should always have enough money to pay the tax, since what's being taxed is the money you earn above and beyond your wages and the return from your capital."
This is the part that makes the least sense, at least in places with a reasonably high proportion of homeowners. In a suburban area, most landowners will own a house with a yard, which they will live in, rather than rent out. They are paying their mortgage using the wages of their own labor from somewhere else.
Do mortgages suddenly disappear in Georgist spherical cow world? Or do the middle class stop owning their houses, and everyone rents?
You might be conflating houses with the land they are built on ?
Yes, that's definitely the part that's hard for me to conceptualize.
I don't live in a land of slumlords with fully paid off properties, so most rentals are a part of someone's house, that they are now, or were recently, paying off in the form of a mortgage. Thus, rents are priced at something approximating a percentage of the mortgage roughly corresponding to how much house I have reserved for me, plus annualized improvements, plus whatever makes it worthwhile for the landlord to do this. So maybe my rent is $600/month (real number from outside a big city), for a duplex apartment built into someone's house. I live near some other, similar houses, and some apartment buildings.
So now the government wants to tax 100% of the land value of this house. How will they do that? One way to calculate it seems to be whatever's left over after accounting for materials and labor. The house was built 70 years ago. So the cost of the original materials and labor plus maintenance will be... annualized over those 70 years? That can't be right? Compared to the rent for an entire house? To the rent for an empty field? There are no empty fields of comparable size anyone in the town is renting.
Maybe they do an appraisal, and decide that the house is worth $200,000, and $50,000 of that value is "unimproved land." Since nobody rents unimproved land, but some people buy it, how will that value be annualized into a "rent"? 1/30 o the cost of a 30 year loan? 1/x where x is the average amount of time the land is held?
Why do you think that nobody rents unimproved land ?
Yeah, valuation is hard and so is a whole discipline on its own, see this post by someone working in that field :
https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty#comment-1761512
Owners are their own landlords; they're implicitly paying themselves rent.
"According to Ralph Gabriel's Course of American Democratic Thought, in New York alone 200,000 people came to see his body lying in repose, half of which had to be turned away. For context, that one crowd was roughly the size of 1% of the entire population of New York at the time."
I'm assuming this is a typographical error. Shouldn't it read "10 % of the entire population of New York at the time"?
I can’t be the only one who read that sentence as “half of his body had to be turned away” and had to reread it a couple of times to understand he meant *the crowd* was turned away
Lazy googling suggests New York had 2,000,000 people in 1897.
https://www.history.com/topics/us-states/new-york-city#:~:text=In%201895%2C%20residents%20of%20Queens,more%20than%202%20million%20people
Which, holy $#!+, does imply 10%! Either a typo or as I imagine, even the author of the review couldn't fathom it and assumed they'd made a mistake.
Gonna take a wild guess that some portion of that 200,000 crowd were visiting from out of state and abroad, but still, that's absolutely huge.
I've updated the post to read "10%" - if the author disagrees, they can email me at scott@slatestarcodex.com and tell me to change it back.
The page linked in support of this claim estimates the population of the "New York Urbanized Area" in 1890 at 2,693,000 and in 1900 at 3,802,000. Taking those as lower and upper bounds for the population in 1897 would yield an estimate of ~5-7.5% for the percentage that showed up at the funeral (linear interpolation would peg it at ~6%).
Having updated the post to read 10%, you ought for consistency to update the corroborative link to one estimating the population of NY circa 1897 at ~200,000.
I'll always be happy to read an excoriation of the British over the Famine, but the tragedy was that it wasn't *deliberately* engineered, it just crystallised out of a set of conditions that had been set up for various historical and political reasons, and that only needed one little push for the entire thing to topple. I suppose George would feel vindicated in the post-famine era in Ireland, where people learned the (wrong?) lesson and "land hunger" became a thing - if you owned your own land, you couldn't be evicted. More land = more success and security. George would say "this is my textbook example of the wrongful use of land and how you set up further poverty and misery down the line".
Okay, let's step back from Irish history for a moment.
"Okay, but won't the landlords just pass the land tax on to their tenants?
By George, no. Rent is a price, and price is governed by supply and demand. Supply of land is fixed, so land value tax has no effect on supply. What about demand? Except in cases where it causes the economy to boom (a good thing), land value tax won't increase land value – what it always does, however, is reduce the demand for land by speculators. If it costs nothing to hold on to land, of course I'm going to want to grab some and HODL. If the rent I could hope to gain is taxed away, I won't bother."
Except that (a) if it's not profitable to charge high rents, I'll just hold on to my land. If it's not worth the while of speculators to pay me an inflated value for it, it's not worth me doing anything with it. Even renting it out, because you'll tax me on the value of the land and the rent will go to paying that, so I lose nothing even if I gain nothing by letting it lie idle for weeds to grow on. Indeed, if I manage things correctly, I may even be able to offset my tax liability against it as a loss! (b) land is valuable in proportion to demand. Large English estates often went under due to being "land rich, cash poor" and the shift in generation of income from 'rental income' to 'returns on investment' in the 19th century was driven by this (c) landlords will *always* find a way to pass on taxes to the tenants.
Let me tell you about a deliberate little fiddle of a rent scheme that everyone, including the government, winks at. HAP http://hap.ie/ is a new scheme that came in a few years ago to replace the former rent subsidy schemes in operation. At the time, still in the throes of the aftermath of the economic collapse, many landlords were willing and indeed glad to take on tenants who were in receipt of rent subsidies. However, as the economy improved and rents began to rise to the market rate, landlords were now reluctant to take those tenants as they could only afford a certain fixed rent. They preferred to go for tenants that they could charge full whack.
What to do? You had a problem of people waiting for social housing, who could not by themselves afford private rented accommodation, and thus a resulting homelessness problem. On the other hand, you're paying out taxpayers' money. If the rental allowance is *too* generous, this will lead to rent hikes because landlords *will* charge up to the limit. You as the government are caught between the rock of paying more and more in subsidies as landlords up the rent - which makes the voters angry - and the hard place of increasing homelessness - which makes a different sub-set of voters angry.
So, despite the fact that this is not supposed to happen, prospective tenants were given "nod and a wink" advice. When signing the rental agreement, the landlord would put down the notional value of rent charged - whatever the amount of the allowance was. Then the tenants would pay, out of pocket, a top up on that so the landlord was getting as near to market rate as possible. So the scheme to help the low-paid and those on social welfare avoid having to pay most of their money on rent ended up with... the low-paid and those on social welfare still having to pay most of their money on rent.
My point about land value is that George is right in one way, and wrong in another. It's only worthwhile for speculators to hold onto that land until they get higher prices, in his example of the village that will get the railway in ten years time, *because* demand will boom with increasing opportunity, increasing trade, increasing employment. It's not worth the while of very many people to buy that cheap land and set up a business there if there is no local demand and no convenient means to ship their goods to market. They probably won't build housing either as the influx of population for the thriving town hasn't happened yet, so there is no demand.
So it makes more sense, if you have money and want to maximise your return on it, to buy now while the land is cheap and hold on to it in the expectation of the boom in value. He can certainly make a *moral* argument for why this is undesirable behaviour, but I don't see an *economic* one. Setting up a factory on the patch of land that will probably fail due to lack of outlets is wasting your money. Building houses that lack tenants is a waste of money. Maybe you can farm it, though if we're talking land in and around a village, that's probably not effective.
I've just skimmed your post but I feel you misunderstand, that the proposed tax is not only on the current rent. but it is tax on theoretical rent that can be extracted which again theoretically equal to the value gain by just holding the land [I am not sure how he propose to assess that]. if you have rental income it would be deducted to that. if you don't have rental income it would keep accumulating until you sold the land and realize your gain at which point the gov would collect the accumulated tax. this way owner occupy or inheritor would not have to pay the tax unless they sell the land
it is suggested that improvement [house, trees] would not be taxed but I don't understand how that would be enforced.
"but it is tax on theoretical rent that can be extracted"
Yeah, these are the kind of tricky little details that, should a Georgist land tax ever get passed, everyone is going to loophole the *hell* out of.
For example, in the case of Carl from "Up", his land tax would be based on where he's living. Formerly, this was in a residential area, so whatever the average value of houses in that area would be a basis for the tax on the land he occupies, let's say $300,000. He's not getting any rent on it because he owns the house and lives in it. Now, however, all the other houses have gone. This is now high-value development land, and the tax rate goes up accordingly. *Theoretically*, Carl can sell his plot for $1 million because it's the last plot that the developers need so they can go ahead. *Now* Carl has to pay land tax based on a value of $1 million. A retired man on a fixed income probably *would* have no choice but to sell his house, whatever George says about "no compulsory sale or purchase".
As to land tax for rental properties - suppose the property is in an area that is now gentrifying? Properties now become more valuable, land tax goes up accordingly. Landlord of rental property - be it a house or block of flats - is going to pass that on in rent increases to the tenants, let's be real here. Maybe he'll even sell the property as it is worth more now than any rent he is currently getting, in which case, good luck with finding new housing former tenants.
Or maybe the value of the tax will be pegged to the value of the property. This is a huge incentive not to maintain and upkeep it or add value in any way. "But that means low rents for the landlord?" Oh, my sweet summer child. Perhaps. But as long as the landlord can juggle "rent that I can charge for my slum apartment is just enough more than the land tax", they'll do it. And again, any tenants that don't like it can lump it and go trek twenty miles outside the city to find someplace to live that they can afford and is in better condition. Oh, you can't get public transport to your job from twenty miles outside the city? Well then, guess you have to put up with living in a slum apartment - after all, beggars can't be choosers.
I just want to make clear that I just want to add a minor correction to your post above. I do not understand the idea enough to say it is good or bad. I am just trying to steelman it for you.
now to derail the thread completely:
again Carl would not have to pay any tax unless he start renting it out or sell the land, as long as it is not used for rent extracting purpose [by actually renting or holding to push price up to sell] the tax remains theoretical [i.e. not collected].
I believe that the book addressed it as follow:
renter rent place A because it gives 10 ultis more than place B only on the land [assuming capital like the actual house/ apartment/ trees are simplified elsewhere], landlord extract 9.5 from renter. giving only 0.5 actual ultis to renter.
Gov, therefore, should tax the land from the landlord 9 ultis then redistribute to both now renter has 5 ultis [0.5+4.5]. landlord has 5 ultis [9.5-9+4.5]. Land lord can not raise the ultis extraction anymore else renter would just leave for place B.
again I am also confused as to how the 9 ultis would be calculated to tax, but if I am reading correctly, this should be the broad idea.
I was under the impression that the book proposed that land tax would replace tax on the house/appartment therefore incentivize house/apartment investment.
> again Carl would not have to pay any tax unless he start renting it out or sell the land,
That's not how land value tax works, it applies if you improve and rent out, or if you leave as an empty field, or if you live there or if you build a factory. The same amount in all cases. Clearly if you own the land, you are forced to "make use" of it and gain value of at leave the LVT, or else you'll need to sell.
That's the point.
"Landlord of rental property - be it a house or block of flats - is going to pass that on in rent increases to the tenants, let's be real here"
I think everything hinges on this. George asserts this won't happen, as do a lot of modern economists. I guess the real thing to do here is look for examples of LVT applied in practice and see if it holds up.
That’s the point I don’t understand. Each slum lord would be taxed the value of his rents (or 0.85 of it, say). Wouldn’t they all just raise their rents? The tenants have nowhere to go because every slum lord is doing this. So they either pay or become homeless.
If the Land Tax is converted to a universal basic income, then maybe the tenants will have more money, but it’ll go back to their landlord, wouldn’t it?
I guess what I’m asking is: What is the mechanism by which a LT eliminates slums? I think I get that it should happen, but I don’t see how.
The slum lords have to pay the LVT whether they have tenants or not. If they raise rents above what tenants are willing/able to pay, they lose money.
Actually, no, landlords cannot just pass on the land value tax to tenants. Landlords get what tenants can pay, not what landlords think they need.
Carl from "Up" could defer the tax until he dies, at which point it would be taken from the sale price of the house and land.
The tax will never go up with improvements to the property, as it is a tax on land values _alone_ and not improvements, ever. So the landlord can freely improve the building and charge more rent for that with no penalty.
This would seem to dovetail magnificently with old school Space Libertarianism, and the allure of the Endless Frontier.
On the desolate icy expanses of Callisto and Pluto, and especially home on Lagrange, where the only land is locked up in cylinder habitats and is vacuum is free, virtually all of the value of land will have to come from capital.
Until some wiseguy buys up the rights to all the asteroids and starts speculating on rocks in the Kuiper Belt...
"George notes that the mass die-off of the Black Death in England in the 1300's significantly reduced the productivity of the individual laborer, and yet wages went up. That's because the decreased population also caused a massive drop in competition for land, in turn causing rents to plummet. (For more detail on this read about the Peasants' revolt, also known as Wat Tyler's rebellion).
George says the opposite happened during the reign of Henry VIII, who seized the lands of the church and those held in common by the peasants, and handed them out to newly minted aristocrats, which was followed by suppressed wages."
Yeah but it wasn't just "after the Black Death, land was cheap". Before, if there were three jobs for ploughmen going and you had ten peasants, then you can get away with paying a groat and a kick in the pants to your prospective employees. After the Black Death, if there are three jobs for ploughmen but also four jobs for blacksmiths, five jobs for millers, and six jobs for gravediggers (since the previous holders of these positions all took sick and died), and you have ten peasants, then you have to offer more than a groat and a kick in the pants. Maybe you have to go as high as three groats and no kicks to get a ploughman. Particularly if you took advantage of the low rents to add on twenty acres to your farm, now you *really* need ploughmen to make this profitable. Land can be zero to rent but it does you no good if all the peasants who would have worked it keeled over dead from the plague.
You've mentioned the Famine, but does George say anything about the Highland Clearances, where the value of land now lay in sheep-rearing rather than having tenantry on it?
"In the first phase, clearance resulted from agricultural improvement, driven by the need for landlords to increase their income (many landlords had crippling debts, with bankruptcy playing a large part in the history). This involved the enclosure of the open fields managed on the run rig system and the shared grazing. Especially in the North and West of the region, these were usually replaced with large-scale pastoral farms stocked with sheep, on which much higher rents were paid, with the displaced tenants getting alternative tenancies in newly created crofting communities, where they were expected to be employed in industries such as fishing, quarrying or the kelp industry. The reduction in status from farmer to crofter was one of the causes of resentment from these changes.
The second phase (c.1815–20 to 1850s) involved overcrowded crofting communities from the first phase that had lost the means to support themselves, through famine and/or collapse of industries that they had relied on (such as the kelp trade), as well as continuing population growth. This is when "assisted passages" were common, when landowners paid the fares for their tenants to emigrate. Tenants who were selected for this had, in practical terms, little choice but to emigrate. The Highland Potato Famine struck towards the end of this period, giving greater urgency to the process."
Going back to the Famine, the effects would have been mitigated if the landless labourers, who relied on the potato crop as their main food source, could have been absorbed into industrialised towns and cities as in England during the period of agricultural collapse post-repeal of the Corn Laws. But again, for various reasons, Irish industry had been deliberately crippled in order not to be competitor with British industries and to keep Ireland open as a market and as a producer of agricultural goods to feed Britain.
The appeal of "One Weird Trick" - in this case, the introduction of a land tax - to solve tangled problems is a perennial temptation to the human race, but simple answers generally don't work that well for complex problems.
> Yeah but it wasn't just "after the Black Death, land was cheap". Before, if there were three jobs for ploughmen going and you had ten peasants, then you can get away with paying a groat and a kick in the pants to your prospective employees.
From my own understanding of P&P, and this review, George might be agreeing with you! You see, he is asserting that it is the total monopolization of land that drives laborers to compete with one another. In a world where land & natural resources aren't gatekept at the price of rent, they wouldn't have to bid against each other for labor -- the would just do whatever productive activity they wanted. We're so used to a world in which laborers "supply" themselves to "capital" for employment, that we take a simple # of laborers / # of paid jobs = price of labor formula for granted, but it's only "Hey I own the land, what will you agree to pay in rent for the privilege of working/living on it?". This is how labor productivity can skyrocket without laborers seeing any of the benefits.
So what I think George says about the black death is not "Well land is cheap now" but that it temporarily broke the back of land monopoly, and so labor didn't have to compete with itself and bid itself down to nothing.
RE: Highland clearances -- here's a full text of the book, CTRL+F didn't turn it up, but he might have mentioned it in another work?
https://oll.libertyfund.org/title/george-progress-and-poverty
>>Today land value tax is widely considered to be the only tax that doesn't suffer from Deadweight Loss.
Generally on board with LVT, but you may wish to add Pigouvian taxes on e.g. carbon emissions.
They kind of follow naturally : if you're destroying someone's (or everyone's) else's land, I assume that you would be taxed ?
The Land Value tax has another key benefit: it has falsifiable predictions, and can be implemented incrementally and achieve incremental benefits (as we've seen in some IRL implementations). Georgists sound like marxist cranks citing 19th century economists, but georgism itself is like an MSG that can be sprinkled over just about any political philosophy and 'fit in'.
Do you know of any good examples of localities who have implemented it and what were the results?
Seem to be quite a lot of examples here: https://en.wikipedia.org/wiki/Land_value_tax#Implementation
Going back and removing about 85% of the "By Georges" would be a considerable improvement to this essay.
Really? I got a giggle out of it every time.
By George, you're wrong!
Yes but also no.
It did get tiresome after a while, but I can appreciate having a schtick and sticking to it, and this was too good of a schtick not to use. We were warned, and honestly if I were in the author's shoes I would probably also have overused it so I can't be too mad about it.
Gotta stick to your schtick, by George 😉
Simply implementing a Land Value Tax in the manner that George suggested will almost certainly trigger a banking/financial and economic crisis as the rents that this tax seeks to eliminate have been a) capitalised into the price of land and b)the land in question has been levered up to a very high degree. The LVT will cause a significant fall in prices which will lead to defaults, bank failures and even personal bankruptcies (e.g. a middle-class family with a 90% LTV mortgage in a metropolitan city). For example, the same problem applies in removing farm subsidies where the value of subsidies has been capitalised and levered such that any removal will trigger bankruptcies and financial losses.
This is not a criticism of George as the same conditions may not have applied in his time. One possible solution is to introduce the tax in stages with a modest tax to begin with.
No reason it has to be implemented at 100% instantly. You can implement it in gradually increasing amounts over a longer timescale, with advanced notice of the changes so people can financially adapt. That's how lots of laws are done.
I don't entirely disagree. As I mentioned, this is a possible solution but the timescales will need to be much longer than most people think. If you simply announce that taxes will go to 100% over a period of, say 10 years, the price of land will factor in this increased taxation in the future and fall almost immediately thus leading to pretty much the same consequences as if taxes had been implemented at 100% from day 0.
Hm, if you follow the theory, wouldn't it predict that the major benefits only occur when the LVT is very high? Essentially, the idea is that a LVT removes the incentive for (high) rents, isn't it? This is because with a 100% LVT, landowners don't profit from higher rents, so they don't charge them. However, when the LVT is 50%, they still have the incentive to get as much rent out of the land as possible.
This is not the only positive effect of LVT. Another one is that with 50% LVT, the rent does not go completely to the landowner, but to the state, which can (for example) redistribute it. This effect stays even with 50% LVT. But my impression from the book review was that George was rather aiming at the first point.
Another possibility that might or might not suffer from the same issues: instead of gradually increasing the percentage of LVT over time, you could also set a cap of X (per square meter or so), and charge only value that exceeds X. You could start with a high value of X, and decrease it over time. Or not decrease it -- as far as I understand, the main theoretical benefits that George predicts would already take place when you only charge value above X. Of course, both ideas (gradually increasing percentage and gradually decreasing cap) don't exclude each other. I would be interested to learn what people with more background in economics think of that.
Yes, of course, but a sudden transition to a 100% LVT (having a lot in common with expropriation) would be either politically impossible, or only possible after a revolution (which has its own issues).
If I understand correctly, the tax on the land shouldn't be 100% of the fair-market sale value of the land, but 100% of the fair-market value of the rent on the land, which would probably be something like 8% of the fair-market sale value of the land.
Yeah, that's what I said "a lot in common", not "outright" : 8% every year, that still adds up to 100% in 12.5 years.
Why 8%?
The tax should be the prevailing interest rate times the land value.
If the land were earning less than the prevailing interest rate through land rent and appreciation, the owner would presumably sell it and buy a different asset which does pay that rate.
Conversely, if land is increasing in value faster than the prevailing interest rate, you'd think that the price would get bid up to the point where the return on land is back in line with the return on other things.
But 50% LVT or even less will already help to make speculation less profitable and give therefore give some land back to the market that was blocked before. This could lower the price of land for anyone who wants to use it.
I suppose just knowing that significant LVT will come in the long therm will reduce speculation and prices
Except that it will be incredibly unpopular, your party will lose the next election, and then the tax gets rolled back...
If you can be sure that income tax and or sales tax will be reduced by the amount that LVT is increased, you'll get a lot of support from people with high incomes but little land.
Just thinking about this as a landlord, it's clear that a LVT would immediately bankrupt me. I make a reasonable return on my property now, but an 85%+ LVT would cause me to lose lots of money, LOTS of money, and the value of the properties would plummet, so I would immediately lose an enormous amount of wealth (labor value that I converted into land + capital). If you eliminated all other taxes it would help but probably still be very problematic. I don't think phasing it in would be especially helpful unless over a really long period of time.
85% sounds incredibly high. Am I understanding correctly that you mean "pay 85% of the value of your land (sans buildings) to the government every year"? I was thinking more like 1%, especially to start.
What level of tax would make you continue to be a landlord without changing anything?
Is there a level of tax that would make you want to build more housing on your property so you could get more rent per land value?
Update: apologies, I now realize the proposal was 85% of ground-floor rent. That still seems crazy high.
There's also the argument that this would vastly reduce the value of land, so "100% of the value of land" doesn't mean nearly as much as "100% of what it costs to but in the current market"
OK but at the same time, if that's the case it would totally wipe out my equity and probably a lot of the bank's equity as well and we would take massive losses even if the rental business could continue, right?
Yes (the idea is to make land have zero value as equity). This is one reason to introduce it gradually instead of at once - if it sets in over several decades, then the equity will go down gradually instead of at once.
(As a minor math point here, I think this implies the tax increase function should be concave - higher taxes starting now affect everything the same, but higher taxes starting ten years from now also have some effect on values today, so for the value to decrease linearly the later tax increases should be smaller)
There are significant transaction costs in real estate, so an additional tax could be small enough that I would continue as I have, but it would have to be smaller than existing property taxes- 1% of existing value/yr or ~1.5 month's rent. That kind of a change wouldn't bankrupt me, but it would crush me and make it so that I was losing money, however a new buyer at a much lower price could presumably make money, so I would just get out and take the loss and would be better off that way.
> Is there a level of tax that would make you want to build more housing on your property so you could get more rent per land value?
Any level of tax would have that incentive - the land value component of your investment goes down, so the rent payoff component of your income from the land goes up and you have more incentive to increase it.
Your ability to do that with an existing structure is limited, particularly considering setbacks and other regulations. I.e. I could probably, theoretically, add a bedroom to a house if the numbers made sense, but I couldn't add a level. Might this system end up essentially eliminating single family housing as inefficient and replacing it with fewer, higher apartment towers? Maybe all the suburban developments would revert back to farmland? It's a bit hard to think through the dynamic effects of such a system.
Yeah, this is a general issue. Almost any idea to improve the american economy is a no-go so long as the current obstructive zoning law regime remains in place.
If you have the capital to do so, which is hardly guaranteed.
I've been noodling on this, and what do you think about this as a transition plan: When the LVT is implemented, the federal government immediately pays current landowners the current land value of their land. So that keeps current landowners whole and gets the thing off and running.
Downsides:
1. If you want this to be expropriative, the wealthy landowners are getting paid for the expropriation.
2. It's a lot of money. Can the feds borrow enough to cover the action?
You can't compensate for the loss in the value of land. It will be too expensive. For example, UK land value is more than £5 trillion (ref https://www.reuters.com/article/us-uk-property-land-idUSKBN1DZ2UT) and the govt can't even realistically make up for a 20% loss in value.
That sounds right to me and it's a huge barrier. I'm persuadable that LVT is the least worst tax, but if transitioning to it ruins all landowners and scuttles the economy as a whole due to vast and overwhelming societal disruption, then maybe it doesn't matter that it's least worst in theory!
I wonder if you could "ease into it" along the lines I'm talking about, say 1% a year?
Perspective: Currently something like 1/3 to 1/2 of our net worth would be taxed under an LVT. We couldn't possibly pay for it without selling the land (or maybe some sort of creative mortgages?)
One option would be to consider the land portion of the purchase price (with some reasonable level of interest added) a “prepaid LVT” and you don’t have to start paying until it’s used up. Meanwhile you continue to find the government with other taxes as the LVT phases in.
That should read “continue to *fund* the government.”
Also this would hit people who used their real estate as a piggy bank somewhat hard (not judging, I’m in that category myself).
"Inflation is always and everywhere a monetary phenomenon"; if the Federal Reserve prints enough money, surely nominal prices won't drop and you don't get total economic collapse?
Whether the Fed can prevent a deep recession will depend on what tools they are willing to use. The current toolbox of QE + buying corporate bonds + liquidity facilities is insufficient. If the toolbox is expanded to include helicopter drops (which is really a monetary + fiscal intervention), then the recession can probably be contained. But this would still lead to bank failures and widespread bankruptcies among the property-owning middle class.
The alternative would be a bailout of the financial sector and the landowners but this would seem to defeat the purpose of the LVT.
It's going to be artificial anyway.
As we went from high levels of growth, to a stable economy, and now entering the period of structural economic contraction (we might be already there since ~2009, the GDP/year was never a good economic indicator, and I'm suspecting that it's being artificially propped up), it's going to be "interesting" to see how the political economy adapts.
It's not certain that capitalism can even *deal* with this kind of situation, since the assumption of growth is basically in its "DNA" :
https://www.ecosophia.net/a-sense-of-deja-vu/
That was a good link, thanks. Ol' Bucky Fuller had the right vision. None of this is ever going to make sense until we start measuring in units of energy, not units of currency, though his faith in computers' capacity to centrally plan hasn't been borne out. It would be interesting to try and adapt this Georgeist framework along those lines.
You could implement LVT in a graduated fashion tuning the tax in such a way that land values stay constant. Initially, this would result in very low rates but over time the tax will rise sufficient to neutralise the price impact of any increase in demand for land.
If you have a huge bubble (of anything) and you see, that this bubble is a bad idea so you take measures to prevent such bubbles to exist. Of cause this will cause the existing bubble to burst, and it will create great stress on all of those that invested in this bubble.
Of course we can come up with many ideas how ti make the transition as soft as possible ant how to deflate the existing bubble rather than burst it. But all this still means that a lot of value that has pumped up this bubble will be lost. In this regard i think the main problem is that the current real estate bubble could be 'too big to fail' because it could tear down the rest of the economy. If it wasn't like this I'd say: all companies that need speculation or income without any work for their business model to work desire to go bankrupt.
An completely different point is the personal problems and feelings of the people loosing something in this process. I understand these feelings and I want to make the transition for them as easy as possible. I can imagine several ways to do this.
1. Individually calculating the LVT:
Nobody says that there must be one fixed absolute amount per square meter. The Idea is that LVT eats up almost 100% of the rent, where 'rent' is used in the sense George defines the word.
So the calculation should be like: LVT = 'Income generated by this property' - ( 'expenses' + 'compensation for owners work' + 'profits from improvements(the building)'
Obviously this gives very different numbers on different uses of the land. So at least for the transition we could calculate this on an individual level, to make it reasonable fair and avoid hardships on the cost of increased bureaucracy.
Some examples how this will work out:
- a farmer owns field A and field B is leased from a landlord. The landlord has no work with the land and has no improvements build on it, so the rent payed by the farmer equals the rent in the sense of George and is 100% taxed away. Now the landlord makes no money from the land and has no incentive jack up the rent or even keep it. But if he likes to he can keep it without loosing anything (except some work for the bureaucracy, but this could count as expenses. Lets change to the farmers perspective: He does the same work on both fields and sells the crops for the same amount, the whole calculation is the same for both fields except the rent he pays to the landlord for field B. In other words the additional profits he makes from field A is exactly the the same amount as he pays for field B and this amount gets taxed away because it is the profit he makes only because of owning the land. No farmer should go bankrupt because of this, it just equals out the difference between farming your own land and farming rented land and makes it easier for new farmers to start without inheriting a farm.
- So what if the field gets residential area and there are homes built on it? Wouldn't this fuel speculation as prices than get much higher than for farmland? Well, if the landlord (or the farmer) than sells the land to a higher price to somebody who wants to build his home on it, they can keep the usual price that would be payed for farmland, the rest gets taxed away because it clarifies as rent in the sense of George.
- a family owns their home in a residential area, their neighbors live in the same kind of house, but they only rented it. Let's look at the differences. The neighbors pay a monthly amount X to the landlord, that's their cost of using this house and the land it belongs to.
The calculation for our family would be: housing worth amount X minus all expenses and minus the profits of the improvements (the house itself) gives the LVT. For ease of transition we can include all costs of the mortgage they used to buy the house into expenses if the house was bought before the introduction of the LVT. If their total expenses exceed amount X they will pay no LVT and there is no change to before. Otherwise their cost of living will still be lower than their neighbors because the profits of the house itself counts as interests and is not subject to LVT. So they may loose wealth because their house is worth less, but it's not ruining them and there is no big impact on everydays life.
- the example above also applies to businesses operating on their own property.
- a landlord owning a apartment (or whatever) building. For easier understanding we assume he is doing no work himself, he outsourced all the maintenance and administration to a service provider. He has income from the residents, part of it is used to pay the service provider, another part is his legitimate interest (profit from the building being capital) and the rest is taxed away as LVT. This way the landlord has no interest to jack up the rents for the residents without investing in the building, because he could keep nothing from this increased income. He still makes a profit from owning without work, but it is less now because it is only from owning the building not from owning the land. If this is a problem perhaps he has to do some work (perhaps administrating his building) to also get a wage and lower his standard of living towards the average person that has to live from the wage only.
2. The state could act as a grantee for all the credits and mortgages that use real estate as security if this real estate looses a lot of value because of LVT. This would hopefully save the banks and financial system from collapsing because the securities are gone.
There could be more Ideas, but it's too late now...
Thanks, this was very much the missing piece if information to me.
Another thing that at first I didn’t get, but now think I do, is: this tax is levied on the moment of a transaction (buying/selling a property or land, or maybe also when asking for rent income), rather than, each month or so, right?
Very well written!
I have a comment on Malthusianism. As a biologist, I tend to think that our escape from the Malthusian cycles experienced by most mammals has to be temporary.
Humans are not having a greater number of surviving offspring in a more prosperous world (mostly) because they have invented birth control mechanisms (actually, turning from clan societies to individualism is also probably important). In the past, humans did not need to have a great desire to have babies to reproduce well; it was enough if they had a great desire to have sex, and that led them to having as many babies as possible. Natural selection didn't need a desire to have many kids.
Now that we have birth control, and all born kids are helped to grow up safely by safety nets in societies, natural selection will grab hold of any heritable trait that causes humans to want or to produce more kids than others. Today there's nothing better, biologically, than to want to have a big family of kids. If this desire is even partly heritable, it should spread. It will take a long time because of our long generation time, but eventually human population should be back to large families of kids.
I mean, you can't escape the greater reproduction caused by heritable traits leading to their greater spread, even at the age of em it will be an important thing in evolution. Does anyone know anything to disprove this or to raise a hope that the non-Malthusian period can last?
as wealth increases, population growth per person doesn't increase too - people have fewer kids when they have more money.
i don't think that trend will reverse and people will 'go back' to wanting a ton of kids. i'm not sure there's any way to disprove your hypothesis since there isn't really a way to prove it without zooming forward a few centuries, but it does stand in the face of the data we have in the status quo, which is that, given more security/free-time, humans spend more time on themselves than on huge families.
Yes, that's true, but the only thing that allows this is, as I said, that in the evolutionary past we didn't have selection pressure to desire many kids. We had many kids even if we wanted to have more time for ourselves just because there was selection pressure to have a great sex drive and there wasn't any good birth control. Now that this mechanism is broken, there will be a huge selection pressure to want more kids. If this wanting is at all heritable, it will spread.
I know several people who have about ten kids just because they really wanted to. If this personality trait is somewhat heritable so that their kids also want more kids, then this trait will propagate. There's nothing to do against it.
i...don't think 'i know people who have ten kids' is really robust data. that kind of huge family is extremely rare in the developed world - there's no 'U' curve for fertility in sight in any rich country. 'Wanting to have lots of kids' is kind of tautologically genetic- i don't think we're gonna see some new selection pressure compared to when humans *needed* to have lots of kids to survive. we no longer need that, and won't in the future, so why would there be new pressure? social pressure? idk i think your thesis here is preeeeeeeeeeeeeeeeeety unfounded unless you can point me to something more substantial you're thinking of.
no-no, not social pressure. Purely mathematical. Just imagine that some people have ten kids and two of their kids also have ten kids, and so on; after a few generations they will dominate the earth, while you and I, who only have 0-2 kids (and our kids also have 0-2 kids), we'll be gone almost extinct.
Now, I also don't know if the 10-kid parents whom I know have a heritable trait causing it. I hope they don't. :) Sometimes the selection pressure cannot raise because there just isn't a good selectable trait in the population. For example, cryptically colored moths would greatly benefit from losing the symmetry of their color scheme: the symmetry often makes them more visible to predators. But they cannot lose it, because the color symmetry is so canalized in insects that there just isn't any individual who has a heritably non-symmetrical coloration.
If we are lucky then we also don't have and never will have any individual who has a heritable trait causing a desire to have many kids; however it seems unlikely to me. Humans have many psychological traits and many of them are clearly heritable.
I predict fecundity memes, not fecundity genes, will do most of the work pushing us back toward Malthusian equilibrium. I'm thinking of religious and nationalist ideologies.
"Survival of the fittest" is a tautology too, doesn't mean that it isn't a very powerful "force" !
I mean, not *nothing*. There is a very clear and obvious way to stop it i.e. state-enforced fertility controls and/or eugenics (nb: to work, you'd have to kill all children born in violation of the controls - else there's still a selection pressure for people willing to flout the laws). It's just, well, dystopian.
In biological terms, we don't have to worry about this for quite a while - it'll probably be another couple of hundred years before the growth rate rises back above zero, it'd take a millennium of 1960s growth to fill up Sol, and there's some spillover capacity beyond that (not a lot, though - exponential is faster than cubic, so without FTL expansion will eventually be outpaced by growth). More concerning, as Scott noted in the Moloch essay, are artificial ways to spam new people (uploads/AI/artificial wombs).
We have the historical example of the Chinese trying to impose fertility controls, and failing.
For the growth rate, Africa seems to be a big question mark : they don't seem to be reducing their fertility as would have been expected ? (Though maybe it's because they aren't developing as expected either ?)
I mean, state power has been growing throughout the last few hundred years; unless this reverses for some unexplained reason, future governments will be able to do things beyond the capacity of past ones.
We already know one potential reason : lack of energy.
Oh damn. But...we evolved the sex drive when we were, like, fish. At this point our behavior is webbed into so much physiology and sociology that, even if your mom gave you a genetic nudge towards 10 kids, you might experience it as a mysterious passion for dog rescues or community theater. I think the lines between genes and behavior have grown so long and tangled that something else would change the game before it finished.
Also...having sex is so easy compared to raising kids. I don't think desire would control the outcome in most situations. Same point basically.
The time that it takes to make a baby... could be the time it takes to make a cup of tea (Billy Bragg)
TIL - Billy Bragg was very bad at making tea. It usually took him about 9 months to make a single cup
I've wondered about this too. I work in elite private schools and there are some families with 5 or so kids. Really educated and successful people who decided they wanted to have a lot of kids. If I had enough resources I would have as many kids as possible. But due to lack of wealth I only have two. My father had lots of kids too. The heritable trait for wanting to have kids and spread genes goes beyond just sex drive. And some people have a stronger desire to pass their genes than others.
This is exactly what happens in Ringworld, with the result that Earth is governed by a totalitarian UN that enforces the fertility laws by summarily executing unauthorized parents.
Well, if the alternative is starvation... I guess that we have to hope that we'll be able to avoid both of these scenarios ?
I personally doubt that this kind of evolution will happen fast enough to have relevant effects before we get our grubby paws into it. It seems doubtful to me that we're more than a few generations, at most, from taking the reins on our own genome
Welcome to Gattaca !
I hope Jack H is right about this particular aspect of the Malthusian question, that humans' propensity to have large families tends to fall with widespread economic security, which allows children not to be regarded as a retirement plan, and industrialization, which allows children not to be regarded as labor in subsistence farming. If we're wired any other way, then I can't see a way of restraining population growth that is either practicable or morally acceptable. Economic development needs to induce people to willingly choose zero/negative population growth reproductive strategies; otherwise, I think we're drawing dead when it comes to perpetuating human civilization.
With respect to Malthus, I am more concerned with a more proximate problem, namely that our escape from the trap was powered by fossil fuels. I follow Georgescu-Roegen in this regard, that coal, oil & natural gas' qualitative difference as a stock of energy that can be expended in arbitrary quantities at will was the key. The pre-Newcomen engine world was one in which humanity had to live within the energy budget defined by plants' capacity to collect & convert a portion of the flow of solar energy. The only stocks available to carry over solar energy with respect to the human economy from one season to the next were stored food, livestock, the embodied energy in durable goods, and trees, which have the longest shelf life, as it were, measured in decades or centuries. The liberation of millions of years' worth of stored solar energy in the form, initially, of coal was the key element which allowed economic growth to exceed population growth and therefore escape the Malthusian trap.
Georgescu-Roegen was philosophically pessimistic because he could see the Red Queen problem inherent in this regime. Even if humanity discovered technology to overcome the most proximate resource constraint, each successive resource constraint would approach ever faster. Humanity became like runners trying to jump hurdles on an increasingly fast treadmill, since both factors impacting our ecological footprint, population and per capita consumption, increase without bound, and the game is over as soon as we miss one hurdle.
For myself, I would be content if we can make the transition to the high-energy solar-based economy before we lose the ability to use fossil fuels to build the necessary infrastructure, if we can find better battery tech (I don't think there's nearly enough lithium available). That would punt that particular problem a couple of centuries down the road, allow us to throw clean energy at the food & water problems (YOU MUST CONSTRUCT ADDITIONAL DESALINATION PLANTS), give humanity some breathing space to see if we can find the right economic structure to eliminate poverty, and then get to a position to test the ZPG postulate mentioned in the first paragraph.
Thankfully, this was all in Joe Biden's platform so I'm feeling pretty relaxed about it.
Is Joe Biden's platform radically different from Obama's platforms ?
I really don't see Biden to do anything to shut down hydrofracturation of hydrocarbons, besides making hand movements like he's doing something, while it's just the natural reduction of output on the other side of the peak tight oil...
Also, it wasn't just about the Newcomen engine, not sure about the comparative power, but it was whale oil that allowed us to transition from land animal fats to underground oil : https://cassandralegacy.blogspot.com/2014/09/the-greatest-peak-oil-novel-ever-written.html
Somewhat surprisingly, this shows that Hubbert curves can be used to predict depletion of renewable resources too !
Sorry, I was being snarky. I forgot the rule for Scott's blog, "Assume everyone here is even more literally-minded than me."
That's very interesting about whaling! I hadn't thought about that before. I mentally model we humies' relationship to fossil fuels as addiction because I think there's something deep in all of us that desires the command of fire, cf. Prometheus, and once we have a taste of "Fiat lux" we will not give it up. The moral & ecological consequences of that desire were relatively legible with whaling, but the key mechanism by which that desire redounds to our detriment with fossil fuels was obscure for centuries until we figured out the chemistry of the atmosphere. It only surfaces in things like the Romantics' instinctual revulsion toward soot & smoke, e.g. Blake's poem "The Chimney Sweeper", which are easily dismissed, and not without some justice, as mere sentimentality.
https://www.poetryfoundation.org/poems/43653/the-chimney-sweeper-a-little-black-thing-among-the-snow
Ah, my bad, I should have realized the snark from having this last phrase being in the same post as the mention of Georgescu-Roegen !
Generally, I'd say, fascination with and addiction to power in general, for obvious evolutionary reasons.
But yeah, fire/light has an extra mystic/sacred aura of its own...
(proof : what does the word "aura" brings into mind as association ?)
I assume that the Romantics were well acquainted with the issues coming from soot, smoke & smog, the equivalent of which we can see in China these days ?
There are some practical issues with a LVT. I describe how this tax could be implemented here: https://gideonmagnus.medium.com/a-simple-way-to-tax-land-3cbf7b81887d
This is very good. I was vaguely aware of Georgism before but this has moved it from mildly interesting to morally and economically urgent in my mind
If you're going to use a town in Saskatchewan as your example of the middle of nowhere there are far better choices than fictional Podunk. Try Ituna, Elbow, Eyebrow, or, my hometown, Moose Jaw! All real towns!
Podunk is, and always has been, in New York. (To someone in NYC a century ago, I'm sure it seems like the middle of nowhere.)
Tbh I always assumed "podunk" was a rude word, not an actual place
How will a LVT interact with the distortions in the market caused by the fact that buying property abroad is one of the few ways for citizens of the PRC to get around strict capital controls?
Also do Georgists expect that the benefit of an x% LVT will be roughly linear in x? (i.e. can we introduce a partial LVT as an experiment and increase, decrease or remove it according to wether it brings the benefits that Georgists claim it will?
We can and have - https://www.lincolninst.edu/publications/policy-focus-reports/assessing-theory-practice-land-value-taxation
evidence points to incremental lvt = incremental gains.
most georgists are practical and are perfectly fine with incremental implimentation.
and yeah the international aspect of LVT seems a bit tough - but if the LVT encourages land speculators to simply buy land abroad, that land doesn't become less valuable - *somebody* has to own it. so LVT is agnostic on people 'fleeing' the country - land isn't capital!
Is it still possible to submit books for review? I kind of missed my chance but have one I think that both Scott and the crowd would enjoy.
I don't think so, but you could write a book review anyway. Maybe there will be another contest next year, or you could post it to LessWrong or Reddit.
Or on Data Secrets Lox, you'd probably get good feedback there as well.
> The two main things Malthus got wrong were failing to anticipate 1) advances in food production technology like the Green Revolution, and 2) that humans can control their own fertility rates.
Well, 1) is debatable (and IIRC wrong), and 2) is plain wrong - AFAIK Malthus was the one (though probably not the first ?) that pushed hard for the education of women in order to curb fertility rates - which now we know is working ! (This includes him founding schools to educate girls !) There's a reason why late 19th century feminists called themselves "malthusians"...
He had some weird ideas about contraception (that "don't do it" would work in practice, for a couple living together), but then there's only so far that an Anglican priest at the time could conceive of...
I'll note that you have NOT proved your stated "strong form of Malthusianism" wrong, and also that you seem to equivocate between whatever Malthus supposedly said or wrote (and which Malthus ? People can and do admit they were wrong...) and between an inform strawman of "Malthusians" (not the abovementioned feminists I assume ?) - are you sure that your "strong form of Malthusianism" actually corresponds to the claims ?
Malthus(ians) being a favorite punching bag these days, you should be very careful to cede to the temptation to add a few cheap shots of your own, we've recently seen how this happened with Galen(ists) and Aristot(e)l(icians) :
https://astralcodexten.substack.com/p/your-book-review-on-the-natural-faculties
https://astralcodexten.substack.com/p/your-book-review-on-the-natural-faculties#comment-1699819
As a parallel : I could also say, for instance, that Darwin(ists) were evil and factually wrong because Darwin's ideas were used by Nazis and Darwin failed to predict DNA/epigenetics/whatever (I'm sure that more examples can be dredged up by citing strawmens of Darwin's work or citations taken out of context).
[Formatting note: appendix links are broken. Also sorry if this comment is overly long and repetitive.]
While I'm sure this is a good introduction for people who haven't heard of this idea before, I went into this with a lot of questions (ranging from my ignorant confusions to unanswered criticisms) about Georgism and LVT, and unfortunately this didn't answer any of them.
I *do* like the idea of Georgism in theory. My hangups:
1. How do you actually calculate the Land Value Tax, in a literal sense?
I always hear from people selling Georgism that tax assessors do it already. But I know nothing about accounting and whatnot; how does that actually happen in practice? Also, why is it done, aren't property and land both taxed the same right now? How do we know that these assessments are accurate, especially if it doesn't currently matter all that much? Even if it currently assesses it accurately, surely if property taxes go to 0% and land value taxes go to 90%, every landowner will suddenly hire a bunch of lawyers dedicated to disguising value from land as value from improvements? And of course one of the big points is that this all has to apply to *all* economic land, not just actual physical land (more on that later).
One solution that I appreciate just because of how different and clever it is is Harberger taxation. (It's an idea used for everything in Weyl's radical exchange system (which I think of as capitalism minus private property), but for Georgism we do it just for land.) The idea is that you self-assess the value of the unimproved land and pay the tax on that, with the catch being that you have to be willing to sell the land at that price to any buyer.
Clever, right? But I don't understand how it works in practice. How can middle-class homeowners reasonably be expected to manage that burden? If they set a price too low, they lose everything, right? After all, what happens if some smart developer actually buys up the land beneath my parents' home? They don't own the actual home, but doesn't owning the land give you the right to tear down and rebuild any structures on it? (If not, then how on Earth does the land have any value?) In practice, how does it work today when land is owned by one entity and the building by another (if that does happen today in practice)?
I suppose the best solution would be that, when my parents bought the house and land in the first place, they would have had the opportunity to pay an extra fee to take the land off the open market temporarily. How big is that fee, how long can the off-market period be, how do you assess the land value in the meantime (you can't just go at what it was worth when it was sold, right? It could radically change, and smart speculators will take advantage of that). Since we're talking about such a massive tax here, I think these questions aren't just nitpicking, but actually matter a lot!
2. What about making new land?
You say that e.g. turning water into land just counts as an improvement. But doesn't it change the analysis if no one currently owns the "land"? (This isn't super relevant right now for physical land, but it could become so if sea-steading or spacefaring ever get off the ground (and also see next point).) The big selling point of Georgism is that the supply of land is fixed, and therefore a land tax doesn't reduce incentives to make new land. But doesn't the presence of a land-value tax disincentivize you from going out to virgin land and bringing it into the market? (I'm actually not sure how this worked in practice for physical land; do people have to pay the government for permission to do this or something?) This isn't necessarily a knockdown argument against Georgism, since property taxes have this disincentive too, but if I'm right on this, it seems important to admit that it's a case where Georgism would introduce disincentives. (Also, the tax is pretty darn high, so maybe it'd be worse than the status quo on this metric?)
Maybe you could say the unimproved value of the land is 0 since it was off the market, and the entirety of the value is in improvements. But then in Elonville, Mars, won't there be greedy landlords paying $0 in land taxes? How _exactly_ does the gradual transition where the "title to the improvements become blended with the title to the land" work in practice?
This is more relevant in light of the next point:
3. What is land, tho?
You do say that land includes all of nature's bounty, but in many places throughout the article you do seem to be implicitly assuming we're talking about physical land. (Everyone writing about economics seems to slip into this habit, passing back and forth between the two definitions without mention. It's an understandable mistake and I do it too; this is the second-worst piece of terminology I'm aware of in any field (the first also being from econ and related to this, namely "economic rent").) With some of the graphs and numbers that people use in these discussions, I'm not always sure if we're talking about economic land in general or actual physical land.
But yeah, anyway, you say that oil *isn't* land, but crude oil still underground is land, isn't it? The act of drilling down and pumping it up presumably being an improvement. Same for all other natural resources. Does every natural resource really have someone tasked with assessing its unimproved value and do they do it well? That can't actually be true, because sometimes like with oil we don't even know the land is *there*.
You say planting a tree would somehow gradually transition from being an improvement to being part of the land, but I'm unclear on how that works. Consider the trees in a swath of forest owned by a timber company, regularly chopped down and replanted. I assume they are improvements since we aren't supposed to be able to "make new land" and we wouldn't want to disincentive planting the trees. So is land actually only the *non-renewable* parts of Nature's bounty? I'm unclear on this point, and on how gray areas would be resolved in practice. Gray areas seem to matter a ton, since in the pure Georgist case it's the difference between a 0% tax and a 100% tax.
When someone buys a diamond ring, do they need to keep paying a tax on the unimproved value of the diamond? Same for literally anything else that requires natural resources to create — do we consider the land to have merely transferred ownership, or "used up" and thus no longer taxable? (If the former, again, how do we actually asses this stuff? If there a Harberger tax on *everything* that had (nonrenewable?) natural resources go into it? If it's the latter, I think that noise in the background is tax attorney's salivating?)
4. What about search costs?
(I only ever heard this critique from Bryan Caplan, who has a blog post (https://www.econlib.org/archives/2012/02/a_search-theore.html) and a paper (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1999105) about it.)
Doesn't it take effort and resources to identify valuable unimproved land? Consider again oil — sure, if there was a global map of all petroleum, an LVT would introduce no disincentives. But doesn't it introduce a disincentive to *find the oil in the first place*? The higher the LVT, the more difficult it would be to recoup one's prospecting costs. This seems to me to apply less to physical land, but Caplan argues it still does at least to some extent, since real estate people have to do research to find out what spots are valuable. In fact, isn't that like the main thing they do?
Or, do we consider recently-discovered petroleum to have a land value of ~$0? I.e., to we consider *the labor put in to identify a land's value* as an improvement, and therefore not subject to LVT? I guess this would be good since then we don't introduce disincentives, but again I am unclear if this will reintroduce the problems of privately owned land (maybe not, since competitors are incentivzed to search for high-value land?), unclear on how you actually draw the line in practice, and very unclear on how the apparent transition from "it's an improvement" to "it's land" is supposed to go. Again, I don't think we can brush these concerns under the rug "we assess things' value now!" because the imposition of a massive LVT would pretty drastically increase the demand for land lawyers.
___________________________________________________________________
I think that's all my questions (though I vaguely feel like I'm forgetting something and may have added more in a comment below (why doesn't Substack have an edit button D:)). I really like the idea of Georgism and an LVT, and I hope that some Georgist comes along and gives 100% satsifactory answers to all my questions. If so, I'll go from tentatively supporting some kind of LVT as better than many other kinds of taxes, to being a full on Perfect Tax Georgist.
Oh, and a couple more things. These are more (relatively confident) disagreements with the post rather than questions about Georgism:
* I don't think it's actually the case anymore that mainstream economists don't differentiate between land and capital? At least, my bog-standard intro to econ textbook talked about four factors of production: labor, capital, land, and entrepreneurial ability. (As an aside, it mentioned that some people instead consider entrepreneurial ability to be a subset of labor.)
* The stuff about where workers get paid from doesn't make much sense to me and also seems to be completely irrelevant, for the reasons Scott said earlier. Workers get paid out of whatever revenue the company takes in, whether that's from capital or sales or whatever else.
* I think the Georgist explanation of recessions is wrong, or at least missing the key points. Given the efficient market hypothesis (which doesn't apply everywhere, but should apply to the short-to-medium-term value of stocks, which collapse in a recession), it doesn't seem to make much sense for the business cycle to actually be a very predictable timeline based on land values shifting. (If everyone knows the value of an asset is going to drop, shouldn't it have already dropped? George came before the whole "Rational Expectations" idea, so I don't blame him for not seeing this, but still.)
What makes MUCH more sense to me is the more common position, the market monetarist neoclassical/new Kenyesian fusion (or whatever it's called at this point). Recessions are caused by unpredicted real or monetary shocks to the economy, especially monetary shocks. In particular, when financial markets suffer some problem that causes a bunch of money to evaporate, central banks have a bad habit of not printing enough money to keep NGDP on a level growth path — and, thanks to the zero lower bound on nominal interest rates and downward nominal wage rigidity, that causes the whole economy enters a deflationary spiral. (Basically, I think Sumner is absolutely right about everything related to money and recessions; he recommends Yudkowsky piece as the best lay-person's intro to the idea: https://www.lesswrong.com/posts/tAThqgpJwSueqhvKM/frequently-asked-questions-for-central-banks-undershooting.)
In sum, even if land rents go up enough to hurt the economy's growth rate, I'm not convinced that shouldn't actually cause widespread unemployment and recession *unless* NGDP growth drops off (which is preventable by the central bank). This obviously isn't a knockdown argument against Georgism; the part about not introducing distortions and fighting rent-seeking is (in theory) pretty great without it literally solving recessions.
(*Last paragraph should read "I'm not convinced that *should* actually cause [...]". Sorry again for making four entire comments for what should have been one; I'm very used to compulsively hitting the edit button.)
https://www.researchgate.net/publication/258164586_Reply_to_the_Caplan_and_Gochenour_critique_of_Georgism
one solution to the 'discovery' problem comes from the IP/patent side: the government should offer prizes for discovering new resources, ideas, etc, but then those ideas become part of the public commons. this is straightforward to imagine with medicine, but the principles apply elsewhere. obviously other reforms would be some kind of self-assessed tax on patents, mining rights, etc, like we see in spectrum: auction the rights, or have them taxed at a self-assessed level, if anyone wants to buy you have to sell at the assessed value. that might not work with all forms of economic land, but for non-physical assets it could help.
there's a lot of answers to your (good!) questions but i don't have time right now to dive in. one way to 'rethink' georgism that might help is to replace the word 'economic land' with 'privilege'. Georgism looks for those sources of wealth that are derived from exclusion, monopoly, limited competition, are enforced by the government, don't increase total wealth. basically it sets out to aggressively protect what you have earned (georgists opposed income taxes) and aggressively prevent private capture of what can't be "earned".
For historical comparison, you may be interested in what the Georgist contemporary and (socialist) market anarchist Benjamin Tucker called the "Four Monopolies":
1. Money (i.e. the legal privilege to mint money & engage in banking)
2. Land (like Georgism)
3. Tariffs (i.e. as protectionism)
4. Patents (there are downsides to them also)
https://en.wikipedia.org/wiki/Benjamin_Tucker#Four_monopolies
What I don't understand is why georgists assume that the quantity of privilege is fixed.
It's clearly not : on a long enough timeline it decreases from the laws of thermodynamics.
On a shorter timeline, privilege can be "renewed" thanks to the gigantic nuclear reactor that is our sun.
On an even shorter timeline, the value of privilege can fluctuate wildly, taking oil again as an example :
- if you don't know it's there, it has no value
- if you don't have a use for it, it has no value
- if you extract it, the value becomes wealth, but the privilege of that chunk of nature is diminished
- the value is going to depend on lots of things like technical progress, and the current oil price
Now, I don't know what this implies for the price/quantity curves, can you have a negative deadweight loss ?
Sorry — cold you elaborate in a little more detail on how that would work? I'm a bit slow.
In the oil example, is the knowledge of where the oil is considered an improvement, or is it just a discovery that the unimproved value is higher than previously thought? I think you're saying it'd be the latter, and so the oil WOULD be subject to a high LVT — but then the government pays the discover a fee to undo the disincentive. (Do I have you right?) Crucially, I don't really understand where the government gets the size of that fee from. Is it just, like, the increase in value of the oil, since I guess that's the value of the discovery? But then, how would that be different from doing *neither* LVT *nor* the discovery fee (in which case Caplan is right and you can't get the benefits of LVT for certain types of land)?
I skimmed a bit while reading that article (lots of semantic/terminological squabbles and disagreements over what George *really* meant), so I'm sorry if I missed something, but I didn't see anything in that article resolving my core issues. It says we consider the knowledge of where oil is to be an improvement and a capital good, but then where *precisely* do we go from there? (Do we just accept that natural resources will be untaxed if it took effort to find it? In which case it seems like it practically agrees with Caplan, because then that means we can't get the alleged benefits of LVT for natural resources that require discovery.) The closest I see is "The land patent duration should be long enough for typical entrepreneurs to be incentivized to innovate" in section 8, which isn't quite the level of precision I'm looking for. (By the way, for anyone else reading this who can't access the article both easily and legally, it is in fact on Sci-Hub.)
______________________________
As for the philosophical argument (land ownership is privilege, it can't be morally "earned", etc) — I do get that, and find it a valuable addendum to the usual way I think about property. I'm grateful to Georgism for giving me that precise shift in perspective.
But in terms of policy I find the pure philosophical argument on its own to be only marginally compelling and marginally relevant. (Which is why I hardly discussed it.) Like, okay, morally, the square meters beneath us is the bounty of Nature and ought to belong to everyone, and anyone who currently owns it under the current system just got lucky. So then, what next? We get a Georgist government, they rewrite all the laws and the Constitution to specify that land really belongs to everyone but the government is allowing private entities to administer it, whatever. A philosophical victory, but who cares about that part? I don't think most people care whether the government has a piece of paper saying that everybody collectively owns the land.
What people DO care about is getting cheap products from private enterprise and getting money from the government. It is Georgism's claimed stellar performance on *those* metrics that make it so tempting to me, and what my questions are aimed at clarifying. The abstract discussion of "privilege" and whether or not something was "rightly earned" is interesting, but ultimately not the core of what I care about, and definitely aren't enough to get me over the hangups I've laid out.
[Sorry again for this long comment; I need to be more concise.]
>Is it just, like, the increase in value of the oil, since I guess that's the value of the discovery? But then, how would that be different from doing *neither* LVT *nor* the discovery fee (in which case Caplan is right and you can't get the benefits of LVT for certain types of land)?
The state has infinite bargaining power; leaving aside waste, it'd presumably just be a bit more than the (risk-normalised) costs of the exploration.
Oh okay gotcha, duh, that makes more sense than what I said, shoulda thought of that.
But that does seem to introduce another problem — if the state is covering the entire costs of exploration, then they have no incentive to keep their costs low, right? Will the state say, "Okay, you guys _clearly_ wasted a ton of money on this, we're only covering half the cost" or something? (I'm pretty unclear on how "negotiation" between private companies and governments work in practice right now, since as you say we can think of the state as having infinite bargaining power — but, also, the state has little incentive to care about cost. I can't imagine the system works perfectly based on how long highway construction projects take.)
So yeah, basically, I still struggle to see how you can avoid deadweight loss if you try to impose a Georgist tax on oil (or anything else where discovery costs matter).
(I don't know if the best solution is to swallow the deadweight losses or try and lower LVT for land with high discovery costs — I guess it depends on the actual numbers.)
I'm probably missing something since I am no expert on economics or Georgism, but wouldn't the value of prospecting be that you buy the land for the cheap unimproved useless land price, then sell it for the expensive land-with-oil price. Same as today, except the tax on the land goes up a lot as soon as it is being used for oil drilling because the land value is now higher.
if I'm understanding what your question/criticism is (if not please tell me):
Prospecting would still have value; oil would still get drilled. It's just that it seems the incentive to do so would be lower than it would be in a pure free market — the higher the land value tax, the more difficult it is to recoup your prospecting costs. It'd be a less profitable venture. And so you get less oil at a higher cost (and less of everything made with (nonrenewable?) natural resources with discovery costs).
Note that if the location and unimproved value of all the oil is publically known, you *wouldn't* have that disincentive with an LVT! (Drilling the oil presumably counts as an improvement, and that *added* value wouldn't be taxed.) That's one of the big selling points of the Georgist pitch — although most taxes have deadweight losses, an LVT shouldn't because the supply can't go down. Again, my issue with that selling point is that, when you have non-negligible discovery costs, it seems like "the supply can't go down" is misleading even if it's true in the literal sense.
That unextracted oil counts as land/nature/privilege too. Its value is subjective of course.
As I understand it, the idea of the "unimproved value of land" is that it'd be whatever the competitive market price of said unimproved land is. (I think.)
The issue with the "unimproved" value of oil is, a tax on it (and any land with discovery costs) seems to introduce the usual taxation deadweight losses that Georgism is supposed to avoid. This is because, the higher the Land-Value-Tax, the harder it is for the owners to recoup their prospecting costs. So, do we just accept that the Georgist pitch of "fixed supply, so no disincentives!" doesn't apply, and just go ahead and eat those deadweight losses in the name of fighting land privilege? (Not *necessarily* worse than the status quo, since current taxes have high deadweight losses too, but still, it weakens the pitch.)
Or, one idea is to consider the discovery of oil to be an *improvement* (like a form of intellectual property) and therefore not subject to the LVT. Only the value of the oil *without knowing it's there* would be taxed. In that case, my issue is that it seems to concede the whole point — in order to avoid taxation distortions, the Land Value Tax on oil would be reduced to, like, the value of the equivalent volume of rock.
(Upon reflection (I really, *really* wish Substack had an edit button), I think I partially retract something I said in part 1. I said that, if you let landowners pay a fee to the government to take the land off the market, you can't just place the value of the land at what it was sold at because the land value could change and "smart speculators will take advantage of that". But in actuality, I suppose that, if the land's value will predictably rise in the future, it will be bid up *now* in accordance with that, and thanks to Georgism the land market will be very competitive. Still, even if would be difficult for "smart speculators [to] take advantage of that", the land value could still fluctuate a lot (unpredictably up or down, zero on net in expectation), and the value that the land is being taxed at could diverge a lot from the actual value. That'd be bad, so you're still back to square 1 in accurately assessing the value of a piece of *off-market* land that the owners are heavily incentivized to make look lower than it is.)
3.) What is land? That's what bothers me. (As a side comment, I live on 30 acres of land, 1/2 fields that we've let go back to shrubs and trees. This to the lament of local farmer friends who see a loss of what was good haying land. Trees can be like weeds, a negative to 'value'.) Farmers around here make a tidy sum leasing land for windmills. Is all that lease money gone to taxes? Or will we have special carve outs if you are using your land for 'good' stuff? Windmills vs gas fracking leases.
Probably, yes. Unless I'm misunderstanding, you're not creating any economic value by leasing the land, you're just giving someone else permission to make value on it (the windmills), so the value you're getting from the lease should be approximately that which the taxation would take (assuming that there isn't another way to make more value off of it that would drive the land value up relative to what you're leasing).
Thanks, Windmills seem like the cleanest example. But I'm forced to use my land to it's maximum extent, or sell it to someone else who will. I'm sorry, but it sounds crazy in this day and age. If I don't want to frack the natural gas under my land, so I can save it for my kids or grand kids, maybe. I can't do that without paying taxes on it for years and years?
Under this system, yes. The whole goal is to remove land as a valid way to store wealth, because it steals value from everything else.
Though in practice I think this is mostly aimed at constructible land and in particular land in cities. Land that doesn't fit these has a much lower value and presumably then also a much lower tax.
Yes, this seems "unfair"... but is the current situation "fair" for the non-owning workers that are forced to work to pay rent or even capitalists that are forced to keep up with the changes in the market or go broke ?
But yeah, georgists seem to have a blind spot for the portion of land/nature/privilege that *is* going to be destroyed if "used" ?
This is a very good point. I'm hesitant to start introducing new categories to save an ideology, since that way madness lies, but is one of the upgrades we'd need to make to George's thought now that we're on the other side of the Endless Frontier/Spaceship Earth transition to add the concept of _wilderness_, land that has to be put outside the human economy on a permanent basis? I see the tendency of this system to disincentivize urban sprawl and reward density as potentially being quite helpful in this regard.
I've done a little thinking, and I'm not convinced there is a big problem in making new land - there isn't actually anything in the theory that forbids land values from changing over time. In fact, the whole point of the theory is that land prices increase astronomically, and this has nothing to do with its intrinsic natural attributes, but because of the positive externalities of all the other human investment near it. I think this is also how land valuation separately from capital value would be assessed in seasteads or on Mars, by George. The land (remember, not capital!) value starts at near zero, and as they become built up, the land value increases.
The weird bit is that in a Georgian economy, a customer would still pay rent which is indicative of the pre-tax full capital value of the land - but because the landowner would always be subject to a land tax, the amount anyone would pay to purchase the land is reduced. You can't buy the revenue stream without the liability stream attached. This also goes some way towards answering your question about how land valuation would actually take place - the rent it commands is indicative of it.
I would definitely be astounded if there weren't some amount of lawyering about this, but the baseline would likely be set on a city or state/country level with a process for objections. This might not be terrible compared to current effort to hide income from taxation? I'm not sure.
But you can't "make new land" - the quantity of land/nature/privilege can only go down, per the laws of physics.
Or would IPv4 addresses count as land/nature/privilege - or would they be as infrastructure, which according to georgists should then be "internationally nationalized" ?
What is not clear to me is how georgists propose to deal with the land/nature/privilege that isn't owned by anyone yet ? For instance, George's example of rays of light - or does he consider them owned by anyone owning the land that they shine on ? (Especially since owned land/nature/privilege is only a microscopic part of all of the land/nature/privilege in the universe ..?)
Obviously the best way to assess land value is to make it so that you have to specify a price at which you will be willing to sell your land to any taker, but the buyer has to raze any buildings on that land to the ground so they are only getting the unimproved value. /s?
(this actually sounds like a good way to allocate the airwaves. *googles 'Glen Weyl Georgism'* Yup that seems to be one of his proposals)
oh wow i just got ninjad by penttrioctium
fun note to add: george's 'social problems' is always how i recommend people get into george from a social justice angle, he gets more in the weeds on the morality of the tax there. 'progress & poverty' definitely seems more fit for the Astral codex audience, it's a lotta econ. Glen Weyl's "radical markets", "the high cost of free parking," "the railroad and the city" and pikkety's "capital" (when understood that his thesis, in practice, is actually about land values https://www.vox.com/2015/4/1/8320937/this-26-year-old-grad-student-didnt-really-debunk-piketty-but-what-he) all get into more modern takes and evidence that could lead one to the principles george also describes. i love the EVE online example - economic rents can be generated in *so many* ways, but at the heart is the idea of *profiting from exclusion* or lack of competition.
It's funny, I received by mail Piketty's latest *Capital and Ideology* (2019) mere hours before this review was posted, now it looks like that I'll have to read *Progress & Poverty* first ! (Better to see the evolution of ideas about inequality.)
My read of Weyl, and of Robin Hanson's defense of Weyl/Harberger type taxation, is that it is more radically rent-confiscationist than Georgist taxation: essentially it forces you to put *everything you own* to its highest-valued economic use, not just land, or pay for the privilege of not doing so. I find the logical consequences of this morally repugnant, but I can see how it might in principle have a stronger efficiency-promoting effect than "classic" Georgism. In general the review would have been stronger if it had dramatically shortened its explication of Georgism to make room for critiques of Georgism, successors to Georgism like Weylism, and the reviewer's own conclusions after reviewing all these. As it stands, the piece is more a cliffs'-notes than a review.
I have a question about the graph of worldwide extreme poverty. Looking at the overall trend line, it appears that extreme poverty would be wiped out around 2026, and even just looking at the most recent trendline around 2015 it seems like the number in extreme poverty would be about half of what they're projecting for 2030.
The obvious answer on the graph is that they expect extreme poverty in Africa to go up slightly in the near future and then stay completely steady for 10-15 years. That notion seems hard to justify, given the trends in all other places around the world.
Does anyone have more information on why Africa might be an outlier, and how reliable the predictions are? They are even expecting southern Asia (India, Bangladesh, etc.) to have Europe/North America levels of extreme poverty (read, very very low) by 2030, but for Africa to be worse than now?
Extremely high demography, I guess ?
> Generally speaking, as you get more people your productivity grows exponentially rather than linearly:
I think you mean "superlinearly" here; it's much more likely that productivity grows something like nlogn than exponentially.
One thing that bothers me a bit in this review: first, the Land is defined as "all natural materials, forces, and opportunities", and examples are given: "That means that a field or a meadow is "land", as is a mountain. But so are the fish in the sea, the clouds in the sky, veins of gold in the earth's crust, and the oil deep under ground."
However, anywhere else it seems like only actual plots of ground are discussed. This bothers me, though I can't quite articulate why. How much does an oil field worth? A lot - for an oil company. Not very much - for a farmer who uses the land above it as a pasture (for simplicity, let's assume oil company actually needs his plot to work the field). Will he find himself suddenly paying much higher LVT if the oil is discovered? He's clearly not using the land
to the full extent now that it became more valuable, so it seems in this model he must be penalized for that. I feel there must be a lot more complications, if you apply the given definition of land to all natural resources.
Another thing that bother me if the government, which usually owns a lot of land, should pay LVT on it to itself. This would provide the government with initiative to sell all land it owns and not actively uses to private entities. Sounds rational, but to me it looks like a fast way to dismantle national parks system, for one thing (though I guess you can make such places exempt).
for georgism 101 starting with ground rent is the easy part. and yes - the government should have to pay LVT, but yeah you still might have society choose to protect national parks.
stiglitz's work tells us that public improvements (parks, subways, etc) increase the value of land - living near a train station you'll see rents usually go up. so if the government re-captures this as a LVT, it creates a virtuous cycle!
Ground rents are the easiest thing to talk about with georgism. next is monopoly, then stuff like spectrum rights (the gov auctioning spectrum is georgist-esque, and was inspired by a georgist economists' suggestions), IP/patents, etc. Georgism can be incrementally implemented, and it would be best to start with the low-hanging fruit of location value, then work our way to the thornier problems. Even just solving the location value issue would dramatically change so many things that it's worth talking about at length, alone.
I don't understand why georgists assume that land/nature/privilege are fixed in quantity - while they clearly aren't. And why would we care about quantity anyway when the value can fluctuate wildly from mere information or available tools suddenly making new land/nature/privilege available for destructive extraction ?
Government paying LTV creates initiatives for various pieces of it to dispose of "hot" land, to keep it off their budgets. I have no idea how bad it would be, though. It would be nice to see a big experiment somewhere.
Well, generally the farmer doesn't own the underground resources anyway (the USA being an exception)... so he wouldn't pay tax on them ?
This creates an interesting situation - if resources belong to the government (as in most countries), then the government suddenly has to pay more or sell oil under the farmer? Another exception could be made, of course, for natural resources that cannot be developed right now for whatever reasons, but this leads down a dangerous path where exceptions outweigh general use...
Also, simplistic approach dictates that government should sell all discovered oil fields without keeping anything in reserve. This seems dubious.
Government doesn't pay taxes ..?
I don't know how it works in USA, but in Russia even local tax authority office pays payroll taxes (to itself; also, by one account I heard, it's often late and has to pay penalties, too). If we exempt government from LVT, it would break the whole system - government will become the biggest and worst landlord (the only one who can hold on to Land indefinitely).
Well, yeah, tiering taxes this way (also various level of government from local to national) can have useful properties I guess ?
----
And technically government is *already* the biggest landlord - it effectively "owns" *everything* inside national borders (see eminent domain or the like - Экспроприация in Russia).
Speaking as a former landlord, as interesting as this may sound in an abstract sense it fails to square with my reality. My reality was profitable, but required a great deal of risk and effort and not just the "improve the property" effort mentioned in the example. I find the conflation of landlords and land speculators.... odd? Disturbing? Unfair? Not sure any of those words precisely fit but gesture I think at the desired frame of reference.
the example was clear: a 'good' landlord can absolutely add value, and part of what we are charged as 'rent' is the return on labor. but the vast majority of what you charged was probably based on location. the 'risk' wasn't the same as other kinds of assets, as we've discovered in COVID as landlords demand their 'risk' be covered by the government when people can't pay rent.
george held no special dislike for land-owners per se- that's why he said 'lets take the kernel, and leave the shell', but the fact of economics pointed out from Adam Smith to Pikkety is that land ownership *in and of itself* is not valuable of wealth-generating.
Your profit was disproportionate to your risk and effort, no matter how hard it felt to be 'inside' the system.
Except that's wrong. It was very risky, and in fact I was forced to sell at a loss that wiped out a couple years-worth of profits. My risk was *definitely* not disproportionately small to my profits. Effort is more subjective, but it was not for nothing. Again, my issue is that the thinking, either of the author of the review or the author of the book, conflates the idea of landlords and land speculators when it's convenient and then splits them apart when it's not. I wasn't holding that land unproductively hoping it would increase in value, I was running a business on it. But where is the line drawn? I paid a property manager to handle a fair bit of the minutiae, does that make me an evil absentee landlord cf the Potato Famine? At what point on the curve do you go from good landlord to bad?
Your risk was not higher than had you spent that same money on actual wealth-creating investments. less risk =/= guarantee of success. Most landlords have the mentality that they shouldn't bear any risk of loss, and then when they do occasionally lose, get upset. You were both land speculator and business owner. The fact that you paid a property manager proves that you didn't want to do the work of 'value-adding', you just wanted to have the benefit of owning a piece of paper that said 'this land mine.'
the spectrum isn't really important to georgism- it's not about judging you. but part of the rent you charged was derived not from your work or risk, but from the commons of the community around the land you owned. that's what should be taxed, and then you can compete to provide great services and what not.
but those taxes don't go nowhere- george supported a ubi! so it's not like people are left out to dry, the whole idea is that collecting economic rent should be sufficient for people to have the basics.
the business you ran you should not be taxed on, but the underlying land should have been. georgists would slash your income taxes, business fees, etc, but make you pay for what you didn't create, but profit from.
I disagree: I would have had much less risk although possibly lower returns if I'd bought gold (and it seems to me gold is a waaaay better example of "land" than literal land) or stock, but whatever, doesn't matter. The underlying general problem remains: if it's barely profitable (or in many cases *un*profitable) to be a landlord *now*, under the current regime, and that is a necessary service (not everyone wants to or is capable of being a homeowner), then in the proposed arrangement that reduces further still the profitability of that enterprise what incentivizes people to be landlords?
Nothing about an LVT prevents you from pricing in your risk. The only thing limiting the rents you can charge is the competition in the market. Presumably other landlords know about these risks and will also price them in. If your rental business is, for whatever reason, riskier in a way that doesn't proved excess value, then you _should_ go out of business.
Yep.
According to georgism, extracted gold is NOT land/nature/privilege one reason being because gold is wealth, while land/nature/privilege aren't ?
Gold ore/veins are land. Processed gold (coins, bars, ingots etc.) is wealth, because it is the result of human labor applied to land to satisfy desires.
Imagine, for a moment, a box. At the end of each day, the box must contain $100, or it will disappear. At the start of each day, the box contains a random amount of money whose amount is evenly distributed between $1-$1000.
It's perfectly possible to lose money owning this box. It's really easy to lose money owning this box if you purchased it for its expected value for 20 years.
And if the box randomly stops working for a year, it's possible to be forced to sell the box at a massive loss.
Yeah I mean clearly this would screw over anyone who paid for land and did not receive windfall appreciation, because in that case you paid the full value for whatever the land is generating in rents and you're not making any special amount of money. The only one this tax appropriately hits is people who own land which had randomly and unpredictable increased in value, which in fairness is a lot of people. But it would also bankrupt a lot of perfectly nice people who are doing nothing wrong and making no spectacular amount of money.
I think LVT is a fine idea in the abstract, but you would have to compensate people for the price they paid for the land originally, that's the only reasonable way to do it. And indeed that might be necessary for it to be constitutional.
I think this is something George just gets wrong--he seems to suggest it's easy to make money by buying land. But in an efficient market, it won't be any easier than via any other type of investment. The difference is that if you do a really good job and beat the market and successfully pick the land that will increase in value, nobody else benefits.
(Insofar as your landlord profits were a result of doing a good job picking land that would gain value, then you probably did work hard for them but they didn't help society. Insofar as they were the result of basically anything else, they were totally valid returns on labor)
It seems like there are two major problems I can see with a land value tax.
1) There is a major tragedy of the commons problem. If I own a lake which is naturally stocked with fish, I can choose to either sustainably fish it, or immediately catch all the fish in the lake. If all of the future "natural" value is taxed away, what incentive is there for long term productivity?
2) In urban/suburban areas, the unimproved value of the land is heavily dependent on the people and land improvements surrounding it. Currently if developers try and gentrify a neighborhood there are two powerful competing interests; landowners who want to increase the value of the land, and renters who don't want to be priced out. A land value tax would mean that landowners no longer have any incentive to gentrify. The obvious political equilibrium is that any development which could increase taxes is preemptively banned.
In addition, the unimproved value of land in developed areas is not a well defined concept. For instance if I put a development block of 100 houses in the middle of nowhere then obviously the unimproved value is simply the value of that land as farmland. If instead I want to build a house next to 99 other houses in a development then assessing the natural value is much harder. The mathematically pure (no deadweight loss) method is to still assess it as farmland, but extracting 100% of Manhattan's farmland value has no impact on speculation or rents.
"There is a major tragedy of the commons problem. If I own a lake which is naturally stocked with fish, I can choose to either sustainably fish it, or immediately catch all the fish in the lake. If all of the future "natural" value is taxed away, what incentive is there for long term productivity?"
- What incentive is there in owning a company for 5% of its value every year, as opposed to selling it for 100% of its value right now?
"In urban/suburban areas, the unimproved value of the land is heavily dependent on the people and land improvements surrounding it. Currently if developers try and gentrify a neighborhood there are two powerful competing interests; landowners who want to increase the value of the land, and renters who don't want to be priced out. A land value tax would mean that landowners no longer have any incentive to gentrify. The obvious political equilibrium is that any development which could increase taxes is preemptively banned."
- I think you have this radically backwards. Landowners in the current tax scheme get taxed on the improved value of their land; the current tax scheme discourages improving the land. The only landowners who "want" to increase the value of their land are those who want to sell in the near future; if you don't plan to sell it in the immediate future, it's in your best interest not to improve anything unless those improvements pay for themselves and their taxes. For the purposes of owning land, rather than improvements, as an investment, a slum is in many respects a better investment than a nice apartment building.
"In addition, the unimproved value of land in developed areas is not a well defined concept. For instance if I put a development block of 100 houses in the middle of nowhere then obviously the unimproved value is simply the value of that land as farmland. If instead I want to build a house next to 99 other houses in a development then assessing the natural value is much harder. The mathematically pure (no deadweight loss) method is to still assess it as farmland, but extracting 100% of Manhattan's farmland value has no impact on speculation or rents."
- You don't need a mathematically pure method. Here's one way to do it: Everybody declares the unimproved value of their land, and can update it once a year at tax assessment time. They're taxed on that value. Anyone else can buy out the current owner for the unimproved value plus the cost of relocating or reconstructing those improvements somewhere else.
"- What incentive is there in owning a company for 5% of its value every year, as opposed to selling it for 100% of its value right now?"
Even if I sell it the future owner has the same long term incentives as me.
Let's suppose we apply your algorithm for computing the land's unimproved value to our hypothetical lake. Suppose there are two possible uses for it.
1) Sustainable fishing giving $10,000 a year forever.
2) One time exploitation for $100,000 and then no production ever.
If everybody plans to fish sustainably, I need to pay $10,000 a year in taxes. If one year I defect (or some other buyer defects) they pay $20,000 in taxes for the year, extract $100,000 in rent and then reassess the value at $0 and make an $80,000 profit.
In ordinary circumstances this would reduce the purchase price of the land. But with an 100% LVT the purchase price of unimproved land should be consistently close to $0.
" I think you have this radically backwards. Landowners in the current tax scheme get taxed on the improved value of their land; the current tax scheme discourages improving the land"
In the current system I am taxed on improvements that I make to the land, which disincentivizes "me" from making improvements.
In the proposed system I am indirectly tax on improvements that other people make to the land, which incentivizes me to prevent other people from making improvements on the land.
Suppose I live in a single family house in Silicon Valley and I would like to stay there. In the current system, if my land is rezoned for apartment buildings I am not directly affected. In the proposed system, the rezoning is catastrophic for me. I am immediately forced to sell my property and move. Why would I ever allow that if I had any political power?
"If everybody plans to fish sustainably, I need to pay $10,000 a year in taxes."
- Given you have stated that this is the annual return of sustainable fishing, that is the value of the unimproved land, plus labor mixed in. Indeed, if you're being taxed for the full economic value of the unimproved land, plus your labor, it makes no sense to own land at all.
Pretty much all your conclusions flow from the basic issue that you're not assigning any value to labor itself, in your valuation of the land, which is why you conclude that with 100% LVT the value of land should be close to $0. If the value of the land is $0, then $0 will be collected in taxes, which means it's worth owning the land.
The thing you're looking for is the equilibrium pricing, which will happen to approximate the marginal value of the land, which is, in fact, greater than $0. Assuming a fishery that makes $10,000 in profit after labor and expenses, the taxes will be somewhere between $0 and $10,000, unless there's some more valuable purpose to which the land could be put.
"Suppose I live in a single family house in Silicon Valley and I would like to stay there. In the current system, if my land is rezoned for apartment buildings I am not directly affected. In the proposed system, the rezoning is catastrophic for me. I am immediately forced to sell my property and move. Why would I ever allow that if I had any political power?"
- First - zoning?
Second, because if the improvements price you out of the land and mean you will need to sell, you'll still make a profit, since the taxes will reflect the marginal value of the land, which must have increased since you purchased it.
That is, you can still profit off land; you can even do some short-term speculation. Long-term speculation and land rent, however, become unprofitable enterprises.
" - First - zoning?
Second, because if the improvements price you out of the land and mean you will need to sell, you'll still make a profit, since the taxes will reflect the marginal value of the land, which must have increased since you purchased it.
That is, you can still profit off land; you can even do some short-term speculation. Long-term speculation and land rent, however, become unprofitable enterprises."
Sure I'll make a profit, but what if I don't want a profit? What if I prefer to stay living in my less valuable home? As a homo economicus I can sell my house and move somewhere else, but that's not always pleasant.
So politically some form of "zoning" will be used to keep that unpleasant thing from happening. That zoning might be formal zoning restrictions by the city. It might be bullshit building codes which just happen to ban any more economically valuable usage. It might even be unexplainable localized spontaneous combustions of new developments.
What, exactly, do you want to happen in this scenario?
The economic incentives are aligned, such that everybody's economic incentives point in the same direction in this situation; frankly, that's basically a miracle. If your objection comes down to "But people might not act in their economic best interests", well, it isn't a new problem, and it isn't clear to me that any system should, in fact, force people to act in their economic best interests.
The fact that it isn't catastrophic for the people involved - that they can even pocket some money after the fact - looks to me like a net improvement over what we have now, in which eminent domain would be used to seize the houses at below market value.
"It's in your best interest not to improve anything unless those improvements pay for themselves and their taxes."
This is always going to be the case, regardless of tax scheme. The issue with the LVT is that it seems to amplify the commons problem. If I put in a park next to my house or a parking lot next to my store, the neighbors benefit (and pay slightly more LVT), yet I pay the LVT for the land with improvement itself. Everyone benefits, yet I pay the most for it.
The way around this seems like it might be multiple layers of government-as-Home Owners Association, where the people affected by the increase in LVT pool to pay for the improvements that benefit them collectively.
How does it amplify the commons problem?
If I install a stadium that increases the surrounding land value in the current scheme, I pay taxes on the full value of the stadium.
In the LVT scheme, strictly speaking, building the stadium should not increase the unimproved value of the land the stadium is on at all; now, there might be a bit of a recursive effect whereby I increase the land value around me, people build stuff there which increases my land value, which increases the taxes I pay. But it certainly isn't obvious that I'm paying "the most", particularly compared to the current scheme.
Also, as mentioned above, if this does happen, I can sell the stadium and land it is on, because I can, in fact, profit from increases in the unimproved value of land - since by definition it's the amount of money somebody will pay for that land, unless there's also a 100% land value gains tax. (I think there are good reasons not to want this, even if it does enable short-term land speculation, mainly to do with aligning incentives.)
[The following is speculation; if I'm wrong, please correct me]
The stadium directly earns you money. The parking lot or park does not.
Any establishment in a retail cluster of separate establishments (rather than a centrally managed mall) that skimps on providing adequate parking gets a substantial tax savings by allowing customers to freeload off of other businesses that paid for adequate parking. Free parking becomes a significant expense in a LVT environment. For that matter, any land use that doesn't bring in money for the owner becomes a significant expense.
Pretend I am a business owner with a retail business in an area with a lot of retail businesses and my establishment has the same land footage for the building and its parking lot. Under the current tax system, most of my taxes (and all of my revenues) are coming from the building; I might be a little annoyed at people using my parking spaces to shop nearby, but it's not a major loss. Under a LVT only system, the parking lot is half my taxes. I can try to enforce a 'employees and customers only' rule, but that costs me in enforcement.
That's not to say that there aren't ways around this. Urban environments where parking itself is a business don't need to worry about this since nobody there expects individual businesses to provide their own parking, although one can expect prices to go up since more of the cost of parking garages is the valuable urban land they occupy when compared to the buildings around them.
If the land could be of more value to society as another building or business, shouldn't that be what we incentivize? Do we, as a society, actually want to subsidize unproductive uses of land?
Well, yes, we do. We want parks, for instance.
Do we want parking lots in the same way that we want parks? And if we do, who should pay for it?
Why do you consider parks to be "unproductive" ?
I don't see how that last bit can work. First the cost of moving/reconstructing improvements will often vastly exceed the cost of the land. Second not all improvements can be moved. Say I've cleared the trees, improved the drainage and fertilized my land to be more productive... it's hard to undo that. Or maybe I've added some ponds or an orchard.
You raise excellent points. Thank you for your comment.
>There is a major tragedy of the commons problem. [lake example]
I'm not sure this is a tragedy of the commons problem. It seems like it would still be here even if a single owner owned the lake.
>In addition, the unimproved value of land in developed areas is not a well defined concept.
True, but it doesn't seem impossible. Existing property tax is done without an exact knowledge of how much a property is worth. That might seem like a strange claim, given that records of real estate transactions exist, but many of the homes being taxed have not changed hands in over 10 years. Given a small year-on-year change, that means a prior sale price can be wildly off from the true market value of a property. In practice, you need to estimate the value of a property from sales of similar houses.
You could look at sales of property, and try to guess what percentage of the value of the property was due to land, and what percentage was due to improvements. In some cases, like the parking lot in Boston which sold for $40 million, the entire value is the land.
Alright, I think this is an absolutely fantastic review, but maybe leaves some stuff unexplained - I assume because the book in question left these things unexplained.
So this is coming at Georgist reform from an entirely different direction than I, personally, came across the set of ideas, and I think it is helpful to come at the reforms from a different direction. Namely, Georgist taxes aren't just taxing rent - that's one way of thinking about what is happening, but not the only way.
If you consider property rights, they are, fundamentally, an exclusive right; ownership of land amounts almost entirely to the exclusive right to use that land. I can build something there, but I don't have to; what ownership means is that somebody else -can't- build something there. Theories of value and natural rights property ownership hit a rather hard limit in the case of land, because land is the unconverted value remaining. So Georgist taxes are taxing the fact that property rights are really just excluding anybody else from using this land; the Citizen's Dividend is paid to everybody else because "everybody else" is whose rights have been limited by the assignment of property rights.
Consider land in its natural state; nobody owns anything. Okay, now imagine somebody builds a farm. We'd like them to be able to enjoy the products of their labor, so we assign them the rights to the farm. Property rights go unjustifiably further than this - if a passing surveyor discovers coal a hundred meters under their farm, who owns the coal? The surveyor who discovered it, or the farmer who put no labor into discovering it, and whose labor goes no deeper than the first half meter or so of the soil?
Georgist taxes in this case don't tax the farm, they tax everything else, and in particular the claim to mineral rights that have nothing to do with the farm itself. They tax the right of exclusivity.
And as others observe, the price of exclusivity could get quite burdersome, when, say, you're talking about a single family dwelling in the middle of Manhattan. I would say it's actually kind of an open question what we want to do here; it isn't obvious to me, either that everybody else gets to demolish the home (as the right to the house is, I think, quite justifiable), nor that the homeowner gets to have a house in the middle of downtown - as the right to have the house in that location is not as justifiable, given what everybody else is giving up in exchange for that house to be there - certainly I don't think the hundreds of people who could be housed in a building that could be constructed in that lot should have their own interests ignored. The cost of exclusivity is, in fact, quite burdensome on society for that case.
I'm all for eliminating land rents, which is good and well, but Georgist reforms have a lot more going for them than just doing that.
---
There's some confusion about why it's important that labor costs come out of production rather than capital; the insistence here is about establishing some clarity in definitions. George wants to define capital in a particular way, as a labor enhancing good or technology. If we wrote an equation, it is something like Productivity = Labor x Capital. The point of the definition is to be able to write something like this equation. Wages aren't part of capital because wages don't multiply the value of labor.
Is this distinction important? It depends on what you're thinking about, and what problems you're facing. Treating money as capital is an abstraction of a process by which money can be converted to capital goods by purchasing them. We can easily construct scenarios in which this abstraction fails horribly; if I sell my farm, take the money with me on a flight, and crash in the desert a thousand miles from anyone else with a suitcase full of that money, I can't buy a farm in the desert and survive on the food and water there. The abstraction can be a useful one, but only in the contexts where it is appropriate.
George is insisting that we separate the abstraction of money-as-capital, from the idea of capital itself; the fact that the wages I'm paying laborers is fungible in a certain sense with capital goods doesn't make that money a capital good.
(Also, the valuation of a company that builds ships is, in an ideal sense, going to vary with the expected returns of that company; the value of a half-completed ship should certainly be priced into the value of the company.)
---
As for Google versus farmers, I think an important thing to note is that I think Georgist land reform could potentially lower the taxes farmers pay, given that currently they are taxed on the value of the farm, whereas Georgist taxes will be taxing them on the marginal value of the land that farm is on. .5% of the value of a farm could easily exceed 100% of the marginal value of the land, particularly given that the value of land in a Georgist scheme will be a fraction of what it is in the current scheme. Another consideration is that Georgist taxes would ideally tax the "land" of intellectual property, as well. Overall I expect a Georgist tax scheme to favor farmers over Google.
good points! Georgism is about exclusion and making markets work - land ownership is, at it's core, a violent way to accumulate wealth-somewhere down the line, someone took the land by force. if you point at the moon and say 'who owns that' and the answer is 'no one' (or 'all of us'), then why shouldn't that be true for what nature provides on earth? does one human have more right to a plot of land because they got there first? ridiculous, and counter-productive.
“Laissez faire (in its full true meaning) opens the way to the realization of the noble dreams of socialism.”
AFAIK generally it's the government that gets to keep that coal, though the farmer and the prospecting company might get some scraps ?
(Except maybe in the USA, which would be one reason explaining the tight gas & oil boom ?)
----
I think that you meant :
Productivity = Labor x Capital x Consumed Land
?
Scroll down to 2nd chart here :
https://jancovici.com/en/energy-transition/energy-and-us/what-is-energy-actually/
I didn't include "consumed land" because it's not necessarily multiplicative - we differentiate between extensive and intensive land usage precisely because value doesn't scale linearly with area (and to the extent that it does, that productivity enhancement is already included in capital) - and because not all uses of land are consumptive. Which is to say, it doesn't impact productivity. I'd include it in a Cost equation, and/or a more comprehensive Profit equation.
Wait, why would you measure georgist "land/nature/privilege" in area ? While I guess that's an easy approximation, it quickly breaks down : it's meaningless to speak about the "area" of unextracted oil or the "area" of IPv4 addresses !
Also, I'd say that useful joules are quite multiplicative (though obviously it's still an approximation). (However I guess that we also get back into the issue that useful joules are a subjective notion..? OTOH so are capital and labor, so I guess approximations like that can't be avoided ?)
----
And what do you mean about "extensive" vs "intensive" land usage ? I'm only aware of this term in agriculture, and it's a spectrum, not just two extremes...
Doesn't a correctly valued 100% land-tax encourage a silly amount of re- development? Wouldn't we be building things and tearing them down every few years just to ensure that at all times the land is being used in the most efficient (economically valuable) way? (Although I guess we wouldn't actually do so, since no one would build a nontrivial structure in the first place, and so more land would just stay vacant.)
A property tax (on both land and improvements, not necessarily at the same rate) can raise as much revenue but gives a tunable control to balance inventives for redevelopment against recognition of the economic value in keeping existing structures in place (even if they weren't be very best use of the land were we starting from a blank slate, which we will rarely be.)
yes, although i'd argue it wouldn't be a 'silly' amount- our current lack of re-development and efficient land use leads to silly situations like this: https://www.bostonglobe.com/business/2019/07/03/one-third-acre-back-bay-location-parking-but-not-for-long-price-million/qyoEyaJMBE1qg9piuf5piI/story.html
=most georgists support incremental phase-in with compensation or protections for the most ridiculous situations, or at LEAST make the LVT revenue-neutral by cutting income taxes and raising a UBI as you implement it. but even today in some of the best cities in the world (where land is most valuable, and zoning restrictions aren't absurd) like tokyo, there *is* a ton of re-development and change, all the time! in area where land isn't so valuable, change doesn't happen so rapidly.
Thanks, but I still don't get it. My concern has nothing to do with phase-in; I'm assuming it's up and running "well".
If the best use of some vacant land is, e.g., a large factory costing tens of millions of dollars in improvements with a pay-back period of 15 years, my understanding is that a good land tax (under every valuation scheme I've found discussed on-line) would be exactly right to make this seem _just_ economically feasible for me (and not really so for any less valuable use, so people with similar plans to mine are the only real developer candidates).
But why would anyone actually go ahead with this if there's going to be a re-valuation in a few years time which *will* (if valued correctly) push me into loss if there's any theoretically better use of the land then (assuming it were to be vacant, which it's not). I wouldn't do that under such high risk, so the land will just sit vacant all along; no factory (or whatever).
There's surely a tradeoff between redevelopment to better uses vs using existing capital well. Both sides are important. And if society wants to control this tradeoff, it will need some policy 'knob' to turn. I don't see where that knob is with a land-value tax. Nor do ad-hoc protections for the "most" ridiculous situations seem to the point of what seems like a systematic problem.
Hmm, but this is already happening with technological progress, yet people build soon to be obsolete and uncompetitive factories anyway ?
Also, wouldn't that knob be the tax % ?
No (about the tax% being the knob). First, that controls two things at the same time: revenue and [mumble]. Society shouldn't need to decrease tax revenue to grant existing developments more stability - those are completely different things!.
Second, even ignoring that, it's "obviously" the wrong control. It lowers the cost of holding bare land just as much as it does land with hugely expensive buildings. But you probably would _want_ 100% land tax on bare land, but something else to give ok-but-not-anymore-the-very-best capital investments some security.
Taxing land AND improvements (though perhaps not at the same rate) seems to give a starting handle on this. We can control revenue (through our overall take) and - rather imperfectly but better than nothing - independently honor the value of existing improvements. But that's a property tax, not a Georgist land tax, so it's out of bounds???
Also, please suppose in my example that the factory is NOT uncompetitive. Suppose it would be the very very best use of the land at the time I built it, it just takes a while to pay back as to all nontrivial capital goods. And the even when the land tax valuers decide that it's no longer the very best used any more of the land (were it to be vacant), perhaps it's a still very good, valuable, productive assets (to it's owners and to society). Just that tearing it down for an office block would earn 10% more or something after assuming the factory just 'vanishes' and that everyone who was financing it is left empty handed from now on.
And the answer can't just be 'it sucks to be the factory builder,
even if it's otherwise profitable a few years further on, it's no longer optimal' since, in equilibrium, who is actually going to build?
Well, obviously, since you wouldn't build it in the first place !
My point is that it's *eventually* going to become uncompetitive, due to the ongoing capitalist competition (including technical progress).
----
Why would the office block earn more ?
I'm really not being clear.
Relative shifts in land-use-value happen all the time. If you want me to be concrete, imagine a large office-based employee moved its headquarters to your city, leased a bunch of existing office space, and now there's a bit of shortage ... so office prices have gone up.
This happens, let us say, only a mere few years after you built your factory - it's in no way even near obsolete. But your land tax goes up TODAY (or whenever it is next reassessed) to reflect the fact that if the land were vacant people would prefer to have an office building than even a brand new factory. (Maybe there's vacant plot of land identical to yours, so the tax assessors use the market to really be confident that the land you are using is now worth more). But ... you never budgeted for that. So this fine productive factory is now a money-loser. Not because it's obsolete!
Maybe were we part company, is that (by my understanding, may be wrong) you don't get to stick with the land tax amount appropriate to it's original use until the time you decide; it has to be frequently adjusted to reflect hypothetical best use then (at assessment time). That's not an optional feature. If it were, Carl Fredricksens wouldn't get priced out of his home by a land tax (note that the review included a lot of handwaving about how it might be best for the old dear anyway, while slightly obscuring that yes, yes, he does get taxed out of his home and that's the point).
Although maybe sympathy will inspire a 'special case' to protect Carl. There surely won't be one to protect my newish, performing exactly as planned, factory. I don't want to tear it down, but at this stage, society probably shouldn't want me to either (well, not necessarily so.)
Can I just say, I really appreciated the stylistic decision to use "By George" when describing his assertions/claims. I chuckled every time.
I enjoyed this very much! Currently I'd put this at about #1 or #2 with On The Natural Faculties and both well ahead of Order Without Law. I enjoyed OWL as well but the competition is fierce
TL,DR: Review good, Georgism makes sense, but "radically more liberal high density zoning" seems simpler, better and easier to implement than a LTV.
Longer version:
This review is great, we can boil Georgism down to "everyone needs land to earn a living, you can't make more land, therefore the price of land (that everyone needs!) will increase too much as landlords receive unearned "positive externalities" from the community developments around them."
I think this is basically right, but modern technology makes one tiny part an issue: you don't necessarily need new **marginal** actual land to earn a living, you need a living/working space, which with low technology (i.e. stone or wood buildings) can be very limited, but with modern skyscrapers (and, key feature, liberal density zoning rules!), it is not. - in the "Up" example, Carl's high rise neighbors could give up trying to build his land and instead put 10 new floors on top of their building (or maybe underground levels!), or subdivide, or whatever other thing you can do to increase density. Almost no place on earth is actually so dense that a few dozen massive skyscrapers wouldn't provide more living/working space than anyone could possibly want (with resulting effects on actual "rent")
It seems to me you CAN create new "living/working space" via density. So the logical opposite counterpart of "Land Value Tax" would be "Living/Working Space Supply Increase", or more commonly called: YIMBY or increased density or more loose zoning. It has advantages over LVT in that the system (zoning) already exists, it just needs to be liberalized/modernized. No taxes change for normal homeowners. Certainly, NIMBY style people will oppose it, but how much do you think they'd opposite getting a huge tax bill for (in their opinion) no good reason? Basically the entire Georgist issue is "community developments increase the value of property without property owners having to do anything" but radically liberalized zoning would only let property owners who *built valuable, high density improvements* on their land reap those value increases. - i.e. what we want - With a far less radical restructuring plan.
With radically less density zoning, when an area gentrifies, the evil slumlords' property value never goes up because his next door neighbor builds a 100 story apartment and absorbs all the demand for new housing. We achieve exactly what we want: landlords who want to reap the community development rents have to improve their property (via density) in order to actually reap it, while slumlords who do nothing do not.
I think I understand what you're proposing, but that would create what I will call arbitrarily large density for a given area. As one of several examples of why that might be a problem, consider traffic. In an area with insufficient public transportation, adding lots of new people will result in huge amounts of congestion. Part of the actual purpose of zoning laws is to control how much is built around existing infrastructure. Other similar considerations are sewers, clean water, electricity, etc.
sure, but I think that is also an issue you'd have with LVT, because density (indeed "density" of people, services, businesses and amenities is precisely the "positive externality" thing that George is saying is increasing the value of the land) is what landlords would turn to to offset the LVT. But density fixes both of your issues: if density increases enough, you need less (car) traffic, as it is replaced with much-smaller-footprint foot traffic. And "infrastructure" is only "too little" with respect to the tax base it services - if density goes up, so does the tax base. And dense population increases are easier to service with infrastructure than sparse ones - i.e. you can provide infrastructure to 100 families in a high rise for a cheaper per person cost than providing the same to 100 families in 100 single family homes in a suburb.
Yes, definitely on the margin, that first 100 story high rise that goes in will likely strain the existing infrastructure/roads, but cities around the world have, over the past 100 years, successfully (some more than others) dealt with large density/population increases and the challenge to their infrastructure. I recommend following the lead of the successful ones, and ensuring that your tax rates are properly set so that if 100 families move into that apartment, it provides at least enough tax dollars to upgrade the roads/sewers.
High rises are *very* expensive to build and operate. Both of which involves destroying land/nature/privilege somewhere else !
But compared to what? 100 single family homes, and the widespread infrastructure and unused land for them?
On the first approximation, yes, I'd say that the single family homes are much less destructive to build and operate. (Depends on what kind of infrastructure we're talking about though.) Also note that the quality of life in a high-rise is probably worse.
I just want to add that Leo Tolstoy, probably one of the most influential humans ever, spent his last few days talking to strangers in trains, telling them how Georgism would solve all of Russia's problems.
"I know of nothing better calculated to make the blood boil than" the goalpost-shifting between saying on the one hand that land is wholly fixed in supply, from which all the wonderful properties of the land value tax derive, and saying on the other hand that long-term improvements become part of the "unimproved value" of the land, thus most of the land's "unimproved" value also derives from improvements, but then immediately pretending that this isn't the case.
"But it will be said: There are improvements which in time become indistinguishable from the land itself! Very well; then the title to the improvements become blended with the title to the land."
The paragraph preceding this gives examples, but immediately dismisses them as "edge cases"; elsewhere, "the amount of land "created" in this way is pretty darn negligible", which is not at all the case, as visible from the very examples the author listed.
Why does this matter? It matters because you get less of what you tax, especially if you tax it 85-100%. This disincentivizes two things: one, never mind improving the land, simple stewardship of it (example given by the author: erosion prevention). Two, provision of transportation. When the author says "Workers priced out of living close by have to spend more time and money commuting longer distances to work", they don't mention that (with the exception of those who walk to work), this takes place on built infrastructure on which service runs: buses, trains, etc.
"An empty lot in the middle of nowhere is worthless, but an otherwise identical empty lot in the middle of New York city is priceless." If I should be able to build a near-instantaneous teleport gate between the two, then people will pay equal money for them; if the transportation I build consumes some time (headways as well as speed) and/or money, they will pay that much less, but people's willingness to pay depends on their access to a potentially quite large (region-sized) labor market.
Henry George may be excused for not realizing the latter point, since in his time a large fraction of people did walk to work, but for a contemporary author explicitly mentioning commuting, this is a major oversight. This is especially strange when they lay out the law of rent and elsewhere think about reducing the cost of housing: building or improving transportation to as-yet-unserved or underserved land is one of the obvious ways to reduce land rents where they are high (in their worked example, improving field C would reduce the rents of fields A and B). Describing without endorsing, this exact process happened in the US during the Cold War; networks of suburban motorways temporarily created a glut of undeveloped land within commuting time limits from preexisting cities, thus land prices fell and people moved to the suburbs; since afterward the rate at which undeveloped land comes into the market (i.e. the rate at which land is supplied) declined, prices moved up once more. Also note that this process happened both with other technologies and in other places; the term "commuter" comes from 19th century railroad suburbs, streetcar suburbs were a thing (contemporary urbanists love them), and similar rail-based suburbs sprang up in pretty much all countries that are competent enough to build railways.
Because the people who build railways do so because they get the money this creates in terms of the increased land values of the newly-connected areas? Or is that a positive externality which, in the currently framework, benefits those who happen to own the land that is now connected, which rarely if ever happens to be the same entity as is constructing the railway?
rarely if ever happens to be the same entity as is constructing the railway?
https://en.wikipedia.org/wiki/Metro-land (ok yes this is an isolated example)
Historically this kind of thing happened extensively in the US as well, as an alternate scheme for compensating railroad companies building towards frontiers; it's the modern context I'm more interested in.
I guess that built infrastructure wouldn't necessarily become land/nature/privilege ?
A counter-example might be IPv4 addresses, which I think became land/nature/privilege pretty quickly ?
(1) I have a question regarding the marginal rent of land- in two places above the author characterizes George's view of the margin of production as "the difference between how much you can produce from a particular piece of land (Lot A or B) compared to the *least* productive alternative (Lot C)." -- but given traditional understanding of marginal economics (as well as basic common sense), shouldn't the margin of production be the difference between how much you can produce from a particular piece of land compared to the *most* productive alternative (i.e., if my land has 100 utils, vacant or unappropriated lot C has 60 utils, and vacant or unappropriated lost D has 30 utils, shouldn't the margin of production be 40 rather than 70? -- it seems like the trouble with "the worst land available" as a reference to margin of production is that I can always point to a place in outer space of no reasonable utility as a reference point and say that every margin of production is simply the highest and best use of land relative to 0 utils.
Now, perhaps this is indeed the Georgist view (i.e., the hypothetical maximum utility of the land is just its margin of production, and what you should tax it on), but seems weird to characterize that as a "margin" in that instance. So am I missing something, or is the review mistaken as to the comparative plot being the least instead of the most valuable alternative?
(2) Loved the review - I have a few outstanding concerns about Georgism's emprical tax assessments as well as some frustrations regarding its implications for incumbent landowners (basically, if Amazon builds its new HQ next door to me this forces my taxes up involuntarily through no act I could reasonably control, and while in theory the tangible gain in exchange-value is meant to compensate me for any decrease in use-value (either because I can't afford the new taxes or because I don't want to live in Amazonville) I can see problems with it in practice -- but I kind of suspect that at a very fundamental level, Georgism is basically right about things.
I guess that in that example there's an unstated minimum for land productivity under which you can't survive ?
For (1) - I was wondering this too and I think you're right.
> Another effect George asserts is that once land is no longer monopolized, labor is no longer forced into one-sided competition, so wages start to go up.
What's the explanation for this? I re-read but still missed it.
I can envision a quasi-Marxist argument that labor and capital are both being exploited by the landlords, and that therefore reducing the power of the landlords should increase the return to labor+capital. But that's a distinct argument from being "forced into one-sided competition".
Is it just the implication that more economic activity would be happening, giving workers more options?
I think I can try a (possibly dumb) explanation, look at this image from the review:
https://cdn.substack.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F10603100-3169-4734-9ab1-574c9408e1f1_600x400.png
Why on earth would the farmer choosing to work on Lot B consent to such a high rent? The explanation is the Landlord sees that the farmer's only other option is working on the unowned Lot C, so he can charge an amount in rent right up to the difference.
But why should the farmer accept that? Why not say, "Look, I can see you're screwing me over here. I'll let you take a nice fat slice of rent, but you HAVE to give me a lot more than a measly 10 utils or I'll walk." Maybe farmer might be bluffing, but the landlord won't collect rent unless he makes a deal so in this situation he might accept.
This works up until the point that a few more farmers show up and anyone who wants to earn their daily bread has to compete amongst themselves for the privilege of working on private land. Without coordination, they bid themselves down right to the margin of production. That's because they have no leverage, but the Landlord does (and the Landlords are much better at coordinating, too). However, Landlords can't pull this off until land is 1) monopolized (it's all privately owned) and 2) the population is sufficient enough that the laborers' leverage is destroyed.
When land is held in common, laborer's wages don't come from someone paying them, it comes from them just applying their labor & capital to nature and making as much as they can produce.
Maybe I am misunderstanding how the LVT is applied, because the way I'm trying to apply it, it looks the same as the landlord in that example. The land values of the lots look to be Lot A = 90, Lot B = 90, Lot C = 0. That is, A&B are better land than C in a way given by nature, not by human effort to improve them. The farmer is therefore indifferent to whether he works the better land or the worse land? That seems weird and undesirable.
One difference maybe is that with the LVT the community as a whole captures the extra value, instead of the landlord capturing it personally.
I'm now more confused.
I think it's better to think of it as :
Wealth = Destroyed Land x Work x Capital ?
See 2nd chart here :
https://jancovici.com/en/energy-transition/energy-and-us/what-is-energy-actually/
The owner of the land has won a bid to own the land; they are willing to pay the most to own that land. The bid they put in must be less than the land is worth to them, but more (or equal) to the value the next lowest bidder placed on the land.
That is the marginal value. The profit to the farmer exists in the difference between the marginal value of the land, and the value they can extract from the land. If they are willing to pay more, that must mean they expect to extract a compensatingly greater amount of value.
(Which is to say, the farmer isn't going to pay $100 for a farm that provides a profit of $100 per year in a LVT scheme, because then they wouldn't get any profit - it would all get paid in taxes. The amount they are willing to pay is going to price in everything, including their labor, such that the farmer may only be willing to pay $50 for the land; this would be the LVT value that is taxed, leaving the farmer with $50 to pay for everything including the farmer's own time)
In some cases it's possible to do a joke to death. But by George, this is not one of those cases.
I disagree, by Jove!
George's theories were independently rediscovered by Irish economist/farmer Raymond Crotty, whose supreme court case made it obligatory for Ireland to have a referendum to change their relationship to the EU. As a naive but educated young farmer, Crotty had thought he would invest in capital, only to discover purchasing more land is what the more sensible/experienced farmers did with their money. He wrote the book "When Histories Collide" in part about that.
I think George was write about taxing the unimproved value of land (I would put Georgist taxes right after Pigovian taxes as the two things to be taxed before consumption, much less income). However, I'm not convinced about cycles. It would seem to be a constant factor. Monetary policy seems to explain recent business cycles, while "real" factors can explain older ones. The US was rather weird in its banking system back then.
https://www.econlib.org/canadian-versus-us-banking/
https://www.econlib.org/what-causes-recessions/
"Buy land - they don't make it anymore" is a very old investment-proverb.
Well, except that in practice, the way that he defines it, the sun is throwing a lot of 'land' at us every day !
I'm pretty sure George would say that the "land" is the watts (or equivalently, the steradians), not the joules. Technically, the wattage of the Sun is increasing, but not by that much.
Yeah, though both can be used, depending on how you look at it. Obviously, a tax has the time dimension embedded in it too, thanks for reminding me !
----
And useful energy/power is both subjective and generally NOT fixed - see the example of oil.
This review is pretty good and really well researched, but I feel it takes a huge dip when he redefines capital, and it doesn't recover until the final part of the first book. Everything else is great, so good work!
Isn't there a math error right at the top? 200,000 people is ~5% of 3.8 million, not 1%
As mentioned elsewhere in this comment section, it probably should be 10%.
By George that was a good review. Thank you. The idea of 'land' seems useful, but (as pointed out by many) confused (or confusing). Radio spectrum as land, is good. Nature's bounty (fish, lumber, oil, minerals) is less good. And even the 'natural worth of land' is confusing. I live on 30 acres of half field half woods. To the lament of our farmer neighbors, we've let the fields turn back into shrubs and trees. This has reduced the value of the land for haying/ farming. Do my land taxes go down? I also get the sense that a land tax forces land owners to 'use' their land for the upmost short term return. This seems to be the wrong incentive for limited resources. (Get the oil out now to stop paying taxes on it.) Am I taxed on all the potential uses for my land? Must I lease my land for cattle, gas fracking, and windmills, because I'm taxed as if I should be doing all those things?
Indeed. I now live on and own 5 acres land that got clearcut a century ago and was farmland 50 years ago, and now is mixed forest again. To any Georgist who sneers at my forest and asserts I should be taxed out of the ass for it, fuck you.
It seems unnecessarily aggressive to say that.
You've improved the land so that it provides a private good (presumably you like it much more now and enjoy it) and a public good (insert a pile of papers here about the value of forests, clean air, green space, etc.). The tax is calculated as 100% of the best possible use of the bare land. If we count your work as improvements, then you would not be taxed on it at all. If your work is treated as having increased the inherent land value because of the aforementioned pile of scholarly articles, then the conversation shifts to how Georgism would treat public goods and externalities when they are provided by a private party (you).
Have I misunderstood you at all?
Well, it's not just "bare land", he's specifically talking about that forest, and a lot of land/nature/privilege rather than his own labor went into these trees in the form of sunlight, carbon from the air, and various elements from the soil, and it's this part that georgists want to tax at near 100% ?
This underscores the political problem with georgism : people like Mark Atwood undeservedly (?) (and very strongly !) feel that they have a right to most (?) of the value of those trees.
Specifically, I have the right to the value of those trees STANDING UP. Taxing of "letting the forest grow back" so I can enjoy the shade, quiet, and privacy seems counterproductive in the face of people screaming about "carbon" and "deforestation".
Yeah, this works both ways - if carbon dioxide is considered a pollutant (so "negative land/nature/privilege" ?), then you should get money for helping to fix it !
I may be missing the point here, but is it really the case that we can’t just reduce rent prices by aggressively increasing supply? Sure, land is a finite resource, but we can build vertically thanks to the wonders of the elevator. Also I read somewhere that before deregulation of the airlines, planes used to be much more spacious, but it turns out that people are willing to forgo a lot of comfort by being packed into a metal tin like sardines, in exchange for a drastically cheaper plane ticket that gets them to their destination (I.e. comfort in exchange for location). It seems like many people exhibit the same preference when it comes to rent, and will choose a tiny apartment in the city over a spacious place in the middle of nowhere. But are we really at the limits of resource utilisation here? If you were able to bypass all the NIMBYs and zoning laws and build several giant skyscrapers full of tiny Tokyo-style capsule apartments in an in-demand location (say, central London) what would happen? I imagine there would be a lot of people who would be willing to live in such accommodations - you could always rent a workspace elsewhere if you need it (of course, this is another form of real estate, but it can be used much more flexibly and thus efficiently than renting a bed, and not everyone needs it) and for leisure activities people can now use very portable smartphones and laptops, as well as all the delights of the city. Possessions can be stored elsewhere where it’s cheaper (in lockers where they can be stored tightly) or people can go without them entirely.
I realise this all sounds very much like the “rectangle fetishism” that Scott skewered in his review of Seeing Like A State, but I believe there’s a real demand for such housing, if nothing else because the rent is so damn high that some people *must* be willing to exchange a lot of comfort in order for more disposable income.
I had always assumed that the only reason this wouldn’t work is because we have dumb crony capitalist regulations (which are designed to protect the interests of people who currently own property at the expense of buyers) prevent it from happening. But was my libertarian instinct naive? If we were to build a bunch of places like this, would super-rich investors just buy them and keep them empty, the same way they speculate on other finite resources, like gold or dogecoin or Andy Warhol paintings? And if this is the case, why does anyone ever get to live anywhere? What’s to stop all tenants everywhere being evicted from their property tomorrow if some billionaires realise it’s a good investment?
I’m significantly dumber than the average ACX commenter, so perhaps someone smarter than me can explain why the government (in the socialist version of this scenario) or a private developer (in the libertarian-paradise version) can’t just aggressively build shit until costs come down due to competition? Or can we? I’m confused.
We could but we don't because capitalist landlords make more money by artificially restricting supply.
The quantity of land/nature/privilege can only decrease (thermodynamics), however its value is subjective, so can also increase.
You seem to assume that denser living is necessarily cheaper, but denser living also tends to require the destruction of a lot more land/nature/privilege + wealth, both to make the buildings, and to operate them, and the reduction in the quantities of land/nature/privilege + wealth is going to impact their values.
However, YMMV about the transportation infrastructure, so, as usual, there's some golden middle that the system will stabilize in ?
Air transportation is a great example BTW : we went from less to more packed aircraft as the value of oil went from ~$20/barrel in the 20th century to ~$50-$100/barrel in the 21rst. (And note that the quantity of oil extracted per year mostly still went up, at least so far.)
This is not missing the point - it is exactly the point. The land is limited, but the living space is capital, which is limited only by the amount of labor dedicated to it.
Under a property tax, someone who replaces a parking lot with an apartment tower will see the value of their property rise (land + asphalt < land + tower) and thus pay more taxes. So if current conditions only support a 10 story tower, but they think conditions in a few years will fill up a 20 story tower, they'll leave the land empty and pay low tax until they can profit later.
Under a land value tax, the person who replaces the parking lot with the apartment tower *won't* see their taxes rise, so they'll have no reason to wait - they can either build the 10 story tower now and fill it up, and lose out on future revenue, or build the 20 story tower now and rent it out cheap until it fills up in a few years, but either way, the city no longer has a blighted hole in the middle.
If you want to show your Georgism with pride, there are some catchy songs: https://www.youtube.com/watch?v=Azc2mcIiZUM
> Without land value tax you get situations where somebody can anticipate that an empty lot will become valuable in the future, buy it, HODL forever, lobby against future development that would depress their property values, and now you have the Bay Area's housing crisis.
There's something askew about this review when we are expected to know what HODL means without any explanation.
But come on, is this even close to the truth? Are Bay Area house price issues _significantly_ driven by people who are holding land back that could (within current zoning!) develop it more intensively? Because in another world, I thought we were worried about gentrification where that is possible and zoning restrictions at other times? People are get pilloried for tearcing down a laundromat to build a high rise apartment. I'm sure the answer is "_to some degree_ people are just sitting on developable land", but is it to a large degree and is this WHY we have a housing crisis here?
And people who lobby "against future development that would depress their property values?" How does this fit the narrative at all? There's still zoning, and if my neighbour wants to build a slum next to me I might fight it. Is the argument
somehow that 'land value tax' implies 'the political process will relax zoning
restrictions'. If so, please connect the dots. If not, could you explain how the economic pressure to relax zoning restrictions becomes different (or less) under a land value tax?
I guessed "hold onto [for] damn life"; I was correct, but this is apparently a backronym from a drunk person saying "hold" on a forum.
Scott might want to think about a word limit for next year's book review contest.
I know that when I read this it was a surprise; I had mistakenly assumed a rather stronger statement than the literal meaning of "not all of them are this long".
That's 2 of 3 so far that have exceeded 100% of Scott's reviews (his longest - including the apology for length - was 11k; Order without Law was 14k and this was 18k).
Too long for me, even though it was well written and mostly enjoyable. The 'By Georges' nearly worked, but after I'd found one irritating, the rest were quite painful to read.
15.5K if you don't include the three appendices, but that's still pretty long.
I had never heard of Georgism before I read this so I found it to be an excellent summary of the main points of his ideas, with constructive examples. Yes, it was long and it really wasn't a review, but it has given me the impetus to read further on the subject. Current taxations are ridiculous. Any set of rules which requires people to read over 1000 pages needs to be thrown away and rethought from first principles. Why do we tax? Because we need money for the state. So what should the state do? Defence, yes; policing, yes; infrastructure, yes but free of lobbying; healthcare, definitely yes but what is covered and what isn't. So much of what we endure from the state needs to be examined critically on the basis of "if we were starting from scratch what would we do differently (by implication better) than we do now". Unfortunately, most of the answers would make the party proposing them unelectable. We live in the age of bread and circuses.
J G Ballard wrote a short story of a couple living in a villa with a beautiful garden filled with roses. All is tranquil but they can hear, in the far distance, the sound of a mob approaching them. When the noise gets too loud meaning the mob is close, they pick a rose from the garden and the mob recedes. But eventually the roses will run out and the mob will destroy them. We are nearly out of roses.
What is wrong with lobbying? People in wheelchairs lobbied for the ADA. People who like to skydive lobbied for and protect the laws that limit the FAA's ability to ban their sport. The laws that require that your food ship with an ingredients label is because of lobbying.
If you are going to sneer at "lobbying", I'm going to insist you unpack that.
I wasn't sneering, I was expressing an opinion. Where does good lobbying end and bad lobbying begin? You cite two good examples - I'm not sure about the third. How often do you read the labels on food packages? I know that I don't. I assume that the food standards authorities have rules on what can be used. I buy almost all of my food fresh in the local market.
From my perspective as a Brit: Washington is awash with lobbyists, most of whom are employed by large companies, or sector representative bodies such as defence industries, who work to influence government to act in ways beneficial to their clients, but maybe not to the citizens who should be the government's priority. Look at the healthcare mess.
It is the same in Brussels. Lobbyists from manor corporations make sure that the barriers to entry into their markets are set to discourage new competitors. The EU is a protectionist state and the rules are skewed in favour of the incumbents.
Due to an ongoing lobbying scandal in the UK people are calling for the rules on lobbyists to be tightened, but only in ways which don't affect their friends; e.g. Labour and the Unions.
"Good lobbying" is just politics.
We have a name for "bad lobbying" : corruption. It's a real shame that corruption has been legalized in the recent decades.
Food packaging is kind of an unfortunate example : the various labels and "nutritional quality" color/letter ratings are at least a step in the right direction, don't you think ?
I agree that corruption is now widespread; but in the West it is nowhere near as bad as in some Asian countries. I have lived in the Philippines and the Provincial governorships are family businesses. Term limits don't work; Mr. X serves his term, then Mrs. X gets elected, then Mr. X Jr. The Marcoses are a primes example. The Customs Bureau and City Halls are packed with rent seekers.
I think that food labelling was lobbied for by liberals thinking that other people (less educated, poor) can't make good choices without being "guided". I don't think it makes a blind bit of difference to people's habits. The traffic light system on packaging helps manufacturers to sell their products by making them just green enough. People think that green = good, whereas it just means "well, according to some standards we think are good, it's OK".
A pernicious example of lobbying is where Government gives money to "Charities" which then lobby government to implement legislation that the government wanted to do but needed to have "citizen support" for the measure. The UK has a lot of that.
"A pernicious example of lobbying is where Government gives money to "Charities" which then lobby government to implement legislation that the government wanted to do but needed to have "citizen support" for the measure. The UK has a lot of that."
I have to agree with you on that. I utterly despise those.
My state in the US is awash in wannabe. The absolute #1 reason why they hate that WA doesnt have an income tax is that means there isnt enough money to give huge grants to these stupid little parasites with their stupid non-STEM aggreived-people-studies degrees.
The "progressives" in WA famously killed a proposed and probably effective carbon-reduction bill, specifically and soley because it was going to move a lot of money around and yet give zero of those dollars to those parasites.
Standards exist because that way instead of everyone having to be (or pay) an expert, which would be very inefficient, you can have only a few specialized and highly qualified experts assessing a small, randomly-chosen sample of goods for their quality for everyone.
*MOST* lobbyests in DC and in each of the state capitals work for much smaller "special interest" groups, such as skydivers, ADA-needers, advocates of home schooling (yet another "lobbying organization I am a member of", small restaurant associations, etc.
You look at a few specific lobbyests with yuge giant clients, and tar them all.
And I don't even blame the yuge giant orgs. They long long ago learned they have to pay the lobby danegeld, or else be destroyed. There is a strong evoluntionary pressure against letting yourself be destroyed.
The fundamental lesson that all the tech companies learned from "DOJ vs Microsoft" was the fedgov can show up at any time and say "nice biznez yaz gots here, pity if somethin' happen t' it!" Up until that case, the tech industry generally didnt spent money on lobbyests, much to the annoyance of the politicians, who consider it unseemly and unfair that there was this big rich giant industry on the other coast, and they were not regularly showing up on bended knee and with big bags of money.
I don't blame them either. I think the rules need to be changed to do away with them. But to do it properly you need to rethink what government is for. Nobody is yet ready for that.
In hindsight, I probably made a huge mistake in aggressively editing my review down. I should have written a book-sized review instead :)
Thanks for writing this! I’ve often come across references to Georgism and land value tax, and this has been a really helpful explanation.
I'm sorry, but I really didn't like this review.
Like, as a description of Georgism, it works. As a recap of the book, it works. There's a lot of good lines. But as a review, I think it fails.
One of the things almost any book review has - and that Scott's have very well - is 'what is the argument against this book?' I generally can't tell, when Scott is reviewing a book, whether he agrees with it or not. "The Seven Principles For Making Marriage Work" is my favorite case of a review where he first presents the argument as overwhelming, then says "actually this is nonsense" and refutes it even harder.
What are the actual arguments against Georgeism? The first one that comes to my mind is that it's useless - the value of land in Manhattan is purely from everyone else having land in Manhattan, so if you fix the land tax at the level of 'what that land would be if it wasn't Manhattan', it's negligible, but if you fix it at 'what the land would be if it was a blank lot in the middle of Manhattan,' then if you don't adjust rents in the future you've just massively encouraged everyone in Manhattan found a duplicate of New York elsewhere and move else there, and if you do, you've just significantly reduced the incentive to build in New York, because you're capturing a lot of the benefit of new construction. It also pretty thoroughly discourages the Irvine Company (or anyone else who might want to) from building another city - their profits come from capturing the value of suddenly-more-valuable land, and there's an 85% tax on that.
I don't think this debunks Georgeism. I'm not even convinced that this little argument would stand up under fire. (If I move into giving-fire mode, I can see a *lot* of holes in it.) But in order for this review to be anything more than a summary of the book, it needs to acknowledge that there are real arguments against the book and talk about them, where 'they' are whatever the best arguments are. And I'm sorry, but I don't think it does that.
(Better example than Manhattan: when I google for an empty lot in Las Vegas, I find numbers like $800k as the low end. If you tax every empty acre of desert in Nevada at a sane tax for $800k, you're crazy; if you tax an acre of Las Vegas at the actual value of an empty acre of desert in Nevada, the tax is useless. How do you find your numbers?)
As far as I understood, you find the numbers by deducing from the current rent the value of labor * capital - used wealth - destroyed land/nature/privilege, and the whole point of georgism is that this equation should tend to 0 ?
Let's imagine a robot hotel that uses no labor, only capital and land - that is, it was built by someone who paid laborers to do it, but at this point its owner spends money on electricity and spare parts, and collects money from renting hotel rooms.
How, exactly, do you measure how much of the income comes from capital investment (such that, by taxing it, people are incentivized not to build) and how much of the income comes from land value (such that, by taxing it, no incentives are placed in any direction?) Maybe if you had a vacant lot with exactly the same neighbors in exactly the same location you could get it, but anything else is going to be 'a tax assessor's semi-arbitrary guess.'
Capital, land, and also *non-capital wealth* then ?
(See 2nd chart here : https://jancovici.com/en/energy-transition/energy-and-us/what-is-energy-actually/
Ressources would be destroyed land/nature/privilege + destroyed wealth. Non-destroyed land/nature/privilege is either not present on the chart or assumed to be part of capital.)
The vacant lot is one way to figure it out, I guess that another way is exactly the same robot hotel in a different location ? Combine both, and you start to get a good idea of the current value ?
Also, I hear from my accountant friends that assessing the value of improvements is a "solved" issue. I'm not so certain of it myself, as I don't find the way that, for instance, depreciation of the value of machines (for instance computers) that is currently calculated, is particularly accurate... (IIRC it's just a % of the initial value per year ?)
P.S.: Any relation to David Friedman ? (I'm surprised that he's not all over this thread !)
Also, I see that you're a fan of Total War, what do you think of Shadow Empire ?
My point about the vacant lot is that it *isn't* a way to figure it out. There may be no vacant lot within ten blocks; there may be no other robot hotel, or the only other one may be four stories instead of eight (are stories 5-8 less valuable because of the time costs of riding the escalator, more valuable because of the better view, less valuable because they produce/take competition from stories 1-4, more valuable because people like staying in a hotel with a lot of other people, less valuable because of your greater chance of death from earthquake, more valuable because...?).
It may be that there is a way to deduce it; it may be that your accountant friends are right; there are a lot of clever people out there, coming up with clever ideas that I don't know about. But I don't see how you can do better than a tax arbitrator's best guess, and I don't trust that to estimate a 100% (or even 85%) tax.
(Response to P.S.:)
I am David Friedman's younger son Bill, actually. :) I don't know why he isn't on the thread, other than that he spends a lot of time on the forum these days. I do, however, disagree with him on a number of issues, and I'm not qualified to speak for him where we do agree, so you shouldn't take me as speaking for anyone but me.
And I have never played Shadow Empire. I think it's on my Steam wishlist?
Yeah, it does seem to be a pretty hard problem to me, see also :
https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty#comment-1761512
The question is, how accurate do we need to get and how accurate can we actually get ? Theory can't give an answer here, we need experimentation !
P.S.: Oh cool, when can we expect Milton Friedman's grandson/granddaughter too in here ? ;p
Shadow Empire is pretty amazing if you're into that sort of game, it's basically Alpha Centauri (with a pinch of Crusader Kings) but with even more wargame in it !
See also Sword of the Stars 1 (not 2 !) if you're more into real-time combat (with pause !), it has often been called "Total War in space".
EDIT : grand-grandson/daughter, I got Friedmans-confused !
It seems like most practical LVTs are focused on land. But Georgian 'Land' isnt just land, its any natural resource. What would it look like to tax some other ones?
For example, how would you assess the unimproved value of electromagnetic spectra? The amounts paid for them depend hugely on how theyre auctioned and planned to be used - is this difference strictly an improvement?
But this isn't an issue specific to LVT, but to anything involving money : value is very subjective.
Auctioning spectrum for government revenue is a tax on economic land, as long as the auction doesn't just happen once for all time. A company will pay more at auction if they believe their return on the use of the economic land would be higher than someone else's, which should therefore lead to no deadweight loss in the auction. Spectrum auctions were introduced to the gov by William Vickery, a georgist.
So, I have direct experience (pretty extensively) of property taxation as it actually exists today. We already divide property values into parts (usually land, improvement, and abatement). This is value, not rent, but you could presumably make a decent formula to guess the relationship between rents and value. This is what we effectively do: taking a percentage of of the value. Some places even take a greater percentage of land than improvements, which is at least quasi-Georgist. You could presumably make it fully Georgist by upping the land portion of the tax.
Here's the thing: the values are set by assessors. Here's how it works. Assessor shows up and says, "Lo, I have a degree in real estate and I declare this house is worth $100 in land, $100 in improvement based on comparable properties and trends in various real estate sales." If the taxpayer doesn't like it, they can challenge the assessment in court. The higher property taxes go, the more aggressive people debate valuations in court. And what happens, realistically, is that people mightily resist re-evaluations upward. This leads to long term chronic undervaluation. Which is hugely popular: popular enough to win plebiscites and elections on.
Undervaluation does not have an effective limit. Nor does the distortion of dirt to improvement rent. When you look at places with high land taxes you get huge valuation distortion. Hungary and China both had land taxes and subsequently huge amounts of land was chronically undervalued or even disappeared altogether. In jurisdictions with differential rates, land rents tend to push lower or higher depending not on objective measures but the government in power being pro-landowner or anti-landowner.
So, in summary, land valuation is a difficult process without significant objective standards. Adding another complication is likely to cause further issues. And on top of it all, property taxes are hugely unpopular and I don't think homeowners care if it's on their land or their improvements. Further, it has significant potential for evasion and historically has caused evasion when it gets high. And to add it all up, it's politically unfeasible and hard to maintain popular support for.
Further, the idea that land taxes don't affect prices is a fairy tale. Remember someone who owns and occupies land, or uses it for industry, effectively consumes the rent they produce. Inserting the government to tax it is thus effectively adding in additional rent but to the government. If you effectively increase the costs of land then you raise the prices on land intensive industries. Including food. This threat, of increased food prices, plus hurting homeowners was a criticism of Georgism in its own time. One that Georgists never really addressed to my knowledge. Or rather, they addressed it by insisting it wouldn't because those rents were already priced into food. But empirically this wasn't true: getting rid of land taxes empirically made food cheaper where implemented.
This is because Georgists ignore a simple, inconvenient fact: land's supply is highly inelastic but not as inelastic as they claim. And land use is very elastic. If you raise the price of owning land, less people will own land. This is again something we see in places with punishing land taxes: people simply surrender the land to the government. The idea that you can tax something without raising its price is not empirically the case, model or otherwise. I'm not even sure it's theoretically sound.
"land valuation is a difficult process without significant objective standards" - this goes for ALL valuation, doesn't it ? I guess the issue with land is that it's highly illiquid ?
It is but in the case of transactions, such as income or sales taxes, the costs are entirely born by the participants. The pricing mechanism is usually considered the best way to resolve the issue and those taxes take advantage of it. In this case, the government is imposing a valuation by guessing theoretical sales price for reasons of extracting tax revenue, which creates an entirely different dynamic.
Governments have gotten around this in the most important places for lvt (cities) by observing the sales price of say, parking lots ($40mil in downtown Boston, btw).
I'm skeptical that if our government legitimately understood and was trying to implement a lvt that it would be insurmountable. Glen Weyl suggests a self-assessed tax, but that has issues to.
The question is: is the cost of solving the valuation problem higher than the cost of the status quo? I'm skeptical, and real world lvt experiments have indicated that it's not at all a pipe dream.
This dismissiveness is one of the most frustrating things about people trying to impose the theories of 19th century philosophers into my economic world.
I am actually involved in this process. I've worked on software several governments use to value real estate and collect the relevant taxes. I have been in conferences with every assessor in some of the largest states in the US. I have literally valued land vs improvements on real houses and thus triggered taxes on actual, living citizen's property on that basis. And I am telling you it is complex and difficult and the Georgist version would be more complex and difficult.
And your reply is that you're skeptical because... well, you decline to actually provide a reason why you're skeptical. You bring up one example: using a comparison to parking lots. And the idea of self-assessment. We can talk about that if you want. Both these methods aren't used for reasons I can get into if you want. But they have deep flaws, which you seem aware of because you mention it.
Of course the government could impose additional taxes on real estate. Real estate is extremely easy to tax which is why it's much more historically common than any other tax. But it would be distortionary in ways Georgists don't want to admit and it would have serious valuation issues.
Do you have reason for your skepticism? Share them. As it stands, you are dismissing objections from someone with more direct experience of land taxes and more empirical examples than you have. Which is par for the course politically but really very shoddy argumentation.
@erusian - that's actually very interesting. Could you elaborate on the difficulties of land evaluation you experience in your work? What are the flaws of the various forms of assesments?
If you raise the cost of owning land, you lower the price of purchasing land. The effect is strictly proportional. Just as much people will own land, probably more since they don't have to fight an inflated bubble.
Less value extracted in rent means a more productive economy overall, just as confiscating money from robbers doesn't result in a lower GDP, but less robbing. If Georgism has an effect on food prices, it's a downward one. The theory itself is sound and apparent from supply/demand graphs.
It's true that if the tax is set above productivity land will fall idle, but that would be a failure of assessment and implementation, not theory.
A good effort, but to nitpick a stylistic issue, the anachronism is annoying. When reviewing an old book it would be better to place it in historical context. History is interesting so tell us more about what life was like *back then*. There is some of that, but also too much about what George would think of Bitcoin, JPEG's, and so on. That kind of thing should have been moved to the interludes from the future.
It's not like we're fooled by obvious anachronism, but it's sloppy and suggests that the author might be sloppy in less-obvious places about what George believed versus what the reviewer believes.
If the first canoe takes 6 months to build, the fish don’t start arriving until the 7th month. And the canoe may continue to exist, and improve fishing, for 20 years, with only tiny amounts of labor to keep it in good repair. And perhaps the number of fish caught may not go up by a perfectly egalitarian 1/3rd, but may cause the number of fish caught to double. Does the canoe maker get no fish for 6 months? If s/h/it isn’t paid out of saved (dried) fish (wealth), they starve to death. Does the canoe maker get fish for 20 years, the length of time the canoe lasts, or only for 6 months, the length of time it took them to build the canoe? Does the canoe maker get a perfectly egalitarian 1/3rd of the increased haul of fish, or do they get all the extra fish that are caught using the canoe? Seems like per George, the ‘wages’ of selling the canoe should be approximately equal to what the canoe is worth to the fishers, which means the canoe maker lives on their own capital of dried fish for 6 months then rents the canoe out for a continuing revenue stream of half the fish, for 20 years. Or some frugal 3rd party, saves up six months of dried fish, and hires the canoe maker to build the canoe, for their opportunity cost (number of fish they would get fishing or digging for those 6 months) and then rents the canoe out for the continuing revenue stream.
I have to confess this is the first time I was exposed to Georgism and I find it very attractive. I would just like to make sure I understand the central tenet of LVT:
1. Suppose there are two identical houses, one in Pudonk the other in San Francisco. The houses have the same size, amenities and so on. The one in Pudonk can charge yearly rent of $10,000; the one in SF can charge $100,000. It follows then that the LVT for the house in SF is _at least_ $90,000 or more accurately at least $90,000 + LVT in Pudonk?
2. The exact value of LVT depends on the house being the most effective use of land in the given area; if an office building in the neighboring lot in SF can charge $200,000 a year, then my LVT would be higher?
If true, it has some interesting corollaries:
a) LVT cannot decrease rent paid by the tenant to the landlord. If the house in SF is the most effective use of land, the rent stays $100,000 but the landlord will now only capture 10% of the rent. However, if the land could be used more effectively, the landlord will have to increase the rent.
b) The process of establishing the optimal use, i.e. maximum possible rent, is very difficult to do exactly: the rent in the same neighborhood can vary a lot depending on things like proximity to busy roads, views offered from windows, good/bad neighbors and so on. The property taxes in my country are based on price maps that are very broad and very inaccurate, but because the actual tax rate is very low, nobody contests the valuation. Making accurate assessments would be time consuming and expensive and also subjective. I get the point of Harberger taxation mentioned elsewhere in comments, but IMO it stacks the deck against the current owner.
c) It would seem to follow that the rent in office block in Pudonk - that is otherwise completely equivalent to the one San Francisco - is _at most_ $110,000 (that would imply that the correct LVT is still $90,000 + LVT in Pudonk).
Can somebody with better understanding of Georgism and economics confirm or deny these conclusions? Thank you.
> LVT cannot decrease rent paid by the tenant to the landlord
This is all speculative of course, but I think the answer to this would be as follows.
If the SF landlord only gets to keep $10K after putting in, say, $8K of improvements during the year, then he should be ready to sell to anyone offering the NPV equivalent of $2K or more per year. Say, $15K dollars.
Can the new landlord keep charging $100K in yearly rent based on an investment of $15K? He can try, but it seems likely that he'll be undercut by quite a bit all the other landlords down the street who think that a 20% ROR is plenty.
This *does* show that in order to be politically viable and not horribly unfair, there would need to be some kind of phase-in, such that the original landlord doesn't have to take quite as massive a loss on his original investment.
Thank you for your reply.
Even with phase-in, how would a new landlord pay LVT of $90,000 if he does not charge more than that in rent? And if the LVT is less - it drops to the level of Pudonk - what would be the mechanism for deciding who gets to live in San Francisco and who does in Pudonk? I would assume that everything else being equal - the rent, the amenities, etc. - people would prefer to live in SF given the overall higher number of opportunities.
It may be argued that the present rent is exorbitant and that LTV will allow us to discover the "just" rent. This might be true but it would still mean that the rent would appear high relative to the investment because much of it would go to pay the tax.
The landlord would have to provide some kind of service to compete with those around him, or offer way more housing on the same plot of land (which is a good thing in most places where that pressure would exist). For example, looking at the land values of Palo alto is comparable to the land values of Brooklyn. But the population density is far lower, leading to calis maddening housing crisis and suburban millionaires.
This is exactly the line of thinking I’ve gotten hung up on with Georgeism. I *think* the answer is that it wouldn’t change the fact that it’s expensive AF to live in San Francisco, but that your money would get invested in the community rather than enriching landlords.
This seems good on net but not the panacea that George promises. But it’s entirely possible I’m missing something.
Thinking about it, there are some other consequences:
d) If Assertion 1 is true, we could set uniform maximum "fair" rent and tax the difference between that and actual rent; such tax would be _at most_ equal and probably lower than LVT. If the tax rate is less than 100% it would still encourage landlords to charge higher rent in more desirable places. This is similar to rent control but approaches it from different angle: instead of setting maximum rent (and creating black market where people pay rent in cash or services), it confiscates large part of the rent that's due to the location.
e) Being landlord is more difficult in more desirable cities: If I pay 90% of rent as LVT, I need to rent out 9 properties just to pay LVT on my own property (if I live in the same location). By contrast, landlord in a place where LVT is just 50% of the total rent needs to rent out just one property similar to his own.
f) The Assertion 1 rests on the assumption that price of improvement of land is the same in Pudonk and San Francisco. This may be true for raw materials, but it's probably not true for labor. A laborer in SF pays higher rent than the one in Pudonk, therefore has to charge higher rate for his services. As maintenance of real estate is labor-intensive, it would be fair to assume that most of the landlord's operational expenses are wages. If wages in a city are proportional to rent in that city (as they broadly have to be) we can see that the expenses of SF landlord will be ten times that of the Pudonk landlord. Now LVT - if I understand it correctly - should be equal to the _interest_ on the value of the land, that is profit the landlord makes after paying all expenses. It would the follow that LVT in San Francisco and Pudonk are actually very similar. This directly contradicts Assertion 1 and would also defeat the purpose of LVT.
This book review might be the most important thing to happen to Georgism in the last 100 years.
You think that any heads of state or ministers are reading ?
https://en.wikisource.org/wiki/Open_letter_to_Mikhail_Gorbachev_(1990)
https://web.archive.org/web/20081216022218/http://www.counterpunch.org/schaefer02272004.html
Good job on the book review. Unfortunately, I’m having a really hard time understanding how this would be meaningfully different that a regular property tax.
It’s easy for a simple residential application, I buy a one-acre unimproved lot in the middle of nowhere that has a Land Value Tax (LVT) of $10/month. I build a house on it and the LVT doesn’t change right? It stays at $10/month because that’s the value of the land, and my structure doesn’t change that, and it doesn’t matter if I put a trailer on it, or build a McMansion with a swimming pool in the backyard or a giant mansion with an indoor pool and private movie theater, the LVT stays at $10/month, right?
But what about Walter? Walter made a lot of money as an artist and buys 30,500 acres in Florida. This land is mostly swamp, has more than its fair share of very unfriendly insects and gets terribly hot in the summertime so the unimproved LVT is $10/month per acre. Walter then drains a few acres and builds a large beautiful amazing amusement park there using his previous art as the theme. It’s an incredible success, everyone want to visit his park.
What would George say? Does his LVT stay at $10/month per acre? That’s the value of the unimproved land. That can’t be right, can it? After all, land next to an incredibly popular amusement park is so valuable that Walter can rent a piece of land the size of an automobile for $20/day. It’s so valuable that he builds a hotel next door and can charge 10X the nearest competitor because his is the only one where you can walk to the park.
I think one easy answer is that the land under the amusement park itself keeps the LVT at $10, but the surrounding unimproved land gets a new higher rate, say 10X or $100/acre/month. That seems unsporting though, after all, Walter has bigger dreams and plans to add more hotels and four other differently themed amusement parks in the surrounding area with interconnected transportation. Walter wants to pay for it with the profits from his first park, but if he has to pay a much higher LVT on that land he can’t do it. If he sells the land, someone who has cash ready will come in and build hotels and restaurants right next door and Walter can’t charge as much for a hotel room or parking and can’t build interconnecting transportation through those other people’s new buildings and his dreams end.
Is this really what George wants? After all, keeping the surrounding land unimproved is just collecting unearned rents. If this is the answer, when does the LVT change, wouldn’t it go up on all the property as soon as the building permit was approved? After all, that was the speculators reasoning for buying up land near where the railway was going to be built. If not when the permit is approved, does it go up as soon as the first island of rides is built? Does it wait to go up until the first customer comes through the gate? Can Walter lock in the low LVT by building a sea of empty shanty towns across his 30,500 acres then tearing down a few to build the amusement park?
Of course, after everything is built in that area including a competing amusement park, doesn’t Walters LVT on his park go up, since the land near a bunch of hotels in a popular vacation area is worth much more than swamp land? I think in practical use an LVT will be indistinguishable from a standard property tax, it will just call itself an increase in the value of the land instead of arbitrarily assigning some portion to the land and some to the structures.
Maybe they will try this on Mars!
Interesting opportunity for a test.
I find this review extremely compelling - are there any strong, academic-ish critiques out there of Georgism that I can read to calm down my ideological excitement?
One damper I will put on it- a LVT is a great idea, but two claims often associated with Georgism are less defensible:
1. A land value tax can be the only tax. Of course, this could be done, but only if we were willing to shrink the state to a fraction of its current size.
2. All manner of economic ills are traceable to the absence of an LVT. There are places with an LVT and they haven't solved all the problems.
Nevertheless, the basic logic behind taxing the unimproved value of land is unimpeachable. The only people who know the details and still contest it either have skin in the game (are landowners) or are in the grip of an ethical or political system opposed to taxes generally. It's probably about as close to a consensus as you can get in economics, on the right and the left.
https://www.econlib.org/archives/2012/02/a_search-theore.html
Well, it looks like they are giving the solution to that issue : information about the land should be considered part of the infrastructure (in which case it should be most local government-owned ?) and/or capital.
This still doesn't answer the issue of georgists seemingly assuming that the quantity of land/nature/privilege is fixed, while by the laws of physics it can only go down (its value can still go up due to scarcity) - see the oil example again.
BTW, this goes back to the question of information : remember that the lack of information used to be called "entropy" - I'm wondering though about the transition from the meso level of physical devices to the macro level that includes human knowledge about oil fields ?
www.av8n.com/physics/thermo/ambig.html#sec-ambig-energy
Concentration of energy certainly seems to be something that should require information !
Hmm, answers might be here, I need to re-read that blog and Roddier's book !
http://www.francois-roddier.fr/blog_en/
P.S.: According to the comments, governments already run a mostly georgist system for mineral exploration and exploitation ?
(Though Mark Wadsworth's example is unfortunate : before peak conventional US oil in 1970, western companies were pretty much in control of Saudi Arabian oil. Also, he seems to misunderstand what georgists mean by "land" ?)
Brief review-of-the-review:
This is great stuff but... not exactly a review? It reads more like a SSC-style FAQ structured along the lines of the book. There's not much discussion of how the book itself reads or critical treatment of its claims. I'm sympathetic to Georgism but if I weren't I'd probably find this annoying, like someone was trying to convert me to their way of thinking and disguising it as a book review. On the other hand the writing is lots of fun and the argument is very clearly presented, so I liked reading it a lot.
If the only thing landlords can make money on is the house, won't this get rid of yards and lawns and space between neighbors?
Houses aren't the only forms of improvements. Landscaping, lawns, gardens, etc, are typically considered an improvement.
Ok, question: on the basis of this model, could books count as capital?
They are the product of someone's labour, and taken from nature. It is arguable that their value as books might not be high, but the value of the knowledge within them could be. And in that case, using the knowledge contained within books to generate wealth for oneself would count as a capital use of the books. This would indicate that certain things can have capital value that isn't tied into the value that someone might pay for them - if they were too ignorant to know why a history book was of value, for example.
Second question: the author points out that clothing isn't capital, since it's a necessary thing regardless. What about if the clothing (or anything necessary and not explicitly capital) is leveraged to produce wealth? Say a designer suit that indirectly results in a better impression at a business meeting and an offer of... etc. We can imagine even consumables in this category, since things like makeup or skincare products can enhance one's appearance and generate 'social/cultural capital' which can afford access to real wealth.
First question:
Yes. A book is wealth, and if you use it to get more wealth, it's capital. But this isn't an inherent magical property of the book, per the review, it's the intention of the human using it that makes it capital.
Second question:
Yes. The review even gives the example of steel-toed work boots. George's point in P&P seems to be that things a laborer needs to have just to stay alive whether they do any work or not shouldn't be classified as labor, but any articles of wealth they need to perform their job *are* capital. So *work-related* clothes like uniforms or a nice suit would presumably be considered capital because their purpose is to aid in the acquisition of wealth. The same could presumably go towards food you have to consume above and beyond your daily bread because of your job --- take a Sumo wrestler as an extreme example, or a hungry cowboy or farmhand needing to eat a big meal after a day's hard labor.
Typo: "whether they do any work or not shouldn't be classified as labor" --> "classified as CAPITAL"
Right, so the important thing is the intention. I'm just interested in those cases where you may posses something that's technically classified as wealth, of greater or lesser value, and that seems to be basically useless or a net loss, but that may become 'capital' under this definition.
Much seems to depend upon the application of the thing, rather than its inherent properties. Money is a claim on wealth, but it (or the wealth it represents) becomes capital if I apply it in certain ways. Similarly, even something that should be the opposite of wealth, say something you must consume, can become capital if used properly.
On that basis, it might be suggested that capital uses of wealth *in general* are predicated upon the knowledge and ability of the possessor to transform material goods into capital-generating objects. And that would suggest that social and cultural capital may be *even more* important than material capital eventually, unless I'm mistaken somehow.
Yeah, though I guess that they instead are to labor what capital is to wealth ?
Would Georgism apply on other planets? Or would land on Mars be considered capital? If it is considered capital, that might produce a landlord-dominated society on other planets.
OTOH, it might make sense to treat new planets in the same way we treat intellectual property. The developer would own it for a limited time and then it would become public domain.
Land on Mars is Land. It's currently not very accessible to us and thus not particularly valuable, but there may come a day that technology allows us to access it, and then it would be just like Land on Earth. The review talks about this regarding "latent potential" in land. If there's a mineral-rich mountain but the nearby population has neither the technological ability or social sophistication to make any use of it, the mountain is worthless; but there comes a day when that changes and then it suddenly spikes in value.
Sorry for the aside, but if...
>Bitcoin isn't wealth, in case you were wondering.
>It's just a (very fancy) financial instrument, a digital
>claim on wealth.
....then what/whose wealth is a newly-minted bitcoin a claim on?
The same thing a newly minted $1 dollar coin is a claim on --- anyone who has $1 of valuable goods in a very liquid market willing to trade for it. Dollars, like Bitcoin, are fungible so they don't necessarily represent a claim on any particular individual's wealth until a trade offer is made and accepted.
With Bitcoin in particular there's also the physical cost of mining. I'm willing to commit the time and resources of my local mining rig and some amount of energy (which indirectly also commits some amount of fuel from my local power plant) in order to mine some bitcoin into existence. I am effectively trading those resources to bring a Bitcoin into existence, and this gives Bitcoin a "cost" and is part of why it's steadily increasing in value.
Now, per George the true value of a thing is not the cost it takes to make it but the price someone is willing to pay. The cost of mining sets a price floor so long as the speculative value of Bitcoin holds up -- miners wouldn't mine at cost $X if speculators weren't willing to offer at least $X+1.
So ultimately it's speculators willing to trade valuable things for Bitcoin that gives it wealth.
"The same thing a newly minted $1 dollar coin is a claim on --- anyone who has $1 of valuable goods in a very liquid market willing to trade for it. "
By that reasoning, if I pick an apple off of an apple tree, is that apple now a "claim" on anyone I can find who wants to exchange it for other valuable goods in a liquid apple market? If not, what is the difference between the mined bitcoin and the picked apple that makes the first "a claim on wealth" and the second "wealth"?
You can eat the apple the person you sell it to can eat the apple. At no point are bitcoins (or physical coins) useful objects in and of themselves. Money just circulates in the liquid markets, unlike apples, which quickly move in one direction from people with orchards to hungry people.
So is the principle then "if something has value but is not useful in and of itself, then it must instead be a *claim* on value"? If so, then I still do not understand what a newly mined bitcoin is a claim on. Seems to me that claims (in the financial sense) must be claims *on* or *to* something. I do not understand how the creation of a new bitcoin somehow grants the new owner a right to third party's property upon its creation. What am I missing?
It's a claim on wealth in the same way a regular dollar is a claim on wealth. It's a thing that is only valuable because people are willing to trade for it, but it doesn't have an intrinsic value in and of itself. I have a dollar, which means (in a liquid market) I am able at a moment's notice able to claim one dollar's worth of goods or services from a variety of people willing to trade with me (e.g. amazon.com, facebook marketplace, a vending machine, etc).
One bitcoin is a claim on any of the liquid wealth that anyone interested in bitcoin is willing to exchange for it right now. Should there arise a situation where suddenly no one is willing to exchange any article of real wealth for any amount of Bitcoin, Bitcoin will cease to be a claim on wealth.
Certain other financial interests have claims that are more limited in scope (such as puts, calls, a title to a specific person's debt, etc).
Does that help?
Bitcoins, being fungible, have an intrinsic value.
Whereas actual wealth can have no intrinsic value, because it can eventually be used for something else than being a token of exchange ?
After thinking about it, it's not just about fungibility, but about ease and durability of storage and transport :
At one end of the spectrum you have stuff like ice, oysters and strawberries, then further long the spectrum you have apples,
then in the middle (?) of the spectrum : stuff like grain and gold,
while the other end of the spectrum would be things like hawala, Internet-carried conventional banking and bitcoin.
This is a polemic disguised as a book review. It doesn't even attempt to criticize the argument of the book or put it in context. Honestly I'm a bit annoyed at Scott for publishing it.
I kinda feel the same way. I got excited when I saw the post — I think Georgism is super interesting, but I have a lot of obvious questions/criticisms (which I lad out in a long comment earlier), and Scott always delves into so much detail and analysis that I was expecting all of that and more to be discussed. Unfortunately it wasn't, it was just the basic Georgist pitch I've heard a hundred times (plus some outdated oddities stemming from this being a 150 y/o book).
Maybe I'm just spoiled by Scott's reviews, but I wanted to see the counterarguments and countercounterarguments and countercountercounterarguments!
Indeed !
There had better be a matching article that steelmans the arguments against Georgism, or else I fear I am going to be very disappointed.
Similar to the Reactionary FAQ and the Anti-Reactionary FAQ.
I'm super interested in that too. Might write one myself.
Indeed !
Some counter-arguments here :
https://www.econlib.org/archives/2012/02/problems_with_h.html#comment-101971
Yeah, this assessment issue might be dooming georgism...
Honestly, it's been 140 years. We can throw theory around all day but we really need is just to see to what degree any of this has been tried and what we can learn from it. I'll start collecting notes and articles and see if I have enough time to put something together in the next month or two.
Apologies if I missed this in the review or discussion, but, by George, why would a LVT affect wages or returns to capital? Why would shifting the rents from a landlord to a government make a difference to the Mathlthusian wages trap? Certainly there would be secondary benefits to laborers & capitalists (UBI, reduction/elimination of other taxes).
But my reading of the review was that George claims the LVT would directly increase wages, and I don't see the link. Excepting places like SF with bad development policies currently, why would rents be any lower under LVT than our current system?
My guess is that, like capital, land/nature/privilege "naturally" tend to get concentrated in fewer hands, and a LVT would be a strong force acting against this kind of inequality-boosting trend, that also (supposedly) has relatively few downsides ?
(It's certainly better than waiting until revolution breaks out and a lot of people are killed, and a lot of wealth and land/nature/privilege is destroyed !)
The basic argument is summed up by this graphic:
https://cdn.substack.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F10603100-3169-4734-9ab1-574c9408e1f1_600x400.png
Competition among tenants on monopolized land will leave Lot C (with a productive margin of 10) as the only alternative, thus the landlord can freely raise rent all the way up to the productive margin. So even though the tenant's productivity on this land is 100, the landlord's leverage allows them to extract 90 and the tenant has no choice but to bear it, because another tenant will take the offer if they won't.
The argument is that the LVT will cut out a significant portion of the rent without allowing the landlord to pass on the tax to the tenant. Because land supply is fixed, according to George, the landlord can't say "well I'll just produce less land this season," the way an oil producer can produce less oil on their marginal wells when a tax is levied on it. Since the providers of land (landlords) can't change their supply in response to a tax on it, and because price is governed by supply and demand, the landlords are not able to raise the rent in response and must eat it.
That argument is made here:
https://cdn.substack.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F730bd7b8-6dbf-4e23-a799-91187ec8b9ed_520x520.png
The difference with property tax, is it's a mixed tax on land and improvements. Imagine just an "improvement" tax for simplicity's sake. We just tax your house and whatever else you build on your land. This tax can be passed off because if you raise the cost of building a house by 10, any house that was profitable only at a threshold of X-10 will no longer be built. This decreases the supply, and thus increases the price of the remaining houses, and the increase is supposedly very close to the amount of the tax.
Thus, LVT reduces rent, but only unimproved rent. Since LVT is not levied on improvements, a landlord can freely charge rent for access to improvements, but this is fair because they have to do some work or spend some capital to produce those.
And when rent is reduced, more of the result of the laborer's productivity (wages) is allowed to go to the laborer.
That's the theory at least.
Thank you for the reply. In that example, why would the tenant's rent be any different than 90 under a LVT? Sure, the landlord's income will be reduced by the amount of the tax - none will get passed on to the tenant. But it seems to me that the same market that drives the rent up to 90 now will still drive it up to 90 with a LVT. Some/most/all of the 90 will be captured by the government instead of the landlord, but isn't the rent still the rent?
Ah yes, good point. Yes that is correct. The government collects it instead of the landlord.
It's the second order effect that reduces the rent. George asserts that the majority of land values are artificially inflated by speculation. Once LVT is applied as a "lose-it-or-use-it" fee that scales with the value of the land, there's no point in speculating because you can no longer buy a plot of land and just hold it at no cost. This removes speculators from the market, lowering the demand for land, and thus lowering the price of the land, which lowers the ground rent.
So at 100% LVT the government effectively charges the tenant (ground) rent instead of the landlord, but the second order effect is to drive out speculation, lowering rent, and leaving more room for workers to retain wages.
(To be clear: *I think*. Might be a dummy)
Thanks for the review. I had heard of Georgism, but I didn't know much about Henry George himself.
If you look at Houston or Dallas, it's clear that we can have affordable housing without massive subsidies or land-value taxes. We just have to give up on greenbelts and urban growth boundaries. Housing has become expensive in certain areas because its supply in those areas has been artificially limited by the government. For example, only 18% of the San Francisco Bay area has been developed. The rest is off limits to development because of urban growth boundaries.
Georgism was a lot more relevant back in the old days when wealth was more closely associated with land. That hasn't really been true for a while in the west. If you confiscated all of Jeff Bezos' land holding, I'm sure he'd be annoyed, but he would be able to buy them back by using with the real source of his wealth -- his technology company.
Arguably the price increases in college degrees and medical expenses have hit the middle class a lot harder than the price increases in homes in certain metro areas. After all, moving to a part of the country with lower home prices is always an option -- there's no such workaround to avoid college and medical expenses.
Texas has among the highest property taxes in the nation:
https://wallethub.com/edu/states-with-the-highest-and-lowest-property-taxes/11585
Property tax is not land value tax, but it does have some crude approximations of its effects. California by contrast has much lower property tax, especially for those guarded by Prop 13
That is a terrible chart on inequality. All that means is that the stock market has done quite well if you invested at the beginning of the 80s.
A much better inequality measure is income adjusted for transfers. And that has actually gone down since 1967.
https://www.wsj.com/articles/incredible-shrinking-income-inequality-11616517284?st=9fzlg2ndu58rc8g&reflink=desktopwebshare_permalink
Interesting, thank you. Yeah, if true, those are some really poorly done statistics !
Why though are they "hiding" the information about the 3 middle quintiles ?
Weren't those hit the most ?
Otherwise, the growing discontent might be explained by the US getting poorer by capita? The lowest quintile is going to suffer more because of it (much less discretionary spending !), even if inequality stays steady.
> Where's the line between "improvements" and "ground rent?" In most cases it's pretty straightforward to separately assess the value of a plot from the value of what sits on it (modern property tax assessors do this already),
> https://web.archive.org/web/20201215230813/https://www.investopedia.com/articles/tax/09/calculate-property-tax.asp
That link does not actually support that claim in any way. This is the primary practical obstacle to Neo-Georgism Now, so this is a very important omission.
Vietnam has LVT already:
100% land is owned by the public, which is represented by the state (henceforth, “the public”, “the people”, “the community”, “The State” are synonyms). Individuals and business can only rent land from the State and must pay annual LVT, i.e: I can “have the right to rent a plot of land” but never own a land. The State calculate LVT consider the below factors:
- Usage purpose (The State predefines for each plot of land), i.e: agricultural land has super low LVT.
- Location advantage, i.e: residental land in dense city has much higher LVT.
- Speculation, i.e: If you only have 1 plot of land for your own living, the LVT is super low, so people like Carl is safe. LVT and selling-tax is higher if you have multiple lands.
- If the community develop the landscape (i.e: from rural to dense city), The State increases the LVT accordingly.
Summary: It’s costly to HODL land, with a caveat: LVT is low, Speculation still ravel. Reasons:
1. Higher tax = more corruptions
2. More detail LVT (different land lot has different tax) = more loopholes
3. Higher LVT = The State has to pay a lot more to take back the land for public construction
4. Taller buildings = same land but a lot more space to rent out
5. Dense construction: If LVT is too high, people will leave no space open, all land will have some buildings on it
6. Shophouse = Owner live in one floor and rent-out the rest, thus only pay minimal LVT
7. Inequality: Megamalls and super apartment complex sit next to mediocre office and next to slum. Which LVT is fair?
8. Timeliness: LVT take a few years to change because it’s hard to determine how much “the community develop the landscape” without market signal because everyone tries to hide the real price of land resell/rental price. It’s super common to fake price on contracts to reduce the tax payable.
How long did it have it ?
Since 1993: https://en.wikipedia.org/wiki/Land_reform_in_Vietnam#Abolishment_of_collective_farms
Independence in 1945 > The State confiscated everything from landlords and apply collective farming > Remove collective farming from 1981 > Allow individuals to rent land from The State for up to 20 years since 1988, then further expand in 1993.
So how is it working out for them? Are they seeing any of the benefits?
Everyone including The State agree that LVT is too low and "we should make the LVT closer to market", but as I said above, there are many obstacles. Basically, LVT is almost useless as it's too low, everyone is more than happy to buy empty land, then either
1) Resell quickly (LVT is time-based)
2) Negotiate a favourable LVT incentive because local government is poor and need someone to build infrastructure for them. Cronyism also say hello.
Why isn't it in the list ?
https://en.wikipedia.org/wiki/Land_value_tax#Implementation
The Republic of China was one of the first countries to implement a Land Value Tax: https://en.wikipedia.org/wiki/Land_value_tax#Republic_of_China
Vietnam is China's copycat.
According to Wikipedia:
"Land value taxation is currently implemented throughout Denmark, Estonia, Lithuania, Russia, Singapore, and Taiwan; it has also been applied to smaller extents in subregions of Australia, Mexico (Mexicali), and the United States (e.g., Pennsylvania)."
So are these places indeed enjoying more affordable housing, more efficient use of land, lower rents, more investment and innovation, lower non-land-value taxes, etc.?
Why is it missing Vietnam ?
https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty#comment-1776148
Wonderful review and discussion. I have learned (*updated* in codex-speak?) a lot. Viva LVT & bring on the revolution, by George 😉
An interesting potential consequence occurs to me. If LVT were working well, and a power-hungry government wanted more tax but was not quite willing to go to war to get more land would be incentivized to expand outward into space to get more "land" / natural resources for its populace...
Does one of the links give a good explanation of how we can clearly and fairly compute the land value? Ideally something that doesn't require benevolent bureaucrats. Is there for instance some way we can use a market mechanism?
I've seen some discussion of that online, I forget where. But yeah, there are modernized versions of the theory where a theoretical auction is held and the land owner must pay taxes according to the price set by the auction winner or else sell to the auction winner. Hopefully you can find a much better explanation with a bit of googling, or maybe someone will chime in here to correct my sketchy summary.
I've seen a related method for pricing *property* taxes: I name whatever valuation I like on my property, but *must* accept any offer to buy at that valuation. Some basic game theory implies good behavior here (I think.) It's largely equivalent if the gov't gets to name whatever valuation they like but commits to buying it from me at that price.
But I don't think this works for LVTs! I can't sell you my land without also effectively selling my apartment building / gas station.
Probably the best book review I've read on poverty and progress by Henry George. It's thorough and accurately describes his economic theory. It takes a little bit long to get to the important distinctions between land value tax and property tax and how it affects rent on privilege but that is indeed the way that Henry George's book is organized the. He does save his solutions for the last part. If you're not familiar wish henri-georges economic theory and solutions and don't feel like reading a huge book oh, this is good place to start.
This is also a book review so expect some complaining about points of inadequacies in the book Style. Not really relevant to the quality of his theory but probably relevant to why his theory isn't more popular. Personally I like the book but I can see it being off-putting to a lot of people.
One final note. If you think you understand the major economics Theory as well and you're not familiar with Henry George, there are probably several important economic theories that you're missing out on including his. There ain't just capitalism and communism.
https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty
A great review. Even as a pretty committed "Georgist" it took me the best part of two decades to summon up the courage to read P&P as I feared a dry, technical, old-fashioned linguistically, dirge of "Victoriana". When I did get round to giving it a go, it is truly a beautiful book, and could see easily why it would have appealed to so many back then. I've always meant to sit down and pick out key phrases and paragraphs to quote for people: now I don't have to, as I can refer to this review! :) Thanks.
I'm almost convinced of a 100% LVT so for sure at 25% or so It’s no regrets. Obviously with compensation.
Two things I need help on.
How is the unimproved rent actually calculated?
LVT does a great job at capturing value from government investment and societal network effects. But what happens to private investment such as a development with private roads etc?
> wages, instead of being drawn from capital, are in reality drawn from the product of the labor for which they are paid.
This is true in the sense that labor is not wealth-constrained by capital, but it is still **liquidity-constrained** by capital which is the key point I think George misses by assuming liquidity is free and all forms of wealth are equally preferred. Labor is still limited by capital because it relies on capital to trade the illiquid fruits of its labor for money. If that liquidity market dries up, labor can no longer function even if it can create wealth without capital.
Workers create the wealth that pay out their wages through the product of their labor. However, not all forms of wealth are equivalent for all parties.
> George points out that as laborers labor, they progressively add value to whatever they're producing. Take the case of a shipwright building ships for an employer – even if the boss can't sell a half-finished ship, it still holds value (for one, it costs less to finish a half-finished ship then no ship at all). And with every stroke of the laborer's work, the employer who owns the shipyard gets an incremental increase in his stock of capital.
The wealth that is present in the fruit of labor may not be exchangable for other valuable goods and services. A shipwright cannot directly sell his contribution towards a half-built ship to the baker in exchange for bread. A shipwright needs to convert the wealth created by his labor into a more liquid form. This is where capital comes in. A capitalist funding the ship company owns the fruit of the workers' labor and in exchange provides them a consistent monthly wage in money (a highly liquid pointer to wealth which can be exchanged for real wealth in the worker's preferred forms: food, clothing, etc). Thus one can conceive of this as a liquidity swap. Workers **discount** their highly illiquid wealth (fruit of labor) for highly liquid money which is much preferred for making payments. Deep-pocketed Capitalists trade highly liquid money for illiquid wealth (ownership of fruit of labor) **at a premium**, thus they make a profit by offering this liquidity service to labor.
Consider the case where capital didn't exist. Each worker would have to make payments directly with the fruits of their labor. This is already implausible in the case of finished goods, but even more impossible in the case of a half-finished ship to which many workers have contributed! Capital doesn't matter only if you assume a theoretically ideal barter economy where transactors are willing to accept payment in any form of wealth. This can never be true in the real world. Liquidity matters.
Thus, we can see how Labor does get constrained by Capital. It **isn't** because capital pays out the wages of labor in wealth-term. It is because capital supplies liquidity for labor's wealth. If Capital stops making that trade, then Labor cannot function even if they want to.
A crew of shipwrights with access to natural resources can still create wealth by building a ship without any access to capital. Yet however much wealth they create, they cannot exchange it for their maintenance without capital providing a liquidity market.
George's focus is on wealth, and assumes exchanging one form of wealth for another is free which is why I think he ignores the critical role of labor in production. I like Georgism a lot, I wonder how much of the policy proposals rest on the assumption that capital is a nice-to-have component of production.
Capital can simply cease to provide this service if they themselves are liquidity constrained during a recession. In the case where capitalists are financially squeezed and are struggling to make payments, they may no longer wish to trade their liquid assets for illiquid ones no matter how steep the premium is. In this case, wages (in terms of money) drops or stop altogether (layoffs). Investment drops as well.
Thus a recession can be triggered by cash outflows surpassing cash inflows. In this case liquidity dries up. Labor is ready to work but unable, because they are not willing to create wealth without access to a liquidity market. And capital is also sitting idle, because it is not willing to be locked up in illiquid assets.
This answers George's proposed paradox of the economic recession with speculation in the capital/funding markets rather than speculation in land markets (though I imagine this can be an important factor as well).
Ideas from: https://www.coursera.org/learn/money-banking/home/welcome
> critical role of labor in production
* critical role of capital in production!
Overall I have such a problem with the premise that I can't take George or his reviewer here serious. I didn't get far in thr article.
What are some practical proposals for limiting the exposure of the avg homeowner who's not renting out their home? Otherwise, this seems to be a pretty big source of potential opposition to the LVT?
Also, what do you think common work-arounds would be on the part of landlords? I doubt they'd go quietly if something like this was implemented.
This is a fantastic post!
But I'm not sure whether this a good _book review_ – I feel like I can't tell because the ideas are so intriguing!
The mythical LVT cannot exist, because no satisfactory definition of ground rent exists. For example, it isn't even additive: the ground rent of an entire city may differ from the sums of individual lots, as each one has a city around it, yet the whole city doesn't! So for example this would just incentivize new city creation in which a single shell corporation owns the entire city, making the ground rent very low.
Wealth/Property taxes give a real way to fight rent collection, and especially NIMBYism. Property value, unlike ground rent, has a clear definition for example given by an auction. Taking the view from a previous post about city regulations justified to libertarians by treating the city as a corporation which owns the entire city, a highly NIMBY city would have to pay large property taxes as a whole, since they'd have to bid against developers who would relax the restrictions. Of course, if they're willing to do this, there's no problem, and no reason to force them to change.
The key reason for wealth taxes comes from the simple fact that you own very little without the government's local monopoly on coercion. Henry George correctly notices that the landowner does nothing, but in fact maintaining all private property requires effort from the state; I think compensation in proportion seems reasonable. Of course, if you want to bury gold in your backyard and not tell the state, I see nothing wrong with this either- just don't expect the state to help return it if stolen.
Ok, so I'm trying to play this out with some numbers to see if it makes sense. I actually think rents will go up, but will be a smaller portion of one's income and this will overall be a good thing. That is if the LVT can truly offset all other forms of tax.
