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H.G. Brown: Significant Paragraphs from Henry George's Progress & Poverty: 13 Effect of Remedy Upon Social Ideals (in the unabridged P&P: Part IX: Effects of the Remedy — 4. Of the changes that would be wrought in social organization and social life
Kris Feder: Progress and Poverty Today
... Moreover, said George, social institutions by which some prosper at others' expense cause talent and resources to be diverted from productive enterprise to unproductive conflict, as individuals find that competing for political advantage can be more lucrative than competing for market success. ...
In short, an unjust system of privileges and entitlements tends to cause misallocation of resources, macroeconomic instability and stagnation, political corruption, and social conflict that ultimately may threaten whole civilizations.
George's central contribution was to show that the distinction between individual property and common property forms a rational basis for distinguishing the domain of public activity from that of the private. ... Read the whole article
Nic Tideman: Applications of Land Value Taxation to Problems of Environmental Protection, Congestion, Efficient Resource Use, Population, and Economic Growth
...Since no one produced land, no one can properly claim to own it. ...
... Realizing that we are participants in a game of territorial appropriation and its extension into the politics of special interest legislation and other manifestation of privilege, we should also realize that substantial gains are possible from ending the game of encroachment and appropriation. We might aspire to end the waste of effort on all forms of rent-seeking and on defense against rent-seeking. But our efforts to end the game have been based primarily on enshrining the status quo: The last successful appropriator gets to keep what has been appropriated. This deference to power might be considered simply realistic. However, it has a high cost. ... Read the entire article
Joseph Stiglitz: October, 2002, interview
Karl Williams: Social Justice In Australia: INTERMEDIATE KIT
We've already seen how speculators can presently hold on to idle parcels of land, waiting for unearned increases in their value to accrue to them. But here's another curse of land speculation: by locking up productive land, it forces newcomers out to less productive land. By "pushing back the margin", the evil of speculation simultaneously raises rents and lowers wages. LVT makes it impossible for speculators to enjoy unearned income.
Let's broaden our understanding of rent by looking at some current real-world examples.
History shows us that, because of relative scarcity or changing circumstances, such licences often become enormously valuable and are resold in the open market for huge sums. This excess is what is meant by economic rent, and plutocrats, big-time speculators and businesspeople dealing with such licences or privileges are called rent-seekers.Nic Tideman: Peace, Justice and Economic Reform
We can now see that the term "economic rent" encompasses a wide range of resources, and can be defined as the excess over a competitive rate of return attributable to owning an asset or resource whose supply is limited, at least in the short run. Note the underlined words, for they indicate sort of some monopoly privilege, as we have seen.
The problems above have exact parallels with the land problem. The monopolistic privileges have often been sold off once and for all to the highest cash bidder (or perhaps given away or even stolen) instead of being auctioned and then regularly (annually?) assessed to determine the economic rent that belongs to the community.
A limited resource is usually a gift of Nature. The windfall profits arising from the granting of timber and mining rights are other instances of uncollected economic rent. Otherwise, economic rent mainly arises as the result of monopolies, duopolies, oligopolies and cartels. The solution is either to regularly assess and collect the economic rent, or to prevent natural monopolies (such as "public" utilities) from falling into private hands in the first place. ...
Green taxes have long been supported by Geonomists. Full resource rentals imposed on such things as timber extraction or commercial fishing prevent undervaluation, wastage and overexploitation. "Polluter pays" pricing policies preserve the planet from plunderers (sorry). In fact, the whole range of carbon taxes are forms of LVT in the sense of being charges for use and abuse of air, water and other natural resources.
The electromagnetic spectrum also falls within the wide definition of land. To sell it off for good to the highest cash bidder is to set up an exploitative and economically inefficient monopoly. The spectrum belongs to the people who increase its value as much as they increase that of land. Government should act as its custodian, auctioning off for rent the various segments of the bandwidth. To prevent changing economic circumstances or technological developments from dropping big chunks of economic rent into the laps of bandwidth lessees, rents should be regularly and appropriately reviewed and raised. That Kerry Packer's broadcasting licences have appreciated by well over a billion dollars shows the foolishness of failing to distinguish, for tax purposes, between land and capital. And perhaps shows the political influence of a powerful rent-seeker. ... Read the entire article
Consider first the conservative claim that justice is defined by traditional rules. The conservative says, "I don't say that I'm better than anyone else, nor do I say that my conception of the good is better than anyone else's. I may not even like what tradition demands. But if you want to be just, you will follow the rules that have traditionally been followed." I have seen one drawing of justice that reflects this conservative view by portraying justice as a seated woman, with a book in her lap. The book is clearly the received law, the source that justice cites as the foundation of her decrees. But this is not the standard image of justice.
There is an important virtue of conservatism. This is that it eliminates the waste of resources in fighting over who has what rights, the waste from what economists call rent-seeking. Furthermore, there will be some situations where there is no time to secure agreement on anything other than the status quo. Thus there is reason to have at least some element of conservatism in the procedures by which disputes are resolved. But conservatism cannot be the ultimate rule of a just society. It would perpetuate slavery, the selling of daughters as brides, racial and sexual inequalities in civil rights, and every other historical injustice that, through our moral evolution, we have overcome. The neutrality of Conservatism is superficial. Conservatism cannot claim to offer either the evenhandedness that the blindfold promises or the equality that scales require. ...Read the entire articleMason Gaffney: Land as a Distinctive Factor of Production
Another thing libertarian philosophers must paper over is the rent-seeking that occurs in the creation of private tenures. They avidly push privatization as a grand Panacea, but ignore the process of privatization and its consequences. Private tenure is often granted under customs that make it a prize for occupying or fixing some capital on land, and continuing to operate it with "due diligence" ("use it or lose it"). Premature investment, settlement and development are frequent results, seriously distorting the allocation of land, labor and capital and contributing to the "Congested Frontier" problem (cf. B-2.) ...
High land price guides investors to prefer kinds of capital that substitute for land. Although capital cannot be converted into land, it can substitute for land, and does so when rents and land prices are high. John Stuart Mill long ago pointed out that the structure and character of capital is determined by the level of rents and wages.19
Such substitution is an integral part of the equilibrating function of markets; the human race could never have attained its present numbers and density without it. High wages evoke labor-saving capital; high rents evoke land-saving capital. It is useful to carry this farther, and recognize five kinds of substitutive capital evoked by high rents and land prices:
a.Mason Gaffney: Rent Seeking and Global Conflict
e. Rent-leading capital. Read the whole article
National governments originate historically to acquire, hold and police land. Other functions are assumed later, but sovereignty over land is always the first business. Private parties hold land from the sovereign: every chain of title goes back to a grantor who originally seized the land.
When economists today speak of "rent-seeking" they usually are thinking not of basic land rent, but in subtle and sophisticated terms, looking at dribs and drabs of transfer rent derived from contracting advantages. They develