Peace, Justice and Economic Reform   [one of the essential documents] A Bill of Economic Rights and Obligations The Case for Taxing Land The Case for Site Value Rating Applications of Land Value Taxation to Problems of Environmental Protection, Congestion, Efficient Resource Use, Population, and Economic Growth Basic Principles of Geonomics Basic Tenets of the Incentive Taxation Philosophy Comments on the NTIA's Comprehensive Policy Review of Use and Management of the Radio Frequency Spectrum Being Just While Conceptions of Justice are Changing The Constitutional Conflict Between Protecting Expectations and Moral Evolution Global Economic Justice, followed by Creating Global Economic Justice The Interaction of Moral and Economic Approaches to Ecological Protection Economics Nobel Awarded for Contributions in Public Finance The Interaction of Moral and Economic Approaches to Ecological Protection The Ethics of Coercion in Public Finance Farm Land Rent and the Renewal of Rural Society: The Self-Financing Model Improving Efficiency and Preventing Exploitation in Taxing and Spending Decisions Land Taxation and Efficient Land Speculation The Political Economy of Moral Evolution Coercion Decision Tree Recommendations for a Society in Transition Market-Based Systems for Assigning Rental Value to Land Private Possession as an Alternative to Rental and Private Ownership for Agricultural Land An Open Letter to Mikhail Gorbachev, signed by 30 economists (November, 1990)

Peace, Justice and Economic Reform   [one of the essential documents]

There is a bumper sticker that says, "If you want peace, then work for justice." At a superficial level, this simple slogan contains an important half-truth. At a deeper level, it contains a more profound half-truth. To understand these half-truths and why they are only half true, we need to know what peace is, what justice is, and we need to understand the relationship between the two. So in this talk I want to explore the meanings of peace and justice, their relationship, and the role of economic reform in attaining both.

"If you want peace, then work for justice." The more obvious and superficial meaning of this slogan is that people who are treated unjustly will prevent the attainment of peace until the wrongs to which they are subject are righted. Demonstrators shout: "No justice. No peace." The apparent meaning of peace in this case is tranquility, the absence of strife. And if this meaning of peace is accepted, the slogan is true. You cannot expect to end strife as long as people have unresolved grievances. But the reason that this is only half true is that this meaning is only a shadow of what peace really is.

Peace is more than armistice, more than the cessation of violence. Peace is unity and harmony. In a peaceful world people are all pleased to cooperate with one another. When we have attained true peace, there will be no person who has any purpose that any other person seeks to thwart. In a peaceful world, everyone will feel the truth of John Donne's meditation,

No man is an Island entire of itself; every man is a piece of the Continent; a part of the main; if a clod be washed away by the sea, Europe is the less, and well as if a promontory were, as well as if a manor of thy friends or of thine own were; any man's death diminishes me because I am involved in Mankind; therefore never send to know for whom the bell tolls; it tolls for thee.[1]

Is it imaginable that we might ever attain a world where everyone felt so? And if we do so, what will be the role of justice in that world? What is justice?

There are so many conflicting, strident claims for different conceptions of justice that a person might reasonably despair of ever finding a meaning of justice that people would agree upon. Any conception of justice may seem to be no more than one person's opinion. And yet there are things that we all know about justice. If I tell you that I stand before you as justice, you know that across my face you will find -- a blindfold. In my left hand I hold aloft -- a pair of scales. You know that in my right hand I have -- a sword that I will use if necessary. And my gender is female.

The blindfold, the scales, the sword, and the feminine gender. These features of the traditional symbol tell us much about justice. The blindfold might seem out of place, since it prevents justice from either seeing what the scales say or wielding the sword effectively. But we know that the blindfold has a distinct and essential meaning. The blindfold ensures that justice will not be swayed by any visible characteristics of those who plead before her. Justice is not concerned with whether you are black or white, short or tall, beautiful or ugly. Every person receives the same treatment from justice.

The scales have at least two possible interpretations. ...

And then the sword. The sword represents the fact that justice is prepared to use the threat of force, and force itself, to see that her decrees are carried out. ...

Thus if we know that justice is the blindfolded woman with the scales and the sword, then we know that justice is the principles of equality and evenhandedness that command and prohibit the use of force in resolving conflicts.

Consider what this tells us. It tells us first that if we wish to claim that justice authorizes the force we wish to use, or that justice forbids the force that others wish to use against us, then we must be able to show that our claim is consistent with equality and evenhandedness. ...

Second, the blindfold tells us that we are not in the realm of justice if the principles we offer to explain why our use of force is justified are of the form, "Because I am better than you," or Hitler's, "Because Aryans are better than Jews." Justice compels us to acknowledge the equality of all persons. Claims of individual or group supremacy cannot be accepted by justice.

If we commit ourselves to neutrality, does that provide a unique definition of justice? No, it doesn't. There are a number of definitions of justice that might claim to satisfy neutrality, although the claims of some definitions are dubious, and other definitions can be rejected on other grounds.

This is a reasonable recipe for implementing the Golden Rule and a fine idea for seeking agreement about the principles by which complaints shall be judged. If people were to follow this suggestion and achieve the agreement that is described, they would achieve fairness.

Next, consider egalitarianism. The egalitarian says that justice is equality. There is a conceptual difficulty in specifying how beings as different from each other as humans are could ever be equal, unless we create a society where all humans are female clones of one another. (This should be technologically feasible within a few decades, if it is not already.) But I do not think that egalitarians want a society of clones. ...

All of these suggestions should be rejected. Talents are not a common pool from which some persons have taken more then their shares. If we are all fishing in the same pond, the quantity of fish that you take will diminish the quantity that is available to me. But the quantity of talent that you have in no way diminishes the quantity that is available to me. Your talent is not acquired at my expense.

From the perspective of peace, no man is an island; each of us is a part of mankind. And any of us who has been graced with an extra measure of talent should recognize that, often, the best use of our talent is to provide for others. Nevertheless, from the perspective of justice, each of us must be allowed to act like an island if he wishes. .

But I don't think you would. I don't think anyone would. We are not egalitarians. We recognize the sanctity of the boundaries of the human body. In a peaceful world I will gladly give a spare kidney to anyone who needs it. But in a just world, no one will forcefully extract a kidney from me, even to save someone else's life. Justice is not egalitarianism.

A proper definition of justice begins with the principles of classical liberalism. In a just world each person is permitted to determine the purposes to which his or her body is put--the hands and the brain no less than the kidneys. We each have rights of self-determination. This includes the right of ownership of what we produce, at least, as John Locke said, when we leave as much in natural opportunities for others as we appropriate for our own productive activities.[11]

We have the right to co-operate with whom we choose for whatever mutually agreed purposes we choose. Thus we have the right to trade with others, without any artificial hindrances, and we have the right to keep any wages or interest that we receive from such trading.

These components of the classical liberal conception of justice are held by two groups that hold conflicting views on a companion issue of great importance: how are claims of exclusive access to natural opportunities to be established?

The other tradition is that of the "geoists," as inspired if not exemplified by Henry George, who say that, whenever natural opportunities are scarce, each person has an obligation to ensure that the per capita value of the natural opportunities that he leaves for others is as great as the value of the natural opportunities that he claims for himself.[14] Any excess in one's claim generates an obligation to compensate those who thereby have less. George actually proposed the nearly equivalent idea, that all or nearly all of the rental value of land should be collected in taxes, and all other taxes should be abolished. The geoist position as I have expressed it emphasizes the idea that, at least when value generated by public services is not an issue, rights to land are fundamentally rights of individuals, not rights of governments.

The second fundamental problem with the position of the homesteading libertarians is that, even if there were previously unsettled land to be allocated, say a new continent emerging from the ocean, first grabbing would make no sense as a criterion for allocating land.

It would be inefficient, for one thing, as people stampeded to do whatever was necessary to establish their claims. But that is not decisive because, if we are concerned with justice, it might be necessary for us to tolerate inefficiency. But the homesteading libertarian view makes no sense in terms of justice. "I get it all because I got here first," isn't justice.

Getting back to where we started, is it true that, "If you want peace-- real peace--you should work for justice?" and if so why? Well, it's half true. To see why, consider what peace is, and how one might create it.

Peace is unity and harmony. Peace is people recognizing that we are all parts of one another, that it is always for ourselves that the bell tolls.

What keeps us from attaining peace? One of the greatest hindrances to the attainment of peace -- real peace -- is that resistance that so many of us feel to tolerating oppression and injustice. When we know that we, or others we care for, have been treated unjustly, it is ever so difficult to attain a state of unity and harmony with others. The leap to peace is so much easier from a position of justice. So, even though peace and justice are very disparate things, and peace is much the more attractive one, still it make sense, if you want to help people reach peace, to work for justice.

But the reason that this is only half true is that, in fact, justice is not actually necessary to your attainment of peace. If you want peace for yourself, you can have it, at any time, in any circumstances in which you find yourself. Whether you are treated justly or not, you are a part of the being that is all humanity. Each person's joy is your joy. Each person's grief is your grief. You don't have to wait until you are treated justly to see this.

So if you want a peace for others, then work for justice. Work for freedom. Work for the elimination of all taxes on the productive things that people do. Work for equality in the right to benefit from natural opportunities. All these things will make it easier for people to make the leap to peace.

A Bill of Economic Rights and Obligations

In living, expressing our liberty, and pursuing happiness we sometimes conflict with one another, so we need a shared understanding of the extent of the sphere of equal rights given to every person, and beyond that sphere our obligation to respect the rights of others. This Bill is concerned with the economic aspects of these rights and obligations. ...  Read the entire article

The Political Economy of the Gospels

The Shape of a World Inspired by Henry George

How would the world look if its political institutions were shaped by the conception of social justice advanced by Henry George?

Henry George was one of the most famous reformers of the late 19th century. Ever since the 1879 publication of his book, Progress and Poverty, his ideas have inspired people working for economic and social reform all around the world. He is most famous for proposing the abolition of all taxes except for a tax on the value of land. But I will argue that the single tax on land was not George's most important contribution, and that the power of his thinking can be best appreciated by focusing on the theory of social justice that he used to explain why a single tax on land is just.

First I will argue that George's theory of social justice provides the dramatic climax as well as the logical foundation of Progress and Poverty.

Next, I will discuss the functions of a theory of justice.

Then I will address the question of what George's theory of social justice implies for relations among nations.

Finally, I will ask what constitutes justice within nations, in a world where relations among nations are governed by George's theory of social justice.

 

The Morality of Taxation: The Local Case

From a moral perspective, taxation is dubious or worse. We tell our fellow citizens that if they do not pay taxes that we say they owe, their property will be seized or they will be sent to prison. Why do we treat people this way? Is there a justification?

The dubiousness of taxation increases when we consider its origins. Government seems to have originated as roving bandits who learned that total destruction was less profitable than protecting their victims from other bandits and allowing them to keep a fraction of what they produced (Olson, 1993). In time, scheduled partial plunder evolved into taxation. Over the centuries, regimes that started as tyrannies evolved into democracies. The public sector evolved from an apparatus for implementing the will of despots into a mechanism for carrying out democratic decisions. But public finance continues to rely on the power of tax collectors, developed under early tyrants, to coerce citizen to pay taxes. The wrath that citizens feel toward tax collectors is probably the strongest antagonistic feeling that citizens have toward a governmental institution. Why do we allow ourselves to do this to one another?

There is a gentler side of taxation that provides some explanation of our tolerance of this coercion. Taxation can be the way that people achieve their common purposes. People may agree to be taxed so that there will be money to pay for public services that they want. From this perspective, taxation may be considered no more than the dues for belonging to a club that provides people with things that they would rather pay their share of than do without. However, to make this "voluntary exchange" theory of taxation relevant, people must be able to choose freely whether or not to "join the club," to be a citizen of the taxing jurisdiction. With all land claimed by some taxing jurisdiction, the choice isn't exactly free.

The problem of morality in taxation is the following:

• How do we retain the possibility of people pooling their contributions to the cost of services that they agree are worthwhile, while eliminating the possibility of citizens treating their fellow citizens as targets of plunder?
• What are the limits of obligations that we can justly impose on our fellow citizens?
• And how do we set up a structure of government that will ensure that these limits are observed? ...

But to make taxation truly voluntary, the option to leave must be viable. If people could move costlessly from one jurisdiction to another, taking all of their belongings with them, then competition among jurisdictions would tend to eliminate oppressive taxation. This would leave only the fees that people were prepared to pay to have public services (Tiebout, 1956).

Of course, moving will always have some costs, so the ideal will not be attainable. But what can be imagined is a system in which all taxes were local taxes. Then people would not have to move nearly as far to escape from taxes that they regarded as oppressive. Higher levels of government would not need to disappear; if the services that they provide are desired, they could be financed by levies on lower levels of government. ...

Such a conclusion would be unwarranted, because there is a very significant source of public revenue that can survive when localities compete for mobile residents. This source is land. When people are taxed in proportion to the land they possess, no land moves to another locality where taxes are lower. Thus two questions arise:

• Would taxes on land be sufficient to finance the public activities that ought to be undertaken, and
• would such a system be fair?  Read the whole article

The Case for Taxing Land
The Case for Site Value Rating

Both for reasons of social justice and for reasons of economic efficiency, site value rating deserves a continued place in the programme of the Liberal Party.

The case for site value rating in terms of social justice is founded on two understandings: first, that the value of land in the absence of economic development is the common heritage of humanity, and second, that increases in the rental value of land arising from economic development and government expenditures should be collected by governments to finance those activities. What is meant by "land" is the unimproved value of sites and the value of extractable natural resources such as North Sea oil.

While there may someday be institutions capable of implementing a recognition of land as the heritage of all humanity on a worldwide basis, in the absence of such institutions each nation should implement a recognition that land within its boundaries is the common heritage of its citizens. This is accomplished not by making the nation a gigantic Common or by instituting government management of all land, but rather by requiring all persons and corporations that are granted the use of land to pay a fee or tax equal to what the rental value of the land they control would be if it were in an unimproved condition.

The case for site value rating in terms of economic efficiency is founded on the fact that a tax on resources that are not produced by human effort is one of the few sources of government revenue that does not reduce incentives for people to be productive. Two other revenue sources that have this virtue are taxes on other government-granted privileges such as exclusive use of radio frequencies and taxes on activities with harmful consequences, such as polluting the air. An economy will be more efficient if revenue sources that do not diminish productivity are employed to the greatest possible extent before any use is made of taxes that impede productivity.

What makes a tax efficient is that the amount of tax that is due cannot be reduced by reducing productive activities. When incomes are taxed, people can reduce the amount of taxes owed by working less. They do so, and the productivity of the economy falls. When houses are taxed, people can reduce the amount of taxes owed by building fewer house and smaller houses. They do so, and the housing shortage worsens. But when the unimproved value of land is taxed, there is no resulting diminution in the quantity of land. Thus taxes can be levied on land without diminishing the productivity of an economy. And shifting taxes from other, destructive bases to land will improve the productivity of an economy.

Subsequent sections explain in more detail these social justice and efficiency arguments for site value rating, describe procedures for implementing such a tax system, and explain why a variety of potential objections are without merit.

Applications of Land Value Taxation to Problems of Environmental Protection, Congestion, Efficient Resource Use, Population, and Economic Growth

When economists think about the contribution that land value taxation might make to economic performance, they are likely to think in terms of property tax reform. If taxes on structures are reduced or eliminated, one can expect that more structures will be built, and cities will be taller, more compact and more efficient.1 But more efficient cities are only the beginning of the contribution that land value taxation can make to improving economic performance. Land value taxation generalizes into the principle that people should pay for all of their appropriations of natural opportunities, according to the opportunity costs of those appropriations, and the resulting revenue should be shared equally. There are important applications of this principle to questions of environmental protection, relieving congestion, efficient resource use, population growth, and general economic growth. This paper discusses these more varied applications of the generalized principle of land value taxation. ...

I have a spreadsheet that takes parameters such as the ones named and determines what would happen (in a comparative static framework) if all taxes were removed from labor and capital, and 100% of the rent of land were taxed. Here are the results:

• The quantity of labor would increase by 55%.
• The quantity of capital would increase by 145%.
• Output would increase by 53%.
• The wage before taxes would fall by 1.7%, but the wage after taxes would increase by 72%.
• The rent of land would increase by 87%, and would provide more than enough revenue for all existing expenditures of all levels of government in the U.S., other than social security.
• The aggregate improvement in well-being of citizens would be about 12.6% of output, or about $1 trillion per year.

I would like to do more work with plausible ranges of parameters. But the model at least indicates that it is not unreasonable to expect dramatic improvements in economic growth from land value taxation, without reducing total government revenue.

Basic Principles of Geonomics

To summarize, the basic principles of geonomics are:

1. Equal sharing of land and natural resources, achieved by:

a. public collection of the rental value of land and of appropriate fees for broadcast rights and other opportunities that must be assigned exclusively, for depletion of natural resources, and for causing pollution or engaging in other activities that reduce the value of surrounding land;b. equal sharing among the population of that part of rent and other public revenue not attributable to public services;

2. Elimination of taxes on labor, capital and enterprise, limiting government revenue to the items mentioned in 1.a. above;

3. Economic freedom, encompassing free enterprise, free trade, and freedom to use foreign currencies;

4. Assignment of the ownership of previously centralized enterprises to all workers in proportion to the number of years they have worked, through shares in mutual funds whose managers are rewarded in proportion to the profits earned. ...  Read the whole article

Basic Tenets of the Incentive Taxation Philosophy

Equal Rights Ending Privilege Equal Rights to Land The Proper Disposition of Returns to Different Factors of Production Replacing Existing Taxes Reducing the Price of Land

The Importance of Constitutional Change Historical Precedents Creating a More Productive Economy Making Housing Affordable Applications Abroad as Well as at Home

Comments on the NTIA's Comprehensive Policy Review of Use and Management of the Radio Frequency Spectrum

Being Just While Conceptions of Justice are Changing

Having considered these seven idealized cases, one can now summarize the principles they embody.

• Case 1 and 2 both embody the principle that when a mistake in social rules is corrected, it is reasonable to require people to relinquish the expectations that the mistaken rules gave them. In one case this implied that compensation for the loss of sale value of land titles should be provided, in the other case that it should not be provided.
• Case 3 embodies the principle that it is sometimes appropriate to restructure past private transactions on the basis of new understandings of the requirements of justice.
• Case 4 embodies the principle that the perpetrators of injustice and their heirs are particularly responsible for providing compensation when the claims they appropriated are overturned.
• Case 5 embodies three principles:
  • first, that there can be circumstances in which the costs of a new moral understanding must be left where they fall, because there is no one to whom they can properly be shifted;
  • second, that compensation financed by taxation should be supported by a finding that those who are taxed are, as a class, particularly responsible for, or have been beneficiaries of, the discredited understanding;
  • third, that if compensation is provided, a person's past gains from the discredited understanding offset claims for losses from the new understanding.
• Case 6 embodies the principle that public moral debate puts people on notice that a future political decision might eliminate the value of their acquisitions without compensation.
• Case 7 embodies the principle that if compensation is provided, a person's past benefits from the new understanding offset claims for losses from the new understanding.

The Constitutional Conflict Between Protecting Expectations and Moral Evolution

1. The Possibility of New Moral Insights that Necessitate Redistribution
2. Assigning the Costs of Moral Accidents
3. The Possibility of a Right of Secession
4. The Complementary Right of Equal Access to Natural Opportunities
5. Power, Population and Process  ...  Read the whole article

Global Economic Justice, followed by Creating Global Economic Justice

I. The Functions of a Theory of Justice
II. Henry George's Principles of Justice
III. Applying the Theory of Justice to Land Rights Among Nations
IV. Applying the Theory of Justice to Other Connections among Nations
V. Differences in Ability and in Wealth
VI. Resources that Fluctuate over Time
VII. Justice and the Demographic Equation
VIII. Conclusion

Some people think of preventing grabbing in terms of preserving the status quo. There are two difficulties with this.

• First, the status quo incorporates extensive holdings that were acquired by indefensible means. A decision to preserve the status quo commits us to defending the indefensible.
• Second, there is no magic to any particular date, before which unjust appropriations are incorporated into the status quo and after which they are reversed.

A practice of allowing an appropriation to be treated as just if it has survived long enough gives aggressors an incentive to see if they can grab and hold on long enough. The result is actions like Indonesia's seizure of East Timor and Iraq's invasion of Kuwait. Only if we have a standard of justice that is independent of history can we expect to end such actions.

Henry George's theory of economic justice--that every person has a right to his or her productive powers, and that all persons have equal rights to all natural opportunities--provides a simple formula around which opinion about the shape of a peaceful world can coalesce.

This may seem hopelessly optimistic. But no other theory that I have seen has anything like the clarity, coherence and power of this theory. ...

In Part II, the author addresses two questions:

1. What would the acceptance of this framework for justice imply for the justice of social arrangements within a nation?
2. What devices might be used to extend the acceptance of such a system of justice once the preponderance of nations had accepted it?  ...  Read the whole article

The Interaction of Moral and Economic Approaches to Ecological Protection
When human actions cause ecological consequences that harm humans or other species, the propriety of those actions is a moral question. But when, either because of limited resources or because of conflicting purposes, people cannot do all that they wish to protect the environment, then environmental protection is a matter of economics as well as morality.

Harm to humans differs from harm to other species, for three reasons.

• First, we recognize greater obligations to humans than to other species. We recognize obligations to each human individual, while our obligations to other species tend to be seen as obligations to the species as a whole.
• Second, because of the possibility of communication with humans through language, we can have information about the adequacy of compensation to humans in a way not possible when seeking to compensate other species.
• Third, humans are ordinarily concerned with the well-being of other species, not just because other species are required for the advancement of their selfish interests, but also because humans acknowledge an obligation to all species for their own sakes. Thus any harm to other species is a harm to humans as well, while we ordinarily do not think of other species as being harmed by harm to humans.

As beings with awareness of right and wrong, humans have potential moral obligations to all species. There are at least three types of effort to protect other species that a person can make out of his own moral convictions, while asserting at most a minimal right to impose his morality on others. For each type of effort, two levels can be identified:

1. He can adopt personal rules of conduct. He can apply these rules first to his own direct conduct, and then to others, as a condition for cooperating with them, as through trade.

2. He can engage in moral dialogue with others, seeking to persuade them to voluntarily adopt his practices of respect for other species, first with respect to their own conduct, and then as a condition for cooperating with others.

3. He can persuade his community to adopt a standard of behavior that will be required of members of the community. Anyone with a contrary opinion can join another community. In this way, for example, communities outlaw cock fights. Because there are always some costs of relocating, there will be some harm to those who disagree. Such standards are least likely to infringe on the rights of dissenting individuals when they are most local. At the second level, a person can persuade his community to require a standard of behavior of its trading partners. Such action is likely to be most persuasive when the proscribed action is directly related to a traded commodity, as when the Unites States outlawed the importation of tuna caught with nets that killed large numbers of dolphins.

In the absence of perfect universal divine revelation, it is virtually inevitable that people will disagree about the extent of their obligations to other species. Thus, in addition to seeking a common understanding of our obligations to other species, we must seek ways to justly accommodate disagreements about these obligations. This is where theories of economic justice enter.

In addition to the efforts listed above, which a person can pursue on the basis of personal moral conviction, with almost no interference with the rights of others who do not share his moral conviction, a person can also advance a theory of justice that permits him to limit the harm to nature that others cause. In my view, the best basis for claiming a right to limit the harm that others do to nature is a classical liberal theory of justice, similar to that developed by Henry George in Progress and Poverty (1879) or by Bruce Ackerman in Social Justice in the Liberal State (1980). A classical liberal theory of justice recognizes the rights of all persons to equal shares of natural opportunities (that is, everything outside of human beings and the value created by human effort) and the right of each individual to pursue his personal conception of the good. Thus under a classical liberal theory of justice, any individual can assert a right to protect his share of the environment.

The idea that all natural opportunities belong equally to all humanity is a radical idea with profound implications for many areas of human activity, from public finance without coercive taxes to world peace to the meaning of human freedom. The management of the environment under such a liberal theory, with each person potentially having a different conception of the protection that other species deserve, provides a challenge for economic theory but not an insurmountable one.

Consider, for example, the protection of whales. If whales are not persons (which they might become if we found ourselves in moral dialogue with them), then hunting whales may be allowed but limited, either because some humans wish to exercise their rights to nature by protecting whales, or because a reduction in the number of whales impoverishes the world for this generation and for future generations. If the fraction f of the world's population wishes to protect whales, then that fraction of whales is off limits to whale hunters. For the fraction of whales that may be hunted, if hunting causes a loss to other potential hunters in this generation, then those who kill whales should be charged a fee for the economic losses that their behavior causes, with the proceeds shared equally among all potential hunters. If the level of hunting is so great as to cause the number of whales per capita that are available to the next generation of humans to fall below the number available to this generation, then the hunting fee should be the larger of the value of the loss to other potential hunters in this generation and the value of the loss of environmental quality to the next generation.

Economics Nobel Awarded for Contributions in Public Finance

In choosing to honor Professors Mirrlees and Vickrey, the Nobel committee has highlighted the contribution that economics can make to the creation of a more productive public sector.

he Interaction of Moral and Economic Approaches to Ecological Protection


The Ethics of Coercion in Public Finance

Introduction What is Justice? Liberalism Conservatism Contractarianism Utilitarianism Libertarianism Justifications of Coercion in Economics Cost-Benefit Analysis

Social Welfare Functions The Pareto Criterion Public Choice Near-Unanimity Competing Local Governments A Just Framework for Taxation Intergenerational equity Notes References

How do we justify coercion? Legislators and bureaucrats who devise coercive tax collection rarely bother to address the question. Nor do interest groups that promote expansions of the public sector, with their inevitable accompaniment of higher coercively collected taxes. Thus coercive tax collection has every appearance of a power play against the weak by those who have the strength to get away with it.

We need to reexamine our acceptance of coercion in public finance. If we are going to continue to rely on coercion, we need to develop a consensus about the framework that justifies it.

This paper begins with a definition of justice and a taxonomy of theories that might be used to justify coercion in public finance. I argue that theories based on Conservatism, Contractarianism, Utilitarianism, or Libertarianism all have value in some circumstances, but not for justifying the use of power to extract resources from people. None of these theories are consistent with what we ought to understand justice to be, because they do not accept the equal standing of all persons in defining what is good. A theory of justice that does accept the equal standing of all persons in defining what is good is Liberalism as elucidated by Bruce Ackerman (1980).

To oblige people to pay taxes while satisfying the limitations that Liberalism sets on the use of power, three conditions must be met:

Justice entails the recognition by those who have power that the use of power ought to be constrained by principles whose relevance does not depend on the views of those with power. ...  Read the whole article

Farm Land Rent and the Renewal of Rural Society: The Self-Financing Model

The rent of land is the amount of money that would be bid for the use of land in an auction. It can be thought of as 100 rubles more than the second-highest bid, that is, the amount of money that the person for whom the use of land is most valuable must bid to outbid the person who places the second-highest value on it.

What land is worth to a person who wants to use it depends on the length of time for which he will be allowed to use it. For the purpose of defining rent, this length of time should be indefinitely long, but with provision for revising the rent as market conditions change. In other words, if similar land rents for 20% more three years from now, then the person who secures the use of a site this year would be required to pay that additional 20% at that time.

The rent of land also depends on the condition of the land. The rent of land is what people would bid for unimproved land. In a town, unimproved land is land without any structures on it. In an agricultural area, many things other than structures can count as improvements--drainage, stone removal, fertilization, leveling, etc. It might be hard to find agricultural land that had no such improvements. Thus in agricultural areas, one must subtract something from observed payments for the use of land, to account for the value that is being paid for such improvements.

Improving Efficiency and Preventing Exploitation in Taxing and Spending Decisions

The third position, which might be called "geoliberalism" emerges from the work of Henry George. This is the position that all persons have equal rights to natural opportunities, which rights should be secured by having the public treasury collect the rental value of exclusive access to land and other natural opportunities, with the revenue used for public purposes and guaranteed incomes.

Of these three approaches, I find geoliberalism most attractive. It fits my sense of justice that all persons should have equal rights to natural opportunities. In addition, by providing funding for guaranteed incomes, geoliberalism offers a greater prospect for removing more of the distorting taxes that finance the welfare state. ...

In collecting the rental value of land, governments will collect enough to pay for any worthwhile local public goods that they provide.

Under the conservative or homesteading libertarian versions of classical liberalism, the possessor of land might say, "This is my land. I didn't ask for these public goods. You have no right to tax me to pay for them." Under geoliberalism, on the other hand, the community can reply, "You have as much right to the use of land and other natural opportunities as anyone else. If you want to exercise your rights in this community, these are the taxes you must pay. If you don't like it, claim your share of natural opportunities somewhere else."

If people are perfectly mobile and have an unlimited range of communities to choose among, then they cannot be exploited and need not tolerate inefficiency. They will move. Competing communities will find that the utility-maximizing public sector equilibrium involves providing all local public goods with benefits greater than costs, financing them by a combination of fees equal to marginal costs and taxes on the land that benefits from differential access to the local public goods. There will be no taxes on labor or capital except to internalize externalities. ...

Of course, we are very far from public acceptance of geoliberal principles. So the question arises of what might be done within current political understandings to reduce inefficiency and exploitation in taxing and spending. It is hard to know how much more than what is being done might be done. Let me be on the imaginative side.

There is a proposal that tax increases be allowed only with a two-thirds majority of both houses of Congress. That has some merit, but it carries a risk of excessive deficits. It also allows the existing level of taxation to go unquestioned. It would probably be better to have a rule that every spending proposal must be approved by a two-thirds majority of both houses of Congress to be enacted. Maybe three-fourths. If spending is truly worthwhile, then, as Wicksell said, there is a way of financing it that will secure the approval of nearly everyone. ...

The current trend toward returning functions to the states is a step in the right direction. But it encounters understandable objections that poor states cannot afford to do what they ought to do. Some form of revenue sharing is needed. But it is important to have the right definition of which states are rich and which are poor. The level of well-being in a state is determined in part by the wisdom of its public policies. States should not be penalized for adopting productive policies. Revenue sharing should equalize per capita levels of natural opportunities (mineral revenues, fishing rights, pre-development land rents, etc.) Replacing the personal and corporate income taxes with either a flat income tax or a national sales or value added tax would greatly reduce the excess burden of federal taxes. (Excess burden is roughly proportional to the square of the typical marginal tax rate.) But almost all the gains go to the rich. Perhaps the flat tax could be combined with a guaranteed income.

Even better than a flat tax or a national sales tax, in my view, would be a return to the revenue system that was apparently envisioned by the drafters of the Constitution in 1787. I mean a rule that the federal revenue requirement would be allocated to the states in proportion to their populations. The use of population as the allocation device seems anachronistic in this era of concern for impoverished regions. But the allocation could be corrected by an expenditure that equalized per capita access to natural opportunities.

I see three important virtues in allocating the revenue obligation to the states.

With only fifty states and each state aware of exactly how much each spending proposal will cost its treasury, I believe that it would be much harder to secure approval for inefficient or special-interest spending..  Read the whole article

Land Taxation and Efficient Land Speculation

The optimal timing of development is an important allocative function that can be either enhanced or degraded by the impact of land taxes on land speculation. This paper discusses four types of taxes on land:

• taxes on the rental value of land,
• taxes on the sale value of land,
• taxes on realized income from land, and
• taxes on realized gains from the sale of land.

The Political Economy of Moral Evolution

The paper begins with a discussion of the nature of moral truth, its relation to scientific truth, and the way in which moral knowledge grows. Next discussed is the difficulty of translating moral knowledge into social institutions, arising from the inevitability and impropriety of judging one's own cause. Ackerman's "neutral dialogue" is endorsed as the most acceptable way of dealing with this difficulty. But I suggest that in dialogues regarding the requirements of justice there should be an understanding that one possible outcome of the dialogue is failure to agree on mutually acceptable conditions for being part of the same society, leading to a parting of the ways. The conditions under which such a parting would occur constitute the most fundamental question of justice. I suggest that Ackerman's proposed condition of equal sharing of the providence of nature (Ackerman's initial manna) among all generations constitutes an appropriate basis for parting if agreement should be impossible.

I argue that such an understanding of the possibility of secession would provide a better framework for the growth of moral knowledge than when the politically successful are able to preclude experiments with alternative conceptions of justice. It would also reduce opportunities for the politically adroit to exploit the less adroit. If competition among societies for citizens resulted from the possibility of secession, the competitive equilibrium would include land value taxation.   ...  Read the whole article

The Structure of an Inquiry into the Attractiveness of A Social Order Inspired by the Ideas of Henry George
 I. Ethical Principles
II. Ethical Questions
III. Efficiency Questions


Coercion Decision Tree


Tideman was among a group of Georgists who provided recommendations to the former Soviet Union for how they might best move to a market economy.  Here are some of the articles related to that opportunity:

Using Tax Policy to Promote Urban Growth

Market-Based Systems for Assigning Rental Value to Land

I. Introduction II. Renting Land One Year at a Time III. Defining "The Rent of Land" IV. Consequences of Foreseeable Increases in Rental Value V. Relaxing the Assumption of Identical Sites VI. Summary of the System Involving Actual Delivery of Land VII. A System Based on Options to Use Land

VIII. Mathematical Analysis of a Bidder's Calculations IX. Relaxing the Assumption of Uniform Rent in the Options System X. Operating the System Involving Options to Use Land XI. Using Land Rent Information to Manage Externalities XII. Extensions to Other State-Allocated Privileges XIII. Precedents in Existing Institutions Endnotes References

Private Possession as an Alternative to Rental and Private Ownership for Agricultural Land