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Gini
and Lorenz
Mason Gaffney: Full Employment, Growth And Progress On A Small Planet: Relieving Poverty While Healing The Earth Georgists have focused on urban
land, stressing its stupendous
value p.s.f., and also its high value per capita. Some have favored
ignoring rural areas completely, to placate the rural vote, and the
putative empathy of urban Americans with their rural roots, and the
supposed rural preservation of old cultural values. If those notions
ever had merit, they do not today. George himself did not think they
had merit in his day, either: his first book, Our Land and Land
Policy (1871) went into great detail about the villainies
(his word) involved in monopolizing rural land from the public
domain. He demolished economist Francis A. Walker while exposing how
Walker’s direction of the U.S. Census concealed the concentrated
ownership of rural land – an early example of “How to Lie
with Statistics.” In the process,
George invented what today is
called the Lorenz Curve, and influenced the U.S. Census to begin
arranging data in a template geared to that curve, and to report on
land separate from buildings (which it did until 1940).Read
the whole article
Mason Gaffney: The Property Tax is a Progressive Tax Mason Gaffney: The Relationship Between Property Taxation and the Concentration of Farm Land Ownership Real
wage rates, meanwhile since 1955, have not risen as fast as
real land prices, and they haven't risen at all since 1975. This
has
raised the labor-price of land (the number of days/years a person must
work at the average wage
rate in order to raise the price of a farm.) Coupling this with
rising acres per farm, the
labor-price of a farm roughly tripled, from about 6 years' wages
(before payroll deductions) in 1954 to about 17 years' wages in 1987.
That, of course, doesn't mean you could buy a farm in 17 years, unless
you didn't eat
anything and saved every penny of your wages to buy a farm.
That is the mean size. At the same time, concentration of ownership was rising. That was the subject Henry George and Francis Walker debated way back in the 1880s. In the process Henry George invented something, later to be known as the "Lorenz Curve" - academicians are not generous about crediting Henry George with his various contributions to the discipline of political economy. Basically this Lorenz Curve is a way of measuring concentration by answering the question, what fraction of all the land is owned by the top ten percent. The curve extends from zero up to 100 percent. This curve has been reduced to a single figure, called the Gini Ratio, which is a measure of concentration which varies between zero and one. At zero, everyone has the same amount; at one, one person has it all. In 1900 the Census Bureau began publishing farm data ranked by acres per farm. Using those data, the Gini Ratio was .58 in 1900. By 1930 the GR had gotten up only to .63. This, remember, was the peak year of property taxes, before the property tax started waning. The GR began to rise faster, and by 1950 it was up to .70. It plateaued there for 15 years and then rose again to .76 by 1987. That is a high degree of concentration. (By comparison, GRs for personal income are much lower, about .40, and are much more stable over decades.) The accelerated rise since 1930 coincided with the rise of mean acres per farm, and both followed the fall of property tax rates. The Gini Ratio has been criticized because it deals only with the concentration among existing farms, and doesn't take into account all of the former farmers who left the business. To adjust for this, we can simply add them to the distribution of the farms as farmers with zero land. There are 4-1/2 million farms that died between 1935 and 1988. If you add in the farmers with zero acres of land to the lowest bracket, that raises GR for 1988 from .76 to .92, a radical rise of inequality since 1930 (.63). But calculating the ratio this way gives you a better sense of how concentration has shot up during and since the Great Depression. In the Great Depression (1930-1941), six million farms provided a refuge for the urban jobless and homeless. Today, that refuge is closed.
Land in farms of 1,000 acres and
over actually dropped
(nationally) by 15 percent from 1900 to 1910, the only drop on
record. Now, however, 34 percent of all irrigated land is in the top
bracket, farms of 2,000 acres and
over. Control of irrigated land means control over water. Control of
water gives control over arid lands roundabout. Ownership and control
based on water have become
highly concentrated. For farms with
irrigated land, the Gini Ratio is
.82, substantially higher than the GR of .76 for all farms.
Mason Gaffney: Rising
Inequality and Falling Property Tax RatesFrom 1930-87, the fraction of all farm acres in units of 1,000 acres and over rose from 28% of the total to 62% of the total. That is a rise of 123% over the 1930 base. That rise in degree of concentration is impressive, all by itself. At the same time, however, the mean value per acre in the largest spreads was rising much faster than that of other farms. In result, the value of the real estate (land and buildings) in these giant spreads rose from 8% of the total in 1930 to 38% of the total in 1987. That is a rise of 375% over the 1930 base. The second thing that makes the trivialization humbug is a statistical principle called "regression fallacy." Many people, otherwise bright, are thicker than mud when it comes to picking up on this principle, so there must be some mental block built into the culture. Once you see this "cat," however, it's pretty simple and straightforward. It says that the degree of concentration you find in any distribution depends on what you choose as the ranking variable. If you want to compare the concentration of value with the concentration of acreage, you can't rank the farms by acreage and then take the top bracket and ask what the value is. You have got to re-rank them by value, and these are entirely different rankings with an entirely different collection of farms in the top bracket, and naturally these are more valuable farms. This reranking, farm by farm, is almost impossible to do from published census data, which come in large groups. But I managed to do it with some other series, and I can vouch for the fact that if you do rewrite the data by value, you get a higher - not a lower - degree of concentration in terms of value than in terms of acreage. So, for those two reasons, concentration of land ownership is not only high but it has risen at a very rapid rate. Read the whole article Vanishing Farmers
and Unaffordable Farms
The Vanishing Middle Class; Gini Ratio The Rise of Land Quality in Vast Farms Rising Land Share and Rising Ratio of Price to Cash Flow THE LESSER IMPROVEMENT OF BIGGER FARMS National Data Concentration of irrigated land Land Concentration for Farms Ranked by Sales Lack of buildings on latifundia Lack of family labor on latifundia Comparisons Among States Lesser Improvement of Land in States with Larger Farms Urban Influence Association of Property Taxation and Land Improvement CONCLUSION It is a common belief that property tax relief is "good for farmers." It certainly raises the private share of economic rent. That in turn raises the investment grade of farmland and encourages its purchase as a store of value, a place to park slack money. This may be at odds, however, with using it as a vehicle for enterprise and an outlet for workmanship. Lower farm property taxes are associated with lower ratios of capital to land, and labor to land, both over time and among states. They are also associated with bigger mean farm size and less equal distribution of farm sizes. In the sections that follow, I first document the rise of inequality in the distribution of farmland that followed a sharp drop in farm property tax rates after 1930. Then I show, by cross-sectional analysis, a positive relationship between higher property tax rates and more intensive use of farmland, which in turn is associated with more equal distribution of farmland. Conversely, I find property tax relief associated with underuse and underimprovement of land. A priori, a tax on
buildings works to suppress building and
to penalize smaller farmers, whose building to land ratio is higher
than that of bigger farmers. The findings seem to show, therefore, a
stronger countereffect, proincentive and pro-subdivision, of the
other part of the property tax, the part based on land value.
... Now, however, 34 percent of all irrigated land is in the top bracket, farms of 2,000 acres and over. (10) Control of irrigated land means control over water. Control of water gives control over arid lands roundabout. Ownership and control based on water have become highly concentrated. For farms with irrigated land, GR = .82, (11) substantially higher than the GR of .76 for all farms. ... To sum up,
The combination means the agricultural ladder has been pulled up. Entry is nearly impossible for farmers lacking outside finance; exit and latifundiazation proceed apace. These changes accompanied and followed a 40 percent drop in farm property tax rates. ... THE LESSER IMPROVEMENT OF BIGGER FARMS A result of rising concentration is the separation of land from capital. With some exaggeration, American latifundia are now lands without buildings, but buildings cluster on smaller farms, many without enough land. This implies at least three points.
It is awkward that the 1987
Census of Agriculture defines "farm
size," and ranks farms, only by acres rather than value. ...
Concentration of irrigated land The yield per acre of most crops stays level or rises with harvested acres per farm. At the same time, sales per dollar of real estate fall somewhat. (21) The most likely reason is that the quality of harvested land rises with quantity. There is, to be sure, a trade-off between quality and quantity, but there is also a bond. Whoever can afford more can afford better. Which effect is stronger? The question must be resolved by data. ... Comparing different crops,
high values of GR go with crops
that are mostly irrigated. For example, 85 percent of tomato
acres and 14 percent of silage corn are irrigated. For tomatoes, GR =
.91; for silage corn, GR = .52.
(26)
(26) Those who find GR
index numbers too abstract will find more meaning in these raw data.
For tomatoes, the top acreage bracket contains 1.1 percent of the
farms, 45 percent of the harvested acres, and 52 percent of the
irrigated acres in tomatoes. For silage corn, the top bracket contains
1.0 percent of the farms, 11.3 percent of the harvested acres, and 26
percent of the irrigated acres in silage corn. ...
Lack of buildings on latifundia The 1940 Census of Agriculture was the last to separate $L from $B, overall. In 1940 the building share of real estate value ($B/[$L+B], or BSREV) was .69 in the lowest acreage bracket, .31 for all farms, and .12 for farms of 1,000 acres and over. (36) (36) 1940 Census of Agriculture, Vol. 3:80. An earlier insightful article on the subject is D. Weeks, "Factors Affecting Selling Prices of Land in the 11th Federal Farm Loan District," Hilgardia 3, no. 17 (1929):459-542. AELOS (1988) gives no comparable comprehensive data, but it does give two series that test the point and have the advantage of disaggregation. One is for "owner-operators" and one for "landlords with debt." For the owner-operators, ranked by acres per farm, BSREV was .63 for farms under 10 acres; .29 for all farms; and .12 for farms of 2,000 acres and over. (37) Building values are much more equally distributed among these farms than land values. ... The inverse relationship
between PTR and GR is particularly
consistent and noteworthy. ...
CONCLUSION One may at least firmly conclude that large farm units are less improved and less peopled than small and medium-sized farms. There are two possible interpretations. One is that big farms are more efficient, getting more from less, but that is refuted by their getting less output per $L. The other is that Veblen was right, many of them are oversized stores of value, held first to park slack money and only secondly to produce food and fiber, and complement the owner's workmanship. The Florida 9 [the high LSREV states] may represent a home grown rural "third world" of large, underutilized landholdings that preempt the best land and force median farmers onto small farms on low-grade land. The issue cannot be settled in a
few words, but the implications
for tax policy are the same either way. If large units are more
efficient, they can bear heavier taxes. If they are less efficient,
heavier PTRs will induce them to release surplus land for others,
which will tend at the margins to equalize factor proportions, moving
more states from the Florida toward the Wisconsin model. Read
the whole article
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