Wealth and Want
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"Don't you know that if people could bottle the air they would? Don't you know that there would be an American Air-Bottling Association? And don't you know they would allow thousands and millions to die if they could not pay for air? I am not blaming anybody. I am just telling how it is."
- Robert Ingersoll, "A Lay Sermon" (1886)

If we are all equal, does anyone have a right to put into the environment more than their per-capita share of the pollution load the environment can carry?  Do corporations, not being persons, have the right to pollute?  How do we reconcile conflicting rights?

Henry George: The Great Debate: Single Tax vs Social Democracy  (1889)
It is perfectly clear that we are all here with equal rights to the use of the universe. We are all here equally entitled to the use of land.   ... Read the entire article

Robert G. Ingersoll: A Lay Sermon (1886)
No man should be allowed to own any land that he does not use. Everybody knows that -- I do not care whether he has thousands or millions. I have owned a great deal of land, but I know just as well as I know I am living that I should not be allowed to have it unless I use it. And why? Don't you know that if people could bottle the air, they would? Don't you know that there would be an American Air-bottling Association? And don't you know that they would allow thousands and millions to die for want of breath, if they could not pay for air? I am not blaming anybody. I am just telling how it is. Now, the land belongs to the children of Nature. Nature invites into this world every babe that is born. And what would you think of me, for instance, tonight, if I had invited you here -- nobody had charged you anything, but you had been invited -- and when you got here you had found one man pretending to occupy a hundred seats, another fifty, and another seventy-five, and thereupon you were compelled to stand up -- what would you think of the invitation? It seems to me that every child of Nature is entitled to his share of the land, and that he should not be compelled to beg the privilege to work the soil, of a babe that happened to be born before him. And why do I say this? Because it is not to our interest to have a few landlords and millions of tenants.  ... read the whole article

Mason Gaffney: Bottling the Air
Times have caught up with Ingersoll. Ronald Coase, prominent Chicago economist, says polluters (whom he calls emitters, to avoid bias) have as much right to emit as victims (he says receptors) have to breathe clean air. It doesn’t matter, says Coase, how we assign property rights originally: as long as property is firm, the market will sort it all out. However, since emitters have invested in costly facilities, and property is sacred... you see whither this unbiased science is tending.

Was he laughed to scorn? Au contraire, he was raised on the shoulders of his adulatory peers and anointed a demi-god (which tells you something about his peers). Having risen on wings of theory the idea found its way into practice, and today The South Coast Air Quality Management District awards "offset rights" to those with worthy track records of emitting. New emitters must buy "property rights" from old ones.  ... read the whole article

Ted Gwartney:  Estimating Land Values
Land value can be thought of as the relationship between a desired location and a potential user. The ingredients that constitute land value are utility, scarcity and desirability. These factors must all be present for land to have value.

Land that lacks utility and scarcity also lacks value, since utility arouses desire for use and has the power to give satisfaction. The air we breathe has utility and is generally considered important, since it sustains and nourishes life. However, in the economic sense, air is not valuable because it hasn't been appropriated and there is enough for everyone. Thus there is no scarcity -- at least at the moment. This may not be true in the future, however, as knowledge of air pollution and its effect on human health make people aware that clean and breathable air may become scarce and subsequently valuable.

By themselves, utility and scarcity confer no value on land. User desire backed up by the ability to pay value must also exist in order to constitute effective demand. The potential user must be able to participate in the market to satisfy their desire.... Read the whole article

Nic Tideman: Basic Principles of Geonomics
The other just and efficient sources of public revenue involve payments for activities that impose costs on others. In this category are fines for causing pollution or engaging in other activities that reduce the rental value of surrounding land, charges for driving on crowded streets, and fees for public services, determined by the costs of providing those services, including the costs of congestion and delays experienced by other customers. ...  Read the whole article

Nic Tideman:   The Case for Taxing Land
I.  Taxing Land as Ethics and Efficiency
II.  What is Land?
III.  The simple efficiency argument for taxing land
IV.  Taxing Land is Better Than Neutral
V.  Measuring the Economic Gains from Shifting Taxes to Land
VI. The Ethical Case for Taxing Land
VII. Answer to Arguments against Taxing Land

There is a case for taxing land based on ethical principles and a case for taxing land based on efficiency principles.  As a matter of logic, these two cases are separate.  Ethical conclusions follow from ethical premises and efficiency conclusions from efficiency principles.  However, it is natural for human minds to conflate the two cases.  It is easier to believe that something is good if one knows that it is efficient, and it is easier to see that something is efficient if one believes that it is good.  Therefore it is important for a discussion of land taxation to address both question of efficiency and questions of ethics.

This monograph will first address the efficiency case for taxing land, because that is the less controversial case.  The efficiency case for taxing land has two main parts. ...

To estimate the magnitudes of the impacts that additional taxes on land would have on an economy, one must have a model of the economy.  I report on estimates of the magnitudes of impacts on the U.S. economy of shifting taxes to land, based on a mathematical model that is outlined in the Appendix.

The ethical case for taxing land is based on two ethical premises:  ...

The ethical case for taxing land ends with a discussion of the reasons why recognition of the equal rights of all to land may be essential for world peace.

After developing the efficiency argument and the ethical argument for taxing land, I consider a variety of counter-arguments that have been offered against taxing land.  For a given level of other taxes, a rise in the rate at which land is taxed causes a fall in the selling price of land.  It is sometimes argued that only modest taxes on land are therefore feasible, because as the rate of taxation on land increases and the selling price of land falls, market transactions become increasingly less reliable as indicators of the value of land.   ...

Another basis on which it is argued that greatly increased taxes on land are infeasible is that if land values were to fall precipitously, the financial system would collapse.   ...

Apart from questions of feasibility, it is sometimes argued that erosion of land values from taxing land would harm economic efficiency, because it would reduce opportunities for entrepreneurs to use land as collateral for loans to finance their ideas.  ...
Another ethical argument that is made against taxing land is that the return to unusual ability is “rent” just as the return to land is rent.  ...

But before developing any of these arguments, I must discuss what land is. ...

Taxing Land is Better Than Neutral

The analysis above explained how a tax on land can be ‘neutral’, that is, how such a tax can have no excess burden.  In fact, taxing land is better than neutral; it improves economic efficiency compared to the no-tax situation.  This section explains how.

First, a land tax can be used to take account of positive and negative externalities associated with land use.  The typical example of a negative externality is pollution.  If labor and capital were perfectly mobile, then the effect of pollution on near-by locations would be reflected entirely in land values.  Thus one might say that a polluter ‘uses’ surrounding land and should pay for that use in the form of a ‘land tax’ equal to the reduction in the rental value of land that results from his activities.  Such a land tax would not only raise govern­ment revenue, but would also improve efficiency by ensuring that people would engage in activities that pro­duced pollution only when the benefits of those activities exceeded the costs.

Because labor and capital are not perfectly mobile, pollution affects not only land values, but also the value of structures and the net well-being that people experience from the opportunity to continue to live in accustomed places.  Efficient management of pollution would charge polluters for these costs as well.

When there is traffic congestion on city streets or on highways, bridges, or tunnels, one might say that there is a problem caused by people not being charged adequately for the use of particu­larly valuable space.  If there is a congestion charge (land tax) that reflects the extent to which any one user of streets and highways imposes costs on others users in the form of increased travel times, then that congestion charge improves efficiency while also raising government revenue.  ...  Read the whole article
Fred Foldvary:  The Rent, the Whole Rent, and Nothing but the Rent
The use of rent for public revenues therefore has no excess burden, no burden on society or the economy. Taxes on income, goods, and transactions do have an excess burden, since by raising the price and reducing the quantity of goods, resources do not get allocated to where the people most want them. Taxes on labor and goods raise prices, while rent-based payments do not affect the rent, and they lower the price of land rather than raise it.

Rent is therefore the ideal source of general public and community revenue. Tax reform should therefore shift to rent as the primary source of general funds. Pollution charges can supplement the rent, and indeed can be considered a rental charge for using and abusing the atmosphere, land, soil, and other forms of land. There could also be user fees for services specific to users, fines for violating traffic rules, and profits from enterprises.

The economic rent from minerals, water, and oil would be natural resource royalties that could be paid by bidding for the rights to extract, from payments based on the amount of mining, and the profits from the operations, depending on the circumstances.... Read the whole article

Nic Tideman:  Applications of Land Value Taxation to Problems of Environmental Protection, Congestion, Efficient Resource Use, Population, and Economic Growth
The first problem of environmental protection is management of the harm that is caused to nearby areas by the discharge of pollutants into air and water. In the U.S. this problem is often managed by quantitative controls. Historic polluters are allowed to continue to pollute at reduced levels, and potential new polluters are restricted even further or prevented from polluting entirely.

A system of quantitative controls can be efficient if the overall level of control is appropriate and permission to pollute is completely transferable. But these conditions are rarely met. It is particularly difficult to know the optimal level of pollution control when the costs of pollution are continuous, upward sloping and not catastrophic. And systems of quantitative controls almost always lack fairness. They grant permanent privileges to those who have a history of having caused harm. If a system of quantitative controls provided that pollution rights would be auctioned, and all the proceeds would be collected publicly, then it would be in accord with a principle that all persons have equal rights to natural opportunities. But there would still be the difficulty of determining the right number of permits to sell.

A system of managing the harm from pollution is most likely to be both efficient and fair if it is conceived in terms of taking account of effects of pollution on land values. Pollution can also affect the value of structures, but these effects are harder to quantify, because they operate somewhat differently on each structure. Furthermore, pollution can raise as well as lower the value of structures. An old structure that would be ready to be demolished in a clean environment can have continuing economic value in a polluted environment. Pollution can also have effects on the utility of individuals apart from its effects on the value of land and structures. If person A is harmed by pollution more than person B, who would move in if person A moved out, but person A does not move because of the costs of moving, then the difference between the costs of pollution to persons A and B is a pollution cost that is not reflected in the value of land and structures. Nevertheless, measuring the cost of pollution by its effects on land values is a good first approximation.

To manage pollution efficiently and fairly, one would estimate the effects on land values of various levels of pollution and derive a "supply schedule" of pollution based on the marginal cost of pollution at different levels of pollution. One would then ask polluters how much polluting they would want to do at different prices of pollution. As long as there were more than a handful of polluters, their incentives to report anything other than their true marginal valuations of pollution rights would be inconsequentially small. Thus one could aggregate the responses into an aggregate demand schedule for pollution rights and use the intersection of the supply and demand schedules to determine simultaneously the efficient quantity of pollution and the price that would achieve the efficient quantity. The payments that individuals made could be construed as payments for appropriating for themselves land rent that was everyone's common heritage.

Pollution sometimes crosses international borders, as when sulfur dioxide from coal-fired electricity generating plants in the U.S. Midwest crosses into Canada. While there are unresolved scientific issues regarding the amount of harm that such international pollution causes, the economic question of what should be done when the magnitude of damage is know is straightforward. When one country sends pollution to another, the resulting decrease in the value of land in the second country represents an increase in the proportion of natural opportunities that the first country is appropriating. The polluting nation owes corresponding compensation.

Without a theory of equal rights to natural opportunities, one could argue that international pollution could be controlled just as well by identifying the optimal quantity and limiting emissions to that level. A theory of equal rights to natural opportunities does not permit such privilege for polluters.

When the area affected by a pollutant is very large, as with the gasses that exacerbate the ozone hole, measuring damage by changes in land values becomes less attractive. Changes in land value are a suitable measure of damages when the choices that people make between land that is affected and unaffected permit the market to reflect the damages. But if all of Australia is affected by the ozone hole, then the damage that the ozone hole does to Australia would be measured by land values only if it affected migration between Australia and the rest of the world. Such effects happen slowly, and their consequences for land values are difficult if not impossible to measure.

Nevertheless, one can apply the principle that natural opportunities are everyone's common heritage. No one has a right to a disproportionate share of the opportunity to emit the gasses that increase the ozone hole. We should seek to identify the marginal cost schedule of emissions of these gasses, and charge a fee that equate the marginal cost and marginal benefit of emissions. All persons in the world should share equally in the proceeds of such fees, after nations such as Australia that bear a disproportionate burden have been compensated for their costs.

With CO2 and other greenhouse gasses, the issue is yet different. Particularly cold areas may benefit from the global warming caused by greenhouse gasses, and no area of planet is immune from the effects of global warming. Still, the principle of equal rights to natural opportunities can be applied. All people have equal rights to emit greenhouse gasses. People have different ideas about what the right level is. The appropriate way to give expression to the idea that we all have equal rights to the environment is to use a structured democratic and market process.

Consider CO2. Start by having every nation propose a quantity of permitted emissions of CO2 per capita. Weight each nation's proposal by its population, and take the weighted median of the proposals. That is an initial entitlement that represents a majority rule equilibrium, a reasonable expression of equal rights for all. Unlike the current global climate negotiations, in this entitlement no preference is given to nations of the basis of their having a history of high emissions.

Next, ask each nation how much money it would be willing to pay for reductions in global emissions below the entitlement levels, and how much money it would regard as adequate compensation for emissions above the initial entitlement level. (These question presume that nations want lower emissions. If a nation desires extra global warming, the questions would be reversed.)

To motivate nations to respond honestly to these questions, the "demand-revealing" process would be used to charge nations for their answers. That is, each nation would pay for the cost that it imposed on other nations (or receive the benefit that it provided to other nations) by having the preferences that it had instead of the average of the preferences of other nations.

The next step is to ask each nation for an offer schedule of how much it is willing to pay for the right to emit CO2 in excess of its allocation, or how much it would regard as adequate compensation for emitting less than its allocation. The (vertical) sum of the answers to the questions about the costs that nations would experience from emissions provides a "supply schedule" of emission rights. The (horizontal) sum of the answers to the question of how much nations would pay to emit more (or accept as compensation for emitting less) provides a demand schedule for emission rights. The intersection of the two schedules specifies the efficient level of emissions and the price that will induce nations to emit the efficient amount of CO2. This is the price to be paid by nations that want to emit more than their entitlements, and received by nations that want to emit less than their entitlements. In addition, all nations pay or receive something for the net cost to other nations for their having preferences that deviate from the average of the preferences of others. These payments ensure that nations are motivated to report their costs of emissions truthfully. ... Read the entire article

Nic Tideman:  Global Economic Justice, followed by Creating Global Economic Justice
When a nation generates air and water pollution that reduces the value of land in neighboring countries, these reductions in the rental value of land become components of what the polluting nation must include in its calculation of the value of natural opportunities that it appropriates, while the recipients of pollution may make corresponding reductions in the reported totals of the natural opportunities they appropriate.

If scientists reach a consensus that emissions of greenhouse gases are harmful, then each nation should include its emissions of such gases among the natural opportunities it appropriates, valuing each emission according to the harm that additional emissions do.

When we become aware of a global problem like the ozone hole increasing as a result of atmospheric emissions of particular gases, if any of the harmful activities are continued, the nations that permit such continuations of harmful activities should include the value of the resulting harm as additional components of the natural opportunities that they appropriate.

In sum, all of the things that a nation does that limit the ability of other nations to use natural opportunities or that reduce the productivity of other nations are charges on that nation's account. This includes claiming land, claiming exclusive extra-territorial use of portions of the frequency spectrum, claiming geo-synchronous orbits, appropriating water in international rivers, appropriating fish in the oceans, appropriating rent in the form of the use of resources that are incorporated into goods, and any form of pollution with international consequences. The axiom that all persons have equal rights to natural opportunities implies that each nation has a right to a share of the total of all such appropriations equal to its share in world population. Any nation that appropriates more than its share has an obligation to compensate those who have less than average per capita shares.  ...  Read the whole article

Nic Tideman: 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?

Nic Tideman: The Case for Site Value Rating
The Social Justice of Site Value Rating
The Efficiency of Site Value Rating
How Valuations would be Made

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. ...

Site value rating embodies the principle that people are allowed to keep what they produce and must pay annually for the value of the naturally occurring and socially created resources they use. This principle can be extended to take account of individual actions that have noticeable effects on the rental value of land surrounding that which individuals use themselves. When land is used in such a way as to raise the rental value of surrounding land, as by providing parking near a commercial center or by providing improvements that are beautiful to see, the person who creates that value should receive it. Correspondingly, when people use land in such a way as to lower the value of surrounding land, by generating noise, noxious smells, air pollution, or unsightly views, they should be charged according to the reduction in the rental value of the surrounding land that results from their activity. The opportunity to be paid for adding to the value of surrounding land will generally make land more valuable. And the requirement to pay for harmful consequences of land use will tend to inhibit such uses of land. ... Read the whole article
Lindy Davies: The Top Ten Reasons Why Land is More Important than Ever
The Georgist economic proposal insists on the primary importance of land as a factor in the economy. Many people dismiss that as a quaint, agrarian notion. "Perhaps," they scoff, "land was that significant back when most people had to work the soil for a living, but modern agriculture has moved far past that! Nowadays we deal with modern issues of technology, global markets, information -- land is no longer a big deal."
10. There's no place to dump your trash for free. ...
9. Scratch a financial crisis, find a real estate bubble. ...
8. Information (like railroads) needs routes. ...
7. Cities can no longer afford to be inefficient. ...
6. Global climate change is too likely to ignore. ...
5. The loss of biological diversity cannot be reversed. ...
4. Two out of every five people lack a safe and dependable source of drinking water. ...
3. The myth of overpopulation causes cultural sickness. ...
2. We have forgotten what nations are. ...
1. "The land shall not be sold forever, for ye are strangers and sojourners with Me." ...

Mason Gaffney: Nonpoint Pollution: Tractable Solutions to Intractable Problems
The Special Challenge to Economic Thinking
The Search for Surrogates
Sources of Nonpoint Pollution
What Problems are Created?
What Problems are Unsolved by Excise Taxes on Surrogates?
The Case of Forestry
The Case of Urban Settlement
The Case of Agriculture
The Common Theme from Forest, City and Farm

All pollution is originally "nonpoint."  It only becomes "point" pollution when someone has taken the trouble of gathering it at a small orifice in order to control it, often for the benefit of others.  If we then tax point polluters while exempting nonpoint we will impair the incentive to control.  That of course is why we are conferring now, and why we are looking at taxing surrogates.   

Taxing and banning surrogates has a place, perhaps a big place in any control program.  But it may not touch many sources of nonpoint pollution.  Let's list them here; see what damage they do (next section); and then see what remains unsolved by taxing and banning surrogates.   

Major sources of nonpoint pollution are:
  • agriculture,
  • forestry,
  • mining,
  • recreation,
  • paving and rooftops,
  • roads,
  • lawns and gardens,
  • onsite industrial waste dumps, and
  • military, for a start. 
To these I would add
  • the class of moving point sources, like autos and vessels and aircraft, which have part of the elusive character of nonpoint sources.  I would add
  • septic tanks; and
  • moonlight dumpers; and
  • everything served by a storm sewer, or no sewer at all.  
"Construction" is usually added, but construction per se is innocent and should not bear the onus.  It is rather grading, the destruction that precedes construction on new lands, that denudes land and allows runoff and blowing.  Filling can be noxious, too, when it takes wetlands that otherwise help filter runoff before it hits shellfish beds and beaches.   

So nice a distinction may seem picky, but it is heavy with policy meaning.  The Sears Tower and the Empire State Building probably caused less runoff than any modern cookie-cutter subdivision.  We can have needed construction without grading and filling by renewing and infilling our cities instead of promoting more urban sprawl.  Milwaukee in the last 20 years has lost 20% of its population.  Buildings are boarded up and land lies vacant while dozers and scrapers tear up new land upstream of it.  At least one-third of Milwaukee, perhaps more, could and should be renewed forthwith, obviating much of the random lateral expansion onto new land whose runoff now causes so much grief down here.   

Within agriculture it is common to hear that tillage is the problem; the solution, evidently, is grazing.  On some lands that is true, but the generalization is not.  On other more fragile lands, grazing causes runoff.  Not for nothing are sheep called "woolly maggots," and the Arab called the father, rather than the son of the desert.  Exploitive high‑grading grazing, leaving weeds to take over the range, is another form of pollution ‑‑ biological pollution, depleting the gene pool.  As with all land problems, "where" and "when" are as important as "what."  "A place for everything, and everything in its place," the slogan of land economics, is the proper watchword.   

We sometimes hear that good organic manure is the answer.  But on feedlots, too much of a good thing becomes a nonpoint pollutant.  Cities in the upper Santa Ana River basin must provide tertiary sewage treatment, but the largest concentration of dairy cattle in the world, in the Chino basin, drains into the same waters.  Next time you visit Disneyland if the water reminds you of Wisconsin, there may be a reason.  (Chino, ironically, is in an agricultural preserve, to enhance the environment.)  These feedlots also overlie what might be one of our most usable aquifers, in a region in sorest need of water storage.   

Cities like Milwaukee are painted as victims of nonpoint pollution, but within cities the great anomaly is that the output of sanitary sewers is monitored and treated while that of storm sewers is not.  A few blocks from this meeting in downtown Milwaukee you can see coal and salt stored in the open, draining directly into the Harbor with each rain.   

In Riverside, the local scatological whimsy is "Flush your toilets, Orange County needs the water."  It relieves the local inferiority complex, but actually that water gets tertiary treatment.  It is our storm runoff that's dirty.  Some cities of course have only one set of sewers, but that creates problems of its own which Milwaukee knows well.   

In Riverside we have also poisoned many of our own water wells with toxic percolation from farm and industry wastes which, since they are inside our expansive city limits, we cannot blame on others; but which our prudent city fathers prefer not to identify too closely.    Read the entire article

Mason Gaffney: Land as a Distinctive Factor of Production
Land is reusable.  All the land we have is second-hand, most of it previously-owned.  Our descendants, in turn, will have nothing but our hand-me-downs.  As there is never any new supply, the old is recycled periodically, and will be in perpetuity, without changing form or location.  Melded briefly with fixed buildings, land survives them to go one more round of use.  Even while melded with capital, land is fit for another use at any time, unlike the capital on it.  Land retains a practicable, measurable, meaningful opportunity cost.  Land value in cities may be defined as "what is left after a good fire"; arsonists take that quite literally.  In Beverly Hills, California, "tear-downs" are routine as taste-obsolescence races through fashionable neighborhoods where the land outvalues even the elegant buildings.  These are dated after thirty years.

The opportunity cost of capital is fleeting.  Capital loses most of it the moment it is committed to a specific form, whose physical alternative use is often only as scrap.  Land's "opportunity cost" is real and viable at all times.  The scrap value of capital is often zero or negative (radioactive waste supplying an extreme example).

Land may be afflicted with such "negative capital," the harmful waste from prior usage.  An example is the spent carcass of an old building needing costly demolition.  Some would class that spent carcass as a subtraction from the site value, but "negative capital" makes more sense, as may be inferred by considering the relations between a landlord and a tenant in a perfect market.  The lease holds the tenant liable for damages he does and wastes he leaves; the prudent landlord requires of the tenant a deposit, or in larger cases a bond, to assure performance.  Both acknowledge that damage done by use is imputed to the user, not to the land.11
11. An example on a social scale is the bonding imposed on nuclear generators by the US Federal Energy Regulatory Commission (FERC).  FERC requires utility firms to set aside a percentage of their fuel budget in a sinking fund to pay for "decommissioning" plants at the end of their economic lives.

Too often, from institutional or market or human failure, the land is left damaged, with no recourse against those responsible.  Then, indeed, the damage becomes part of the land, just as some of the good relics of history may as well be considered part of the land.  Toxic wastes, and endemic parasites imported with previous crops or trees, become mixed into the dirt.  We do not trivialize nor quibble over what to call such damage: it happens, and it impairs the reuse value of land.  In such cases the site is less valuable, but still permanent and recyclable.  Such cases are, fortunately, still more the exception than the rule.  They are at most a minor qualification to the major points made here.

Physical abuse of land is less a problem, actually, than the fall of value that results from social decay.  Much of land value is a social product.  When a society sickens, declines, and self-destructs, as we know may happen, it lowers ground rents, which mirror social progress and decay.  We cannot surely forecast that our own society will not self-destruct, as parts of cities already have.  However, until it does, land will outlast capital economically.  Even when it does, landownership may remain the last bastion, as happened in the feudal system.  Even if barbarians overrun us, it is the land they will take: little else will remain. Read the whole article
Mason Gaffney:  Full Employment, Growth And Progress On A Small Planet: Relieving Poverty While Healing The Earth

Green economics. George’s paeans to compact settlement, both rural and urban, are highly compatible with the modern need to discourage invasion of wilderness areas, wetlands, etc. George would satisfy the demand for land on the lands best suited for human use, leaving most of the earth undisturbed by man. (Gaffney, 1976). If anything, he understated the high capacity of good lands to meet all human needs (Gaffney, 1999). As a son of the frontier, he overstated its virtues in some oratorical passages, anticipating Frederick J. Turner. His pioneering work on the marginal productivity theory of wage determination puts too much emphasis on the frontierish “margin of cultivation,” borrowing from Ricardo. In practise, however, George was a devoted urbanist (like Ricardo himself).

In other respects, to “green up” Georgism we need to free it from its exclusive focus on the virtues of a land tax levied in the form of a property tax (Gaffney, 1998). George himself stated his central thesis in another form: “We must make land common property.” To him, the property tax was simply the most convenient and practical tool to that end, one directly at hand.

Now, we need at least two modifications.

    • One is to recognize the occasional virtues of taxes on the extraction or withdrawal of natural resources from the earth. (Gaffney, 1967, 1977, 1981, 1982, 1983, 1998). This has become the common meaning of “green taxes.” An obvious modern case is the withdrawal of water from rivers and wells (Gaffney, 1992). Another obvious case is levying effluent charges on polluters, where that is feasible (Gaffney, 1965). This proposal harks back at least to A.C. Pigou (1928), and often bears his name.

      Obvious as may be the virtues of such green taxes, polluters have successfully rallied behind an alternative, the tradable pollution permit. This idea entered academia through J.H. Dales and Ronald Coase, who challenged the “polluter pays” principle. It entails a massive validation of pollution, making it a kind of property right, based on “ancient and honorable histories” of pollution. This is not the place to skewer it as it deserves, but obviously Georgists should help put it down.

  • A less obvious, but more challenging case is dealing with “non-point” pollution. Here, simple market-oriented policies are hard if not impossible to apply. I have to agree with a Marxist like Burkett that some problems call for systemic changes that make us think outside the box of the market and its logic. I have offered up a package of such changes elsewhere (Gaffney, 1987). Read the whole article

Mason Gaffney:  Rent, Taxation, Dissipation and Federalism
I. The issue
II. Sources of rent
III. Dissipation of rent before the fisc takes it: what and how?
A. Dissipation means waste and destruction or suppression.
B. How rent is dissipated.
C. Open access followed by tenure: rent-seeking institutions.
IV. Dissipating rent via public spending
A. Taxes and lease provisions need not twist incentives.
B. Public spending of tax proceeds may dissipate rent.
C. History of recognition of this spending effect
D. Successful compromises with the principle.
1. Barriers to immigration or sharing.
2. Selling voters on the benefits of immigration
E. Less successful compromises with the principle
1. Public works.
2. Subsidized public works in tandem with exclusionary zoning
3. Hocking the revenues
V. Solutions
A. Socialize rent at the national level.
B. Limit benefits to citizens per se (not to landowners per se).
C. A social dividend to citizens is the obvious route.
D. Return rents to local school districts in inverse proportion to local tax base per capita (the Colin Clark principle).
E. Promote James Madison and Neville Chamberlain to elder statesmen emeritus.

I. The issue

The question before us is "how can we prevent the dissipation of resource rents?"

This cuts to the heart of ancient and modern issues of land tenure, growth management, fiscal Federalism, tax methods, and spending priorities.

II. Sources of rent

I premise we understand "rent" to mean the income imputable to natural resources, and natural resources means gifts of nature, fixed and limited in quantity. We understand there are marginal resources yielding little or no rent, grading up to superior ones yielding much. We understand there is a dynamic secular tendency for rents to rise with rising population and moreso with rising disposable income per capita. There is a tendency for marginal exhaustible resources to rise in value with the depletion of superior ones that are normally used up first.

Because land is not produced, rents may be zero or less, and rise without limit. There is no competition from new production.

I premise resource rents are the joint product of three distinguishable factors:

  • nature;
  • complementary private activity; and
  • public works and services, publicly financed.

I premise rent is the most basic and general source of taxable surplus, especially in an open economy in which other input costs and product prices are set at world levels in world markets.

Triffin's epigram says "Surpluses are either competed away or imputed away." Rent is what we call it when they are imputed away. He might have added, they may also be frittered away: that is what we seek to avoid. ...

B. How rent is dissipated.
Open access, tragedy of commons. Arthur Young, Scott Gordon, Garrett Hardin, et al. Simple cases like open range, fisheries, public parks and beaches, freeways: a principle easily perceived (although not usually by undergraduates).

C. Open access followed by tenure: rent-seeking institutions.

Rent is dissipated through prematurity of investments. Squatters' Rights (Preemption Act of 1841), and residence requirement of Homestead Act (1862), traditional examples. Prior appropriation doctrine of water rights, simple example. Air routes; broadcast licenses; extending utility franchises; zoning; offset rights to pollute; other modern examples.

Offset rights to pollute are doubly effective in dissipating rent. By generating a nuisance and lowering the value of surrounding land, a polluter is rewarded by receiving a valuable vested right to continue the nuisance in perpetuity, or sell it.  Read the whole article

Mason Gaffney:  Sounding the Revenue Potential of Land: Fifteen Lost Elements
Many rents are best tappable by variable charges. “Taxes on rent” are much broader than the traditional property tax on real estate ex buildings.   We explore in this work the revenue potential of variable charges on road crowding, water withdrawals from surface and underground sources, minerals extraction, air and water pollution, spectrum use, fish catches, billboards, and so on. Some of these are major additions to land revenues. California, a major oil-producing state, does not even have a severance tax. In the fiscal crisis of 2003, with 136 or so candidates running for Governor, only one (Arianna Huffington) even mentioned it, so total is the mental blackout.

      Taxing air and water polluters by levying "effluent charges" won the favor of economists in the 1960s. Make polluters pay for preempting publicly owned air. Reaction in America later moved towards creating private property in pollution rights.

      Non-point pollution does not lend itself to effluent charges, nor to markets in pollution licenses. It calls for a variety of creative counter-measures, including but not limited to land value taxation. Read the whole article
Mason Gaffney: The Taxable Surplus of Land: Measuring, Guarding and Gathering It
1. Common Property in Land is Compatible with the Market Economy.
2. The Net Product of Land is the Taxable Surplus
A. To socialize the taxable surplus, land rent, effectively, you must define and identify it carefully, and structure your taxes to home in on it.
B. Taxable surplus is also what you can tax without driving land into the wrong use.
C. To tax rent we must be sure there is rent to tax, and we must adopt public policies to husband and maximize it, and avoid policies that lower and dissipate it.
i. Avoid "perverse subsidies."
ii. Avoid letting lessees of public land conceal their revenues.
iii. Avoid letting lessees or taxpayers pad their costs to understate their net revenues.
iv. Avoid dissipating rent by allowing open access to resources like fisheries,
v. Avoid trying to distribute rents to consumers by capping prices below the market.
D. Raising output by removing tax bias
E. Maximizing public revenue.
F. Sustaining the tax base
3. Taxing the Net Product of Land Permits Untaxing Labor
4. Taxing the Net Product of Land Permits Untaxing Capital
5. Taxing the Net Product of Land Provides Ample Public Revenues: a Master Solution to Many Problems
A. Public revenues will support the ruble.
B. Your public credit will, of course, recover to AAA rating when lenders see that there is a strong flow of revenue to pay public debts.
C. Never again need you bend to any "advice" or commands from alien lenders, nor endure patronizing, humiliating homilies from alien bankers, nor beg any foreign power for aid.
D. If you again feel the need (as I hope you will not) to rebuild your military, you will of course require strong revenues.
E. Strong national revenues are required to unite Russia, and keep it one nation.
1. Common Property in Land is Compatible with the Market Economy.
You can enjoy the benefits of a market economy without sacrificing your common rights to the land of Russia. There is no need to make a hard choice between the two. One of the great fallacies that western economists and bankers are foisting on you is that you have to give up one to enjoy the other. These counselors work through lending and granting agencies that seduce you with loans and grants to learn and accept their ideology, which they variously call Neo-Classical Economics, or "monetarism," or "liberalization." It is glitter to distract you and pave the way for aliens to acquire and control your resources. 

To keep land common while shifting to a market economy, you simply use the tax system. Taxation is the form that common property takes in a monetary, market-oriented economy. To tax is to socialize. It's then just a simple question of what you will socialize through taxation, and how; but in the answers lie success or failure.

Not only can you have both common land and free markets, you can't have one without the other. They go together, like love and marriage. You need market prices to help identify land's taxable surplus, which is the net product of land after deducting the human costs of using it. At the same time, you must support government from land revenues to have a truly free market, because otherwise you will raise taxes from production, trade, and capital formation, interfering with free markets. If you learn this second point, and act on it, you will have a much freer market than any of the OECD nations that now presume to instruct you, and that are campaigning vigorously to make all nations in the world "harmonize" their taxes to conform with their own abysmal systems.

The very people who gave us the term laissez-faire -- the slogan at the core of a free market economy -- made communizing land rents a central part of their program. These were the French economistes of the 18th Century, sometimes called "Physiocrats," who were the tutors of Adam Smith, and who inspired land reforms throughout Europe. The best-known of them were François Quesnay and A.R. Jacques Turgot, who championed land taxation. They accurately called it the "co-proprietorship of land by the state."
Since their time we have learned to measure land values, and we have broadened the meaning of "land" to comprise all natural resources. Agrarians will be relieved, and may be surprised, that farmland ranks well down the list in terms of total market value. Thus, a land tax is not primarily a tax on farms; only the very best soils in the best locations yield much taxable surplus.  ...  

Another natural resource (hence part of "land"), whose nature and value the mass of people are only slowly realizing, is the radio spectrum. In this age of communication its value is vaulting skywards even faster than the rockets launching the satellites that direct and relay signals through the spectrum. Each satellite requires a spectrum assignment, or it is nothing but space junk. One minor American entrepreneur, Craig McCaw, collected a bundle of spectrum rights for cell phones, and a few years ago sold them to AT&T for $12 billions. Then Mr. McCaw went partners with Bill Gates, perhaps the richest American, in a firm called Teledesic, to launch hundreds of satellites and amass radio spectrum rights around the entire world, including your part of the world, in the hope of dominating worldwide communications. Radio spectrum is a natural resource, and it belongs to the government, even in the capitalistic U.S.A. When Teledesic comes calling, under the auspices of our Vice President Al Gore, don't sell anything cheap! In fact, don't sell anything at all, but lease it for a limited time, so you may gain from future rises in value. And don't stint on the professional help you should hire to protect your interests: these lease contracts are complex, and are worth Billions if you play your cards right.
Hydrocarbons are a third set of valuable resources. The values involved are gigantic. The recent merger of the Exxon and Mobil oil firms was valued at $260 billions, several times greater than the Russian annual budget. Why should private parties make off with all this natural value? Several nations, including some of your neighbors, support themselves entirely from these revenues. Norway pays for a lush welfare state from its oil revenues. Its reserves are so valuable that the mere change in their appraised value in several recent years has exceeded the entire GDP of Norway. And your oil reserves? If they match your production, they may be the largest in the world.
World oil prices are down this year, as you know, but there is another side to this. The devaluation of the ruble has raised the value of your oil in Russian terms, because the oil earns "hard" currency abroad. Your government has recognized this by imposing a special tax on the resulting "windfall," but we will see below (Sections 2,C and 2,D) that there is a much more effective way to tax resource rents.
The American state of Alaska holds down its other taxes by socializing part of its oil revenues, which otherwise would inure to a handful of the major stockholders of two corporations (ARCO and BP). Alaska not only holds down other taxes, it pays each resident - man, woman, and child - a social dividend of over $1,000 per year. Go thou and do likewise. Your expert, Dmitri Lvov from the Russian Academy of Sciences, a speaker at this meeting, has written that you could cover most of your national budget from your enormous production of oil and gas.  
Many third-world nations like Venezuela or Nigeria have fabulous mineral oil that they fail to exploit for their own people, letting sophisticated or ruthless foreign corporations, in tandem with weak or corrupt insiders, reap the gains. The question for Russia is whether to follow their bad example and become a poor resource-colony of the west, or whether to assert your own sovereignty over your own resources for the benefit of your own people. You need look no further than Norway for a model.
Other subsoil resources have great value, too. Many nations, even backward ones, gain large parts of their national revenue from "hardrock" minerals. Bolivia, Gabon, Jamaica, Liberia, New Caledonia, Papua-New Guinea, Zaire, and Zambia have raised over 25% of their budgets this way in recent years; Chile, Thailand and Malaysia have taken lesser, but substantial amounts. Saskatchewan, a Canadian Province, raises large revenues from potash and uranium; Minnesota, an American state, from iron ore; and so on. Some other nations fail to raise much revenue from fabulous minerals from which others profit, like S. Africa with its gold and diamonds, West Virginia with its coal, or Missouri with its lead mines and reserves. Russia is a treasure-house of untapped mineral wealth that you can and should tax to alleviate the condition of the Russian people.
In arid lands, water is life, and the most valuable natural resource is water. For example, in southern California we need water so much we import it from the Feather River 600 miles north of us, pump it uphill through the long San Joaquin Valley, then over the high Tehachapi Mountain range, and tunnel it through the San Bernardino Mountain Range, all at great cost. When it gets here, it supplements and competes with local water that nature provides freely in the Santa Ana, San Jacinto, and other rivers. That local water then has a value equal to the high cost of importing the remote northern water. That value in the local waters is a taxable surplus. However, we have not learned to take that surplus value into the local treasuries; we give the water away, and worse, we actually subsidize people to withdraw water by helping them pay for dams, canals, and pipelines so they can waste water without paying for it. Thus we turn a public asset into a public liability - an extreme form of folly that is called "dissipating rent." In this age of growing water scarcities it is past time we learned to husband and nurture rent, in order to socialize it by taxing the surplus. So should you, in comparable circumstances.  
Another value from water is to generate power. Again, California witlessly fails to socialize this value, but Canada, our northern neighbor, has shown the way. British Columbia, Newfoundland (the Labrador part), Quebec, and other provinces raise large revenues from charges on the use of falling water. Russia, with some of the world's largest hydro-electric projects, can do the same, or better.
Fisheries are another source of value. In the past most nations have let this rent be "dissipated" by overfishing. In recent years the U.S. and Canada have in effect "privatized" fishing in their offshore waters by limiting the number of licenses and boats. This limitation was needed and desirable, overall. It created large rents, where previously there were little or none, by preventing overfishing and the great waste of duplicate, triplicate, and even quintuplicate fishing effort. That is a good example of husbanding and guarding rent, which is necessary before you can collect it. It was not necessary or desirable, however, to give away this net benefit to private parties.
The government did not sell these licenses, but simply gave them away to owners of existing boats, and others with political influence. Each license now sells for something like a million dollars, creating a new class of instant millionaires and "parlor fishermen." This giveaway to the few, and takeaway from the many, created an instant class society where before there were equal access and equal opportunities.
These privileges are worth so much that there are now documented cases off Alaska where the parlor fisherman takes 70% of the total catch. The captain, the crew, and the owner of the boat, who do the work and bear the dangers and discomforts and financial risks of fishing, must get by with the other 30%. Parlor fishermen are simply leeches; these rents should be socialized, relieving the workers from taxes. ...

Avoid "perverse subsidies." These are subsidies that encourage harmful things like
  • polluting air and water,
  • wasting water,
  • cutting timber whose value is less than the cost of logging, or
  • populating remote regions whose costs exceed the benefits derived.
Cape Breton Island, the northern tip of Nova Scotia, contains the most polluted area in Canada thanks to years of subsidies to sustain its uneconomic, obsolescent coal and steel industries that employ just a few people by fouling one of the most scenic jewels in North America.
We have mentioned how we actually subsidize people to withdraw scarce water from our overdrawn rivers in the arid U.S.A. The so-called water "shortage" in the lower Colorado River is entirely an artifact of such misguided policies: every major agency drawing on the Colorado is actually subsidized to do so, when they should be paying for the privilege. If they paid, they would stop wasting water, and would enrich the Treasury, which could then abate taxes on work, trade, and saving.
The U.S. Forest Service has turned a great national asset, our national forestlands, into a drain on the Treasury by subsidizing forest roads in subeconomic areas. It makes money selling good timber in good areas, but then spends $10 on roads into subeconomic areas to get $1 in revenues from sale of timber to private parties, destroying scenic values and watershed protection.
Perverse subsidies like those are unspeakably foolish and wasteful. They "dissipate rent" so there is none left to tax.  Read the entire article
Karl Williams:  Social Justice In Australia: ADVANCED KIT - Part 2
"The meek shall inherit the earth - but not the mineral rights." - Jean Paul Getty (1892 - 1976), billionaire oil tycoon

Rather than requiring a highly centralised body overseeing the collection of LVT and resource revenue, Geonomics proposes to devolve power to a range of relevant authorities at different levels of government.
  • LOCAL Local governments are ideally positioned to collect LVT on sites for homes, businesses and farmland surface land values. In Australia and many other places council already levy rates. However the rates collected today are minimal, are usually based on land and improvements, and have all sorts of flaws such as fixed charges, maximum or minimum thresholds, and exemptions. In immediate financial terms alone, the vast majority of ratepayers would benefit from LVT, the exceptions being speculators and businesses which waste valuable expanses of land (such as sprawling car yards and derelict factories on prime real estate).
  • REGIONAL State governments are best constituted to collect user fees for forestry and water resources.
  • NATIONAL The federal government is in the best position to collect user fees for fish caught in national waters, oil and mineral resources.
  • GLOBAL We mentioned a possible role of a Global Resource Agency in equalising natural advantages between nations, but there's a much more achievable role this body could take in collecting user fees from our transnational commons. This includes site fees for satellites placed in geostationary orbits, royalties on minerals mined in international waters or the Antarctic, royalties on fish caught in international waters, and for use of the electromagnetic spectrum.
Many taxes or fees based on the polluter-pays principle would clearly fall within the province of the Global Resource Agency. Here significant global revenue sources could, for example, be levied on aviation fuel, international shipping, and dumping at sea (where that would still be allowed). These could all be construed as site and resource rents in the broad sense of those terms. If a polluter is dumping into a river for example, and thereby rendering x million cubic metres of water nonpotable, he would be charged a rental value for that resource usually equivalent to the cost of returning the water to a potable state. Such a charge will soon force polluters to look for cleaner production processes or be forced out of business by such punitive site and resource rents.

This agency would also be best placed to administer the proposed Tobin tax on currency speculation. And, if international arms' trading is not to be entirely abolished, the agency could be given the authority to impose a heavy "misery tax" on it.

There's a valuable monitoring role that the Global Resource Agency could take in being responsible for safeguarding the global commons (e.g. air quality, ozone shield, ocean fish, worldwide biodiversity etc.). The agency could determine access rules, issue permits, collect resource revenue and levy fines.

Not only would the access fees to the Global Commons ensure careful use of our common heritage resources, but also this revenue could go a long way towards solving some important problems. Where should the money be spent? Global Geonomics has no spending doctrine or dogma, but here are a few suggested uses:
  • Sustainable development programs
  • Environment restoration programs
  • The facilitation of policy convergence in areas such as trade, currency exchange, pollution targets and human rights
  • Population control programs  ...   Read the entire article
Nic Tideman: The Constitutional Conflict Between Protecting Expectations and Moral Evolution
Power, Population and Process

There are two other difficulties that are more serious.

  • First, the existing distribution of recognized exclusive rights to natural opportunities (land, mineral resources, fishing rights, water rights, etc.) is the outcome of a game of power, and those who have won at this game have great power are loathe to part with their winnings.
  • Second, Malthusian analysis has led people to expect that if the value of exclusive use of natural opportunities were distributed equally, population would expand until everyone was at a subsistence level.

There is a solution to the second problem, contained in the idea that all persons have equal rights to the use of natural opportunities. If the crowding effects of additional persons outweigh the beneficial effects of greater economies of scale, then any region that has an above-average population growth rate is appropriating more than its share of the scarce natural opportunity to be a parent. The costs that this region thereby imposes on other regions can justly be subtracted from what would otherwise be its claim on the value of using natural opportunities. Each region could then decide for itself whether to pass those costs on to individual couples who decide to conceive children.

Similarly, when a region imposes costs on others through interregional pollution, the costs so imposed should be subtracted from the region's claim to the value of exclusive use of natural opportunities. The great challenge is to overcome the entrenched power that benefits from continued blindness to moral necessity. The mechanism must not be force of arms, for that entails too great a risk of installing a new power elite who would be as unprincipled as the first. Nor should the mechanism be the power of majorities, through legislation and referenda, for these processes can also be used for the selfish aggrandizement of those who control them. It is good that constitutions prohibit the taking of property without just compensation. It is to be hoped that courts will interpret such restricitons as prohibiting taxes that take all of the value of things currently regarded as property.

When respect for a newly understood moral truth requires the dissappointment of previously protected expectations, those who would push their fellow citizens to incorporate that truth into the governmental process should be obliged to have their ideas reviewed in a constitutional amnedment process that will ensure that they will be adopted only if a broad consensus on them is achieved. When people are ready to see a new moral truth, that truth can overcome such a hurdle.  Read the whole article

Jeff Smith: Subsidies at Their Worst: Privileges

Money is the mother's milk of politics. Yet the milk invested by lobbyists and those they represent is a drop in the bucket compared to the flow they get back from the public tit, thanks to the milkmaid state. Politicians grant well-connected big businesses:
a. direct cash outlays, such as cash to corporations for advertising overseas,

b. lucrative contracts, such as with weaponeers et al campaign contributors, and

c. tax breaks that burden would-be competitors, such as tariffs that protect GM and Ford but not autoworkers. Even if we were to abolish subsidies (a) and taxes, eliminating the advantage of tax breaks (c), and negotiate responsible contracts (b), that'd still leave in place

d. seven subtle privileges, mere pieces of paper that government grants its customers at nowhere near market value, positioning the privileged to claim all the surplus value of society.

1. The corporate charter's salient feature is to limit the liability of those choosing to profit by putting others at risk. ...

2. Pollution permits, performance waivers, land use exemptions -- whether granted by bureaucracies, legislatures, or courts - are worth much more than however much government charges and business pays. ...

3. Patents protect the basement inventor, right? Wrong. ...

4. Utility franchises create monopolies in exchange for some public service, such as providing electricity, phone communication, etc. ...

5. Communication licenses for TV, radio, cell phones, and the like are given away for free or for far less than market value, turning recipients into "instant billionaires" (the business press gleefully notes). ...

6. Resource leases for public oil, minerals, forests, and grazing land, are often let at "fire-sale" prices. ...

7. Land titles do protect the average homeowners but because they cost virtually nothing (a paltry filing fee often about $2.00), they also protect enormously wealthy absentee landlords. ... 

Land titles are the granddaddy of all privileges. Historically, titles preceded all others and created a class of elite owners with the power to win the six other indirect subsidies, along with the more direct ones – grants, contracts, and tax favors. To undo and reverse this history, it's necessary to collect and share the natural rents from all seven inconspicuous privileges.

For these pieces of paper, government should charge full market value. ... 

Getting a Citizens Dividend would not only eliminate poverty, it'd also erase any rationale for subsidies - direct or indirect - to the poor or to the privileged. Repealing the free ride of privileges would be like repealing capitalism. Without those subtle detours imposed upon public revenue, owners would have to work to amass a fortune, and work is one of the worst ways known to strike it rich.

What you can do: Dry up the milkmaid state. Dispense with the notion that the state must meddle in enterprise. Dispense the notion from others, too. Focus government on its lone raison d'etre - defend rights. Demand your right to a fair share of natural revenue. ...  Read the whole article

The Most Rev. Dr Thomas Nulty, Roman Catholic Bishop of Meath (Ireland): Back to the Land (1881) 

Land Monopoly Usurps God's Gifts to All.

Thus, on the highest and most unquestionable authority, are we forced to conclude that, owing to the monopoly which the landlords have usurped in the land of the nation, they sell out the "use of the original and indestructible powers of the soil"; of "the natural and inherent powers of the soil"; of "the natural powers of the soil"; that is to say, they sell the use of God's gifts like so many articles of private property, and as if they were purely the result of their own toil and labour.  Read the whole letter

Bill Batt: The Merits of Site Value Taxation
... And to take a final example, compliance with legal provisions imposed on industries that pollute the natural environment -- difficult and expensive to enforce for government, and often confusing, economically inefficient, and expensive to perpetrators as well -- can more easily be brought about through fiscal instruments that serve as "carrots" rather than "sticks."

... Command and control approaches, requiring as they do the persistent and assiduous hand of bureaucracy and political oversight, are therefore vulnerable to not just mutation and neglect but even corruption. Well-conceived fiscal measures have the advantages of fostering voluntary compliance and with much less continuous scrutiny. Although many industries have seized upon the anti-regulation sentiment to press for the elimination of any strictures upon their behavior at all, however irresponsible and socially harmful, there is growing appreciation of the power which well-crafted measures hold. While more attention may be required initially to ensure that their design is correct, they ensure, long term, that the economic burden which society bears is far lower. ... Read the whole piece

Bill Batt: The Nexus of Transportation, Economic Rent, and Land Use
Charging for pollution externalities of motor vehicle travel invites more complex issues. One approach widely explored involves reliance upon what are known as Pigou taxes, after noted British economist Arthur Pigou.(31) It attempts to recover the costs of externalities in the natural environment and even involving health damages. Yet Pigou taxes are more often talked about than actually implemented. Related to such designs are those growing out of the theories of Ronald Coase, designed not necessarily to recover the full social costs of negative externalities but rather to foster the most efficient economic choice among options, even if some parties are disadvantaged.(32) Taxes recovering such costs are most easily collected at the production stage -- at the wellhead or the refinery for oil, and from the manufacturer for tires and other materials.(33) Still a third approach is that represented by the Georgist tradition, which would recover the costs of specified pollution externalities by accepting them to the extent that the environment is capable of absorbing them, and charging polluters for the use of the environment as a sink for such wastes. This approach is particularly attractive as a way to charge for the release of noxious gases in motor vehicle exhaust.(34)... read the whole article

Bill Batt: The Compatibility of Georgist Economics and Ecological Economics
So also in the case of the auctioning of “pollution credits” or tradeable permits, what in fact constitute the right of power industries to treat the air as a dump to the full extent which environmental tolerances allow.45 These “credits” are now “owned” by the private sector and traded back and forth among corporations, even though all people experience the consequences of its treatment. Airport landing slots, “prime time” broadcasting, and many other time-sensitive dimensions have all been handed over to the private sector with nominal benefit to the public. London Mayor Ken Livingstone has been a strong supporter of renting the landing slots at Heathrow and Gatwick Airports, and is at this very time exploring a rent recovery scheme to pay for the upgrade of components of the Jubilee tube line.46 ...

he heart of ecological economics is ecological carrying capacity and the premise of economic sustainability. Although this term has to some extent become a mantra and widely abused, its most popular definition remains that first enunciated by the 1987 Brundtland Commission Report: "development that meets the needs of the present without compromising the ability of future generations to meet their own needs."92 Principle 3 of the 1992 UNCED Rio Declaration: "The right to development must be fulfilled so as to equitably meet developmental and environmental needs of present and future generations."93 At various times scholars have sought to improve upon this definition; one offered by adherents of the ecological economics school reads as follows:
1. For renewable resources (fish, trees, etc.), the rate of harvest should not exceed the rate of regeneration.
2. The rate at which we allow economic activity to generate wastes that must be passed into the environment should not be allowed to exceed the environment’s ability to absorb them.
3. The depletion of nonrenewable resources (oil, coal, etc.) should not be offset by investment in and development of renewable substitutes for them.94 ...
Underlying the whole agenda is a commitment beyond simple description to sustainable development economics and to Daly’s “steady state” economics. This entails the institution of environmental safeguards, protection of cultural and biological diversity, minimal resource use, and recycling. It further means protection of small countries and localities — of both ecosystems and populations — against all-encompassing economic units that preclude the possibility of their being able to survive independently. It presumes also that not just humans alive today have entitlements, especially privileged elements of wealthy countries; it recognizes rather the justice and moral claims of people and natural ecosystems yet to live to survive as intact and integral units. It recognizes that governments must take a hand in the preservation of such ecosystems, as markets forces left to themselves will wreak destruction on the most vulnerable parts of the earth and ultimately upon the earth itself. It accepts the fact that the carrying capacity of the earth is  limited, and that we appear to have already exceeded that carrying capacity in our ignorance.119
119One oft-cited article is that of Peter Vitousek, et al, “Human Appropriation of the Products of Photosynthesis,” BioScience, Vol. 36, No.6 (1986), pp. 368-373, available at http://dieoff.org/page83.htm. It calculates that consumption of earth’s resources is doubles at an ever increasing rate, and that humans have already appropriated 40% of terrestrial biological productivity. The most comprehensive collection of articles addressing this perspective is created and maintained by retired Cornell Professor Jay Hanson, at www.dieoff.org. The site name arises from his view that the world economy’s dependence upon fossil fuels faces an imminent end, and the earth will then be capable of supporting only about two billion people. Hence a looming dieoff.

The distinction between CAC approaches to environmental challenges as compared with pricing approaches is central to all this analysis. Daly’s shows a strong preference for the latter. In what he calls “graded ecozoning,” for example, potential atmospheric impacts are divided into three areas.
  • First, for emissions that do not cause significant damage and do not accumulate in significant concentrations, taxpayers would be charged a general fee.
  • Second, in instances where incentives require altered behavior to address problems such as high ozone or carbon monoxide emissions in certain local areas, more targeted taxes would apply.
  • Finally for those pollutants that have profoundly damaging impacts, regulation and perhaps criminal liability would be called for in cases of their release. These classes are labeled the “property rights zone,” the “incentive zone,” and the “regulatory zone” respectively. The model follows the growing interest and preference for pricing approaches over more heavy-handed and administratively inefficient CAC approaches.
Green taxes, sometimes also called corrective taxes or Pigouvian taxes, are their first candidates for consideration. This is because they can, if priced right, recover the costs of externalities in ways that allow individuals to use their own discretion about employing environmentally damaging practices. But the authors extend their thinking to cover goods and materials that may have negative ecological impacts although not yet conclusively demonstrated by science. The answer there is to rely upon a “precautionary polluter pays principle” based on the present value of the forecast impact should the worst case scenarios be borne out. The annual cost of using a car in the early 1990s, for example, was $51,656 according to their calculations.120 This would obviously entail an enormous imposition of taxes, far above the less than $7,000 direct annual costs typically shouldered by drivers now,121 the rest of which are now passed on to society generally. Grave doubt exists about the potential impact of various externalities of driving, along with concern about the extent of damage which might possibly occur to the ecosystem; this warrants employment of the precautionary principle and calls for policy solutions to curtail this travel mode. Complete prohibition of certain materials and chemicals may be warranted in some cases.... read the whole article

Hanno Beck:  Bathroom Policy

We were four college sophomores. And we were not going to live in a dorm, no sir, we figured that we were smart, mature fellows and so we arranged to rent a house. Each person would have his own private bedroom and we would share the bathroom. Four guys, one bathroom. That sounds reasonable, right? ...

How about Charlie? Well, he had a problem too -- shaving. It was always a disappointment to see Charlie walk into the bathroom, because by the time he was done, you would find shaving cream on the mirror, on the sink, on the floor. Lots of shaving cream all over the place. And if it doesn't get cleaned up, it looks bad and becomes unsanitary. The rest of us picked up after Charlie, but we got no compensation for doing so. Charlie was a polluter. That felt unfair. ...

Now let's talk about you and everyone on Earth. We don't have to share a single bathroom. But we do all share one planet.

Our planet's natural resources are a common heritage for all humanity, just as the bathroom was a common resource for the four of us in college.

Look what happens to our planet.
  • We see people or corporations like Edward, taking more than their fair share of oil, fresh water, minerals, without compensating the rest of us.
  • We see people or corporations like Charlie, polluting the land, water and air with toxic wastes, chemicals, carbon in the atmosphere, making the world less safe, forcing others to clean up, and they are not compensating the rest of us.
  • We see people or corporations like Andrew, monopolizing resources such as land -– an urban land speculator who holds an acre out of use, anticipating a price rise, is displacing the rest of us, forcing development out into the countryside. A single acre of downtown land brought into use would save a dozen outside acres from premature sprawl development.
Those who take, monopolize, and pollute, are imposing costs on the rest of us and on the economy in general. We are forced to be less efficient, or forced to endure hardships, so that the takers, monopolizers and polluters can benefit. That is not fair.

Is there a solution? Of course there is. It's a simple solution. To respect our common interest in our planet's resources, those who take or monopolize or pollute more than their fair share of our planet should compensate those of us who they are taking from.  ... read the whole article

Peter Barnes: Capitalism 3.0 — Chapter 4: The Limits of Privatization (pages 49-63)

Free Market Environmentalism
One other version of privatism is worth considering. Its premise is that nature can be preserved, and pollution reduced, by expanding private property rights. This line of thought is called free market environmentalism, and it’s favored by libertarian think tanks such as the Cato Institute.

The origins of free market environmentalism go back to an influential paper by University of Chicago economist Ronald Coase. Writing in 1960, Coase challenged the then-prevailing orthodoxy that government regulation is the only way to protect nature. In fact, he argued, nature can be protected through property rights, provided they’re clearly defined and the cost of enforcing them is low.

In Coase’s model, pollution is a two-sided problem involving a polluter and a pollutee. If one side has clear property rights (for instance, if the polluter has a right to emit, or the pollutee has a right not to be emitted upon), and transaction costs are low, the two sides will come to a deal that reduces pollution.

How will this happen? Let’s say the pollutee has a right to clean air. He could, under common law, sue the polluter for damages. To avoid such potential losses, the polluter is willing to pay the pollutee a sum of money up front. The pollutee is willing to accept compensation for the inconvenience and discomfort caused by the pollution. They agree on a level of pollution and a payment that’s satisfactory to both.

It works the other way, too. If the polluter has the right to pollute, the pollutee offers him money to pollute less, and the same deal is reached. This pollution level — which is greater than zero but less than the polluter would emit if pollution were free — is, in the language of economists, optimal. (Whether it’s best for nature is another matter.) It’s arrived at because the polluter’s externalities have been internalized.

For fans of privatism, Coase’s theorem was an intellectual breakthrough. It gave theoretical credence to the idea that the marketplace, not government, is the place to tackle pollution. Instead of burdening business with page after page of regulations, all government has to do is assign property rights and let markets handle the rest.

There’s much that’s attractive in free market environmentalism. Anything that makes the lives of business managers simpler is, to my mind, a good thing — not just for business, but for nature and society as a whole. It’s good because things that are simple for managers to do will get done, and often quickly, while things that are complicated may never get done. Right now, we need to get our economic activity in harmony with nature. We need to do that quickly, and at the lowest possible cost. If it’s easiest for managers to act when they have prices, then let’s give them prices, not regulations and exhortations.

At the same time, there are critical pieces missing in free market environmentalism. First and foremost, it lacks a solid rationale for how property rights to nature should be assigned. Coase argued that pollution levels will be the same no matter how those rights are apportioned. Although this may be true in the world of theory, it makes a big difference to people’s pocketbooks whether pollutees pay polluters, or vice versa.

Most free marketers seem to think pollution rights should be given free to polluters. In their view, the citizen’s right to be free of pollution is trumped by the polluter’s right to pollute. Taking the opposite tack, Robert F. Kennedy Jr., an attorney for the Natural Resources Defense Council, argues that polluters have long been trespassing on common property and that this trespass is a form of subsidy that ought to end.

The question for me is, what’s the best way to assign property rights when our goal is to protect a birthright shared by everyone? It turns out this is a complicated matter, but one we need to explore. There’s no textbook way to “propertize” nature. (When I say to propertize, I mean to treat an aspect of nature as property, thus making it ownable. Privatization goes further and assigns that property to corporate owners.) In fact, there are different ways to propertize nature, with dramatically different consequences. And since we’ll be living with these new property rights — and paying rent to their owners — for a long time, it behooves us to get them right. ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 6: Trusteeship of Creation (pages 79-100)

Valves and Their Keepers

One job of common property trusts is to preserve habitat and landscapes, but such trusts can also play another role — controlling the flow of pollution into ecosystems. In this case, what they’d be managing isn’t the ecosystems themselves, but human economic activity around the ecosystems. In that sense, they’d be more like the Federal Reserve than the Nature Conservancy. ...

Think, for example, about carbon. At present, our economic engine is emitting far too much carbon dioxide into the atmosphere; this is destabilizing the climate. We desperately need a valve that can crank the carbon flow down. Let’s assume we can design and install such a valve. (I explained how this can be done in my previous book, Who Owns the Sky? It involves selling a limited quantity of “upstream” permits to companies that bring fossil fuels into the economy.) The question then is, who should control the valve?

Unfettered markets can’t be given that responsibility; as we’ve seen, they have no ability to limit polluting. So we’re left with two options: government or trusts. Government is a political creature; its time horizon is short, and future generations have no clout in it. Common property trusts, by contrast, are fiduciary institutions. They have long time horizons and a legal responsibility to future generations. Given the choice, I’d designate a common property trust to be keeper of the carbon valve, based on peer-reviewed advice from scientists. Its trustees could make hard decisions without committing political suicide. They might be appointed by the president, like governors of the Fed, but they wouldn’t be obedient to him the way cabinet members are. Once appointed, they’d be legally accountable to future generations.

Now imagine a goodly number of valves at the local, regional, and national levels, not just for carbon (which requires only one national valve) but for a variety of pollutants. Imagine also that the valve keepers are trusts accountable to future generations. They’d have the power to reduce some of the negative externalities — the illth — that corporations shift to the commons. They’d also have the power to auction limited pollution rights to the highest bidders, and to divide the resulting income among commons owners. That’s something neither the Fed nor the EPA can do.

These trusts would fundamentally change our economic operating system. What are now unpriced externalities would become property rights under accountable management. If a corporation wanted to pollute, it couldn’t just do so; it would have to buy the rights from a commons trust. The price of pollution would go up; corporate illth creation would go down. Ecosystems would be protected for future generations. More income would flow to ordinary citizens. Nonhuman species would flourish; human inequality would diminish. And government wouldn’t be enlarged — our economic engine would do these things on its own.

One final point about valves. It’s not too critical where we set them initially. It’s far more important to install them in the right places, and to put the right people in charge. Then they can adjust the settings. ...

A Second Set of Books

Mental models begin with assumptions. Most economists today assume there are only two kinds of property, private (that is, corporate or individual) and state. There are no shared assets, no inter- or intragenerational obligations, and no nonhumans other than those we eat.

Yet as we’ve seen, many things are missing here. The most obvious omission is the great economy of nature within which the human enterprise operates. We’re borrowing prodigiously from that economy, but not recording the loans. Equally absent are future generations, from whom we’re borrowing just as wantonly and surreptitiously. In a proper bookkeeping system, every loan shows up on two balance sheets, the borrower’s and the lender’s. One entity’s liability is another entity’s asset. But this isn’t true in contemporary economics. When the human economy grows, assets on corporate and individual balance sheets go up, but nowhere is there a debit. In fact, there aren’t any accounts that could be debited. There’s only good growth on one side of the ledger, and on the other, a void in which illth and debt accumulate, uncounted and unnoticed.

In recent years, economists have added a few bits to this stripped-down model. For example, they now recognize public goods and ecosystem services as contributors of economic value. Public goods are services like national defense, education, and flood control, which benefit everyone but can’t easily be sold at a profit. Because markets don’t adequately supply them, governments step in and do so. Economists sometimes debate whether the value of these public goods exceeds the “burden” they impose on taxpayers, but they don’t see the expenditures as adding value to any account, or to any asset owned by anyone.

Similarly, many economists now recognize ecosystem services as valuable inputs to the economy. However, the ecosystems that produce these services have no owners or balance sheets. They’re just there, floating in space, with no connection to humans. What I’m suggesting is that economists treat them as if they were common property held in trust. This simple supposition would not only put ecosystems on the books, enabling us to track them better; it would also pave the way to real-world property rights that actually protect those ecosystems. ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 10: What You Can Do (pages 155-166)

To build Capitalism 3.0, we each have unique roles to play. I therefore address the final pages of this book to a variety of people whose participation is critical. ...


You are the architects and defenders of property rights. You’re well compensated by private property owners for your labors. Now is the time to lend more of your talents to the commons.

Your job is to design and defend inclusive forms of property that spread benefits to as many, rather than as few, as possible. To do this, you must play both defense and offense. On defense, be on high alert for “takings” from the commons — they happen all the time. I’m not talking about takings by government, but about takings by corporations, which occur far more frequently yet are much less noticed.

Pollution is a taking, noise is a taking, capturing nature’s scarcity rent is a taking. Your first job is to defend the commons against such enclosures.

Your second job — the offensive part — is to forge new property rights for the commons. These can be blends, like conservation easements. Be creative. Private and common property can often mesh together to the benefit of both. Making that happen is your gift. ... read the whole chapter


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