Jeff Smith: Sharing
Natural Rents to Sustain Human Society
To get rich, or more likely to
stay rich, some of us can develop
land, especially sprawling shopping centers, and extract resources,
especially oil. While sprawl and oil depletion are not necessary,
they are more profitable than a car-free functionally integrated
Scity. Under the current rules of doing business, waste returns more
than efficiency. We let a few privatize rent -- ground rent and
resource rent -- although rent is a social surplus. As if rent were
not profit enough, winners of rent have also won further state favors
-- tax breaks, liability limits, subsidies, and a host of others
designed to impel growth (20 major ones follow herein).
If we are to sustain our selves,
our civilization, and our
eco-system, we must make some hard choices about property. What we
decide to do with rent, whether we let it reward our exploiting or
our attaining eco-librium, matters. Imagine society waking up
public nature of rent. Then it would collect and share its surplus
that manifests as the market value of sites, resources, the spectrum,
and government-granted privileges. Then we could forego taxing labor
and capital. On such a level playing field, this freed market would
favor efficiency -- the compact city -- not waste -- the mall and
Drawing their cue from the
public, governments tolerate
"rentention", the private retention of publicly-generated land
values. Lacking this Rent, states turn to taxes. But to grow the
economy, all governments -- left, right, or undecided -- hustle to
stimulate development; they cut taxes and slop subsidies. Going
beyond the call of duty, the state excuses producers' their routine
pollution and limit liability, thereby cutting the cost of insurance.
Companies that don't impose on nature, worker, or customer are not
benefited at all but lose a competitive advantage. On this tilted
playing field, one with the lumps of subsidies and the tilts of
taxes, technologies lean and clean have a hard time competing as
suppliers of materials, homes, food, rides, and energy. ...
Noticing rent, realizing its
social nature, accepting that it's to
be shared, and understanding that wages and interest should not be
expropriated, for most people that's a new way of thinking. Thinking
such thoughts leads to a new way of conceiving economics, too.
Ecological economics becomes not just a branch of economics but a
whole new discipline, needing a new name. In geonomics we maintain
the distinction between items bearing exchange value that come into
being by human effort - wealth - and those that don't - land. Keeping
this distinction in the forefront makes it obvious and
non-controversial that speculating in land drives sprawl, that
hoarding land retards Third World development, that borrowing to buy
land plus buildings engorges banks, that so-called "interest" is
quasi-rent, that the cost of land inflates faster than the price of
produced goods and services, that over half of corporate profit, says
the Urban Land Institute, is from real estate.
Summing up these analyses, geonomists offer a Grand Unifying
Theory, that the flow of rent pulls all other indicators in its wake.
Geonomics differs from economics as chemistry from alchemy, as
astronomy from astrology. The acid test of any science is prediction,
a test that economics fails and geonomics passes. Plugging in the
land price cycle of 17+ years lets geonomists crank out predictions
more accurate than those generated by "the experts" who missed,
example, the collapse of mighty Japan. When the land of the Rising
Sun was on the market for four times the assessed value of all
America, that's when a few geonomists, like voices in the wilderness,
countered conventional wisdom by proclaiming that the Japanese boom
would bust. According to these geonomic prognosticators, don't expect
America's next downturn for at least another five years, despite the
tech wreck or any other stock market fluctuations. ...
To sustain that which we love, we
must transform our relationships
to nature, to government, and to each other. We need to become
geonomists in worldview, theory, discipline, and policy. Geonomics
creates an economy that's not at war with but aligned with the
natural world.... Read the whole article
Weld Carter: A Clarion Call to Sanity,
to Honesty, to Justice
... In 1933, the University of Chicago published a book by Homer
Hoyt entitled One
Hundred Years of Land Values in Chicago. This monumental study
consists in 7 chapters, of which each of the first five describes one
of the five major business cycles of the period in great detail.
What was so outstanding about Hoyt's book was its compelling confirmation
of George's analysis, some thirty-five years after George's death in 1897!
What is even more significant is Hoyt's handling of his data in chapters six
and seven, the balance of the study. In these two chapters, he selects some
sixteen events which not only are present in each cycle, but which occur in
the same order in each cycle.
Mr. Hoyt concluded with the usual caveat: that the mere fact that this sequence
is observed this many times does not guarantee that it will ever happen again;
which is to say that we can never prove truth, we can only fail to disprove
rendition of one such cycle appearing below was devised by John
Monroe, the Director of the Commerce and Industry Division of the Chicago
Henry George School of Social Science. For classroom use, Mr. Monroe had
set up a
large magnetized blackboard with a large inverted "U"; the sixteen items
of the figure were described on sixteen magnetized chips, which were shuffled
and distributed along the participants. The author once had a class of five
company presidents; after defining the task, he never spoke during the exercise.
The individual members had sole control as to the place on the curve where
each chip belonged. It was thrilling to see and hear the discussion and the
ultimate positioning of the individual chips. At completion, they matched
the historically-based results of Hoyt. Five converts, one of whom had been
the President both of Chicago's Real Estate Board and of its Building Managers
Association, as well as a trustee of the University of Chicago, walked out
of that session.
A Case History of Five Major Booms and Busts 1830-1933
1. Machine techniques, production methods improved
2. Population begins to spurt up
3. Shortage of housing, office & commercial space first felt
4. Rents begin to rise.
5. Selling prices of old buildings begin to advance
6. Vacant lot purchases begin to rise
7. Rate of new construction begins to rise sharply
8. Credit eases to stimulate volume of new building
9. Rapid growth of population projected far into the future
10. Prices of tracts near settled areas advance rapidly to peak.
11. Large tracts subdivided beyond needs of immediate development
12. Lavish public expenditures
13. Rate of population growth falls off
14. Vacancies reappear
15. Rise in rents slackens
16. Volume of building construction at peak.
17. Asking prices of land advance in face of fewer land sales
18. Financial institutions continue loans on peak values in face of lessened
19. Holders of 2nd mortgages begin to foreclose with faith in 1st mortgages
20. Stock market crash
21. Unemployment mounts to peak; wages down
22. Increased movement of population to small city or farm; doubling
up in city
23. Vacancies mount to peak in houses, apartments, offices, stores; industrial
24. Interest charges high in proportion to net rents
25. Taxes high in proportion to net rents
26. Second mortgage holders wiped out in flood of first mortgage foreclosures
27. Bank failures mount; loaded with real-estate "frozen assets."
28. Volume of new building at bottom
29. Subdividing stopped; most vacant land not salable at any price
30. Construction costs at lowest point
source: Homer Hoyt: One
Hundred Years of Land Values in Chicago, Copyright University of
Chicago Press, 1933
There are banks which have gone under supporting
rising land prices, loaning money on land at speculative price levels. The answer is not to rescue those banks;
it is to rid ourselves of the fundamental process of speculation in land values.
The wringing out of land speculation from the dynamics of economics will remove
that unacknowledged offence which has so labored the economic profession and
the public at large. As Henry George discovered and as Homer Hoyt so brilliantly
depicted speculative land prices as the cause of this bitter cycle, so will
its removal rid society of this hitherto hidden defect. It will put the land
market on a current value basis and eliminate the terrible risks to which that
market has always been subject in the past.
The reason for such speculation under the present practices is obvious. All
products of labor are subject to increases or decreases depending on supply
and demand. When an oversupply of any commodity begins to rear its ugly head,
prices tend downward and production is thereby lessened until there is a contrary
swing upward. Land, on the other hand, is of fixed supply. Nothing man does
can increase or decrease the amount of land, and therefore that brake that
operates in the field of production does not apply to land values and prices.
Just think of the social benefits that would accrue to a society that could,
at a stroke, rid itself of the potential hazards to which all prior societies
have been so subject. Production will then occur on a steadily rising level,
demand increases as the well-being of society improves, new techniques develop,
new inventions are made, and all these will be benefits to the community as
a whole, and not just to the land-owners as in the past.
Back in the early days of this century, Winston Churchill saw and recorded
an example of this. ... read the whole article