Let's say a worker earns $1,500 a year and their overall tax burden is 1/3. So they get to keep $1,000 a year after tax.
I'm not certain what affect the reduced price of land would have. My understanding is that the value of the land would drop by a LOT. A $5,000 property might drop down in value to $2,000 to $3,000 without all that nasty speculation driving up the price.
So there will be some effect where if a landlord tries to jack up rents on me...I will now have a new marginal advantage in terms of buying as an alternative good. Instead of renting, I could choose to buy instead.
But leaving that aside initially, let's say the rent that the do-nothing landlord is able to extract from me is 30% of my income. I'd be paying up to $300 in rent a year.
If the LVT is able to displace my other taxes, then that is a boon to me of $500 a year. Instead of earning $1,500 and paying 1/3 to in taxes, I'd get to keep the entire $1,500.
The reason I'm thinking the LVT could offset more tax than I was paying in rent (perhaps only $150 of my rent was due to the land speculation) is that residential land isn't the only thing that LVT will apply towards, but only citizens will get paid, so all other types of land will pay LVT, but only people collect it.
At this point we might have a strange thing going on. The price of buying property would go down dramatically, but the rent could theoretically go up if I'm still willing to pay 30% of my income in rent. But I'd still be better off.
Before I kept $1,000 after tax and then paid 30% in rent to pay $300, which left me with $700 for me to use throughout the year.
But if I now retain the full $1,500 I earn, and I'd be willing to pay up to 30% for a $450 a year rent. Then I'd have $1,050 left over for me to use. So even with a somewhat higher rent, I would retain an additional $1,050 - $700 = $350 a year. So I'd be $350 a year better off under the Georgist plan even if my rent to income ratio stayed the same.
But then the lower land price come into play. If I can buy that same property whereby I'd pay a mortgage plus LVT of less than $450 a year....then I would select an alternative good of buying instead of renting.
Before at say $5,000 in land value with no LVT and super high speculation on the property, perhaps the cost to buy it would have been $500 a year. And this was in comparison to my prior $300 a year in rent. So I would select renting over buying due to the costs of a loan.
But now that the land is only worth $3,000 with a mortgage plus LVT of only $300 a year. I would not choose to pay $450 in rent to some nasty do nothing landlord when I could just buy a property for $300 a year in total costs. The do-nothing landownership class can't simply extract 30% of my income because they feel like it. The reduced value of the property due to the removal of speculation works out in my favour.
So there would be some marginal cost difference playing out between the value of the housing (not the land) and the competition for rent, etc. which would work out in the favour of the worker.
I don't know what it'd be exactly, but if we say it plays to the middle ground, then rents and property prices would settle down midway between the $450 which is a 'reasonable' 30% of my income and the $300 which I could get by buying a house instead. That demand from so many renters turning into owners would drive up demand a bit, reversing a part of the decline in property prices.
i.e. we'd increase the market size and demand for the house part of the property now that the land value had been removed from the equation, all due to the overall costs of owning land going down and increasing the pool of people who could potentially afford to buy a house.
So perhaps we'd see a new equilibrium for rent/buying around the $375 mark which is the average of $450 and $300. The reduced land values gives the worker more negotiation power as he/she is more likely to be able to buy property instead of renting or their peers might do this. One cannot simply say that 30% of one's income must go to rent.
So the worker could choose to rent a larger property or save more money instead since they have more options. Those savings could go into starting a business or consumption or improving their own wage potential through education or training.
To be fair the whole 'monopoly' aspect of landlords owning the land is in itself a core aspect of what is wrong in the pre-Georgist world. In a free market all players have roughly equal negotiation power and the more one-sided it is, the higher the extraction by violent non-producer landlords is, with the extreme case being slavery or even fully abusive slavery to work people to death seeing them as disposable if there is an abundance of new slaves to be had.
Overall I see this as a positive and it would encourage workers, capital investment, and innovation in the economy. Even though we might end up slightly increasing rents in the process, we'd increase income even more by removing other taxes.
Think of the LVT in other areas too such as in telecommunications where the telcos pay nothing or next to nothing to access the common bandwidth. This could apply to the internet as well and other domains where landlords are using and profiting from things they did not create.
Truly the dead money tied up forever in land which acts as a blackhole sucking in productive energy from workers into non-productive consumption and hoarding by landlords is a highly unfair and inefficient system which tends towards serfdom in the same way our modern banking system tends towards the banks eventually owning everything or the way a marble tends towards the bottom end of a see-saw which has one side all the way up and the other side all the way down.
The worker would go from $700 a year in useful income after tax and rent to a situation where they'd have $1,500 - $0 tax - $375 rent = $1,125 a year. This is a $425 increase for the worker and it would be derived from the common value the community creates. Thereby returning a dividend to each person in the Georgist model while improving conditions for everyone - well everyone except the do-nothing landlord and existing property owners.
Truly this avoids the heap of manure which kills the land and from which nothing grows to a system of spreading it out so that each person might create additional prosperity and velocity of money within the community.
Instead of each dollar going on a trip like this:
Land - Labor - Capital - Wages - Rent - Landlord forever.... a linear process.
We could have a better cycle of money flowing over and over again through the community.
Land - labor - capital - wages- cafe - capital - wages - cobbler - capital - wages - rent - landlord - building repair - capital - wages - etc.
This engenders an enduring cyclical process where money never ends up dead and useless in some do-nothing landlord's pile of cash. They will HAVE to improve the property, perform some labour themselves or the LVT will siphon it away from them over time. Forcibly putting it into the hands of the community again, the ones who generate all of the increased value of the land.
No one has a natural right to steal from the community's creation to hoard it and do nothing with the money except find new ways to steal even more through the creation of a slumlord property empire which makes everything worse for everyone else. That's just theft and has no moral grounds to be tolerated by everyone else who outnumber the landlord.
The main challenge would be....how do you politically enact something which will remove huge amounts of value from existing landowners? They typically have almost 100% pure corruption and control of the ruling classes or are in fact the ruling class themselves where rulers and landlords are the same person. Show me a president, a senator, an MP, or a house member who does not own land or is not behold to donations/bribes from those who do own lots and lots of land?
Georgism does justify Colonialism, doesn't it? If insufficiently-productive individuals become unable to pay increasing ground taxes as many more more-productive individuals move in next door, and so will have to change their ways or give up their land, then why doesn't the same apply to insufficiently-productive peoples confronted by other, more-productive, peoples?
Nothing the author says on this point gainsays this: (1) "many Native Americans already had a roughly Georgist understanding of land"—that turns out to be a concession, not a response; (2) "it was precisely the colonialists' conception of land as private property that was the mechanism by which the indigenous population was expelled and their lands seized"—true, but all that means that is that the colonialists should have been Georgists, which (given the first point) the indigenous population would have been in no position to object to; (3) "The English first practiced this on their own people"—true, but irrelevant to colonialism; (4) "As a practical matter though, if you want to impose a Georgist policy, that only applies to territory your state has authority over"—Why would it only apply to property relations within states? The Georgist argument will be the same, whether we are talking individual land owners, or collective land owners, just applied from a much larger perspective. And what is so impractical about it?
Sure, but does this even mater today?
I disagree that Bitcoin under the model is not wealth. If anything it’s a truer form of wealth than any money because it’s not an iou it’s a true existing digital good physically produced by the expenditure of human capital through mining
My critique in 11 parts. I agree with the conclusion of a land value tax, despite many flaws in George's argument.
1: "Though neither wages nor interest anywhere increase as material progress goes on"
This is very, very, very, falsified by subsequent developments. And even in George's day it was already false. Industrialization creating poverty was an illusion -- it just made poverty more visible by concentrating it in cities next to educated elites who could write about it. >90% of farmers voluntarily went to the cities in a century. If people didn't subjectively consider industrialized city life vastly superior to the old subsistence farming, that mass migration wouldn't have happened.
The book is based on this this gigantic false premise that economic and technological progress INCREASED poverty, when in reality it DECREASED poverty by a lot. 800 million people were lifted out of poverty by China's laissez-faire reforms and technological development over the last few decades. By George, this would be impossible, because the landlords would have taken all the surplus as increased rent.
But it still has some redeeming values which I'll get to later.
2: "where the value of land is highest, civilization exhibits the greatest luxury side by side with the most piteous destitution"
Homeless per 10k population (https://en.wikipedia.org/wiki/List_of_countries_by_homeless_population):
Hong Kong: 2.4
South Korea: 2
Japan: 0.3
Thailand: 0.7
China: 18
Norway: 7
Finland: 8.8
Poland: 8
Hungary: 10
Spain: 6.4
Portugal: 3
Italy: 8.4
Russia: 4
Denmark: 11
Iceland: 10
Ireland: 16
UK: 65
France: 45
Germany: 81.9
Sweden: 36
(the following don't have per 10k stats, so I had to google "homeless population in X" and divide by "population in X"/10000)
Singapore: 1.8
Los Angeles County, CA: 63.7
San Francisco, CA: 91
Jacksonville, FL: 20.8
Oklahoma City: 24.5
Empirically, it seems like rich countries/cities only get high homelessness when they are both (1) very diverse and (2) run by baizuo (a chinese word meaning "white left" https://en.wikipedia.org/wiki/Baizuo). When either of those conditions doesn't hold, a developed country/city doesn't get homelessness over 25/10k. When both of those conditions hold, it usually does. Denmark and Ireland may seem like counterexamples but aren't really. Denmark is a bit less diverse than Sweden, and a bit less woke. Ireland is a lot less diverse than the UK and a bit less woke. Both are a lot less diverse than Jacksonville or OKC.
3: The claim that rents increase enough to gobble up all productivity improvements seems falsified by these charts of San Francisco incomes versus San Francisco rents:
https://fred.stlouisfed.org/series/MHICA06075A052NCEN
https://medium.com/@mccannatron/1979-to-2015-average-rent-in-san-francisco-33aaea22de0e
Since 1989, median household income went up by $7500/month, but average rent went up by only $3000/month. Even after adjusting both figures for inflation and taxes, workers would come out way ahead of where they were in 1989.
4: "In fact speculators often keep it out of use, because this forces people to use less valuable land instead, pushing the margin of production down even further, forcing land values up, and now The Rent Is Too Damn High."
This implies speculators sacrificing their individual self interest for good of all speculators, and is therefore dubious. Any individual speculator would make more money renting out his land, because that wouldn't have much of an effect on land values in general. Also, at any point, someone with a more-productive-than-expected use for the land can buy the land from the speculator and put it to use. If the land had instead already put to use by the first person who had any use for it, maybe the transaction costs would be higher because they'd have to tear down something to build the more productive thing.
5: I was put off by the beginning of the review where he beats peculiar definitions to death to (seemingly) rhetorically devalue capital accumulation without doing any empirical work. But when I got down to this, I sorta saw the cat: "Mr. Slumlord puts in as little work as he can get away with and invests as little capital into maintenance as will keep the state off his back. His return is almost entirely rent. And the only reason he can charge rent in the first place is because of the valuable location – value the community produced, not him....The problem with our current system is that when anyone in the community builds improvements, it makes adjoining land more valuable, and then those adjoining landlords jack up the rent. This makes things worse for everybody but the landlords. George's insight is that extra value from my improvement "spills over" from my land and is soaked up by the ground rent of your land."
6: "even though higher earners are responsible for withholding the vast majority of tax money in fraud."
It's not so dramatic. The latest paper showed only a modest difference in the rate of income underreporting between bottom and top income brackets (like 7% vs 20%), and its methodology was based on audits which are basically incapable of detecting cash that never enters a bank or buys something huge, so it's probably understating underreporting on the low end where people get cash from tips/wages/drugs and directly spend it on petty purchases which will never show up in audits. https://www.nber.org/system/files/working_papers/w28542/w28542.pdf
7: The total land value of US land is estimated to be 23 trillion (https://www.usatoday.com/story/money/2019/05/08/the-most-and-least-valuable-states/39442329/), and a normal rent-to-value ratio is 8%/year, so LVT would raise 1.84 trillion if land values didn't immediately crash. Total taxes collected by the US last year were almost double that, 3.32 trillion. So clearly the story is not quite as extreme as landlords gobbling up all the surplus value creation everywhere. The state's monopoly on violence can do that too. In a sense you have two landlords extracting rent: your regular landlord, and the state. On average the latter is extracting almost twice as much rent. Both of their claims arise from the land you happen to reside on.
8. "Land in Times Square will still be a lot more valuable than land in Podunk, Saskatchewan, but both will approach the same price as the LVT rate gets closer to 100%. "
If this is true, then what incentive does the person who owns less-productive land in Manhattan have to sell it to someone who will put the land to a more-productive use?
9. I like everything about UBI, except: If people don't have to first demonstrate the ability to produce something of value before they reproduce, then after a few centuries dysgenics collapses the system, unless there's some AI/biotech eschaton. Biotech solution is iffy due to political/cultural opposition to it and difficulties of scaling.
10. "The absolute size of the human population is still growing, but this is just due to inertia; the human population will peak somewhere between 9 and 10 billion in the 2060's, and then decline from there."
It's still kind of an open question whether subsaharan Africa will ever have not-above-replacement fertility. Their IQs are probably not yet high enough to develop their economy enough to have a complete demographic transition. If we are betting even money on when Earth's population will stop growing, I'll take the over 2065. If we are betting even money on when sub-Saharan Africa will have not-above-replacement fertility, I'll take over 2200. Maybe their IQs rise as long as they're still in a Malthusian condition, so that they'll eventually reach a threshold IQ to industrialize. Seems unlikely for any intervention by foreign biotech to have enough scale to make much difference.
11. George's take on the Irish potato famine seems basically correct except he doesn't seem to note that the rich countries were much more industrialized than India, China, and Ireland, and that is what enabled them to support a higher population density.
I retract #8 which was based on a misunderstanding about LVT being based on market prices instead of imputed value. Since LVT is based on imputed value, then the market prices can be equal but the higher-value land will still have a higher tax which will incentivise a sale by any owner who doesn't take full advantage of the high-value land.
It seems that we need a better word than "justly" in sentences like the following.
> If you're ploughing a field and I lend you a tractor which makes you ten times as productive, I can justly claim more compensation for that than if I lend you a mule that only makes you twice as productive.
More compensation can be claimed by the lender, because the borrower is willing pay more, because the tractor has more value to them. It is not a matter of "justice".
Perhaps the meaning would be better conveyed by flipping the framing from "the lender can justly claim more compensation" to "the borrower is willing to pay more".
I have a few large quibbles with the Georgist proposal. Looks like this platform will force me to break them up, but here goes.
1) What you tax, you have less of.
You cannot have less land.
But if what is being taxed here is "Land / NATURE VALUE / Privilege," you CAN have less "Nature Value"! A few have alluded to this above, but it seems like a much bigger problem than discussed.
This proposal might concentrate sprawl some, yes. That would be great. But it would *definitely* put development pressure on undeveloped land.
Undeveloped land is what makes the ecosystem function. It filters polluted water and recharges the water table. It prevents mudslides. It sequesters carbon. It builds topsoil. It supports biodiversity. I can't even count all the "public goods" undeveloped land creates. Do I have a problem with it all being in the hands of the super rich? Yes! That is a problem! Am I really inclined to divide the world into "human system" and "ecosystem where humans never go"? No, that's a fallacy; it's all ecosystem, including us. Also, when all wilderness belongs to the wealthy, we peons are not allowed to set foot in it anyway. But to heavily incentivize development is going to leave us with a vast concrete apocalypse. We are already staring down the barrel of ecological catastrophe. Maybe we *shouldn't* "improve" everything our eyes can see.
Here in Vermont, we have something called the Current Use program. It is more or less the opposite of Georgism: If you own a chunk of land and you either set it aside for conservation or use it to generate land-based employment (farming, forestry), you get a property tax break. If you later develop it, there's a hefty penalty. Does this primarily benefit the wealthy? Yes, it does. Are we short on affordable housing? We very much are. (Though I would be inclined to blame poor zoning and building codes for that first and foremost.) Nevertheless, I, a lower class person, moved to Vermont specifically because the ecosystem was still mostly intact. Is that privilege? Yes, partly, though I give up a lot of "wealth" (monetary income) to make it work. But I'm not seeing how wiping a good thing out to level the playing field is going to help the world.
You could partly fix this by paying landowners to maintain ecosystem services, as a valuable commons not presently regarded in our economic system. A carbon tax and dividend paid out according partly to tree cover, for example. Mark Atwood above would do okay with that. But if you do that, Georgism penalizes the vacant parking lot, but it does NOT penalize the semi-wild thousand-acre private estate. Land still concentrates in the hands of the wealthy. I don't have a fix here and I don't see anyone else in this discussion proposing one. How would you solve this?
3) I suppose this is a subset of the points above, but again, like Civilis and peak.singularity, I worry about regarding all land only at its "highest value." Personally, I look at a vacant lot and I think "Community Garden!" Better than a parking lot, no question. Not as "valuable" as a skyscraper, though. Does all green space instantly disappear from cities? Because right now owners of parking lots vampirically feed off a tragedy of the commons, but by removing that, can anyone afford to have a park in a city at all? It raises property values around it, yes, but the park itself isn't generating cash revenue. And yet it's taxed, right? Unless you write in an exemption for ecosystem services.
4) >As long as you have land you can work and generate wages.
Right. So this is particularly dear to my heart. I homestead. I have ten acres, seven of which are steep, rocky, boggy spruce forest I can't even get the tractor into, so only three are useable. I keep a cow and grow all my own food. It's subsistence farming; I trade milk and meat for hay, so the cow pretty much pays for herself (not counting my labor), and otherwise, I generate wealth (all my own food and firewood) but I don't generate income. I have a part time job for that. My land, sans improvements, is assessed at $80K and a glance at market price for undeveloped land suggests that's about right. (I got it for half that because the guy before me wrecked the place and there were negative improvements in the form of burned-out, falling down buildings with hefty removal costs. I've mostly cleaned up the mess, by sweat equity. So we'll call it $80K, but some of that I *earned,* darn it.)
So: You're proposing I be assessed an additional $3,400K yearly in taxes.
I make about $16K with the off-farm job. The market value of the wealth I produce in food and fuel is probably about $5K. (In George's time that would have been doubled; as I said above, the agricultural market is completely wonked.) I don't receive any of it in cash income. But I would have to pay taxes in cash income. And my labor in homesteading would then generate no return at all.
Now: am I farming "inefficiently"? Of course I am; I do most of it with a shovel. But the ownership of the land gives me a freedom I wouldn't have anywhere else, because land IS the source of life. Owning land meant I could build my own cabin, for example, which would absolutely not have been *allowed* on someone else's land, not without meeting codes that would have doubled the cost or incurring liability that doesn't apply when I do it for myself, on my own place, and what landowner could have afforded to pay me back my sunk costs if I had to leave? Most towns wouldn't even allow me to park a tiny house on a trailer on leased land, not if I were to ask permission. The only way I could ever create stable shelter *for myself,* through sweat equity and never mind the "rent," was to have fee simple control over a plot of earth. It took me ten years of hard looking to find anything I could afford and secure access to it. Now that the "housing" (land) market is booming again, I suspect no one younger than me will have the opportunity at all.
So I definitely do consider land speculation and ever-concentrating ownership to be an enemy, which is why I'm taking the time to read and think about this. I'd like a fix too. But if you wind up disincentivizing the direct ownership of home and land, you're also disincentivizing sweat equity and subsistence, are you not? So what happens to everyone who lives outside of the cash economy, suddenly taxed?
Is the problem essentially that *as productive land,* my homestead is greatly overvalued, because of speculation? Well, yes, probably at least in part. I am using this land more productively than it has been used in fifty years, and more productively than all the absentee landlords around me who just bushhog the fields of their vacation retreat once in a while. But I'm not generating nearly enough wealth on this soggy boggy scratch-ankle mountain homestead to cover its taxable assessed value, and we *don't* need to pave it over and build skyscrapers. So how would you solve this?
*If you redistributed a LVT as a UBI then it might work, yes. But if you were to exclude ecosystem services from taxation, that effect is weakened (though maybe my seven acres of useless spruce swamp would get some of that exemption; right now it's valued the same as any other "acreage"). And if instead of a UBI you just used it to replace income tax ... I don't have income.
Again, direct personal production of "wealth" is not participation in "the economy" because "the economy" only values things you pay *other* people for. If you do it for yourself, you don't have cash. If you then have to pay cash for access ... Isn't this what Shay's Rebellion was about?
Georgism seems to run the risk of exacerbating our existing fallacies in what the market does, and does not, "value." That's what I'd like to see addressed.
2) This comments thread so far has been fairly dismissive of the problem of agriculture, and has tended to use "farmland" as a base value of worthlessness. I guess none of you eat.
Georgism incentivizes land to its "most valuable" use. That's not ag, according to our present market. We are already losing farmland to development at a truly alarming rate. Topsoil is THE basis of human life, not to mention civilization. There is a limited amount of arable land. Once you pave it over, it's gone for good. If you don't have it available near your urban centers, you are dependent *for life itself* on the assumption that nothing can ever possibly go wrong with shipping and trade. Now Ukraine is rubble and nearly 20% of the world's grain supply just went off the market. It's going to be bad. Maybe we should have supported more decentralized local agriculture along the way?
The suggestion is that the farmer would only wind up paying taxes equivalent to what he would pay if he were renting farmland. But farmland, unless restricted, is NOT valued at its agricultural potential, but on a different scale entirely, the "highest market value," which is in no way related to its productive capacity. Every farmer I know prays desperately that no one gets it in their heads to "improve" anything, anywhere nearby. Because if they do, land values will go up, and the farmer will instantly lose home and livelihood.
Eating is important, but our present market doesn't value it. Like devaluing the carbon absorption capacity of a functioning forest, this is a market distortion which needs to be corrected for.
Massachusetts has something called an Agricultural Preservation Restriction, not unlike Current Use but more restrictive. The state buys or accepts a donation of the development rights from the landowner. At least in theory, the land then drops in value because it can never be developed, but must be kept in agriculture. It is the only way there is any farmland left at all in the Connecticut River Valley, which is some of the richest soil on the planet, but under intense pressure for development. It is of course an expensive program for the state to run, and therefore applies only to a very limited amount of land. Also, regardless of theory, in practice, this land often still winds up being bought by the wealthy as private estates and merely leased to someone who will hay it once in a while. But at least it's still *there.*
So someone earlier said:
>Georgism would obliterate the returns on owning farmland but not on working it.
Okay, but there are two problems here.
A) Given our present disastrous state of agriculture, there pretty much *aren't* returns for working it. Farmers are "land rich and money poor"; many of them just barely break even year over year and depend for emergencies or retirement ENTIRELY on the sale of land. The overall economics of farming are completely, completely screwed up. Market forces are not working to correct this at all. It's sliding (plummeting) towards monopoly. Monopolistic markets of Cargill, Archer Daniels Midlands, Tyson, Purdue. Monopolistic suppliers of seed and inputs. Farms getting squeezed and squeezed and pushed to consolidate in fewer and fewer, bigger and bigger operations. Here in Vermont, we have lost 94% of our farms since 1945. Yes, you read that right. We're down to a few hundred and losing more daily.
Now, is part of this the direct result of land speculation? Yes! To what extent is land speculation the primary force driving farm consolidation into the hands of fewer and fewer giant players? I don't know. It's worth debating. But as proposed, you're going to hit the last remaining small family operations too, and that's NOT going to help. How would you solve this?
B) There seems to be an assumption that there's no difference between a farming operation conducted on land one owns vs. land one rents. There is a difference. Leased land is subject to the whims of the landowner. These whims are very often absurd and unreasonable. Witness all the Cliven Bundys of the world furious with having to follow government rules. But we farmers on the east coast tend to think the government gives them a *fantastic* deal, because *we* have had to try to deal with individual rich people dictating the lease terms, including daily details of how we are permitted to farm, and these are nonsensical. So very much land does just sit unused, at best bush-hogged once a year, because the conditions of the lease are not only illogical but often wildly unpredictable, IF farming opportunity is offered at all. Land under the direct ownership control of the farmer who works it is almost always better managed and better worked, and it certainly doesn't get yanked out from under them on a moment's notice, as leased land often does. If you disincentivize land ownership, I am not at all convinced you would be properly incentivizing its "improvement," as a tenant farmer's "improvements" still belong to the landowner. Let alone would you be incentivizing its stability in use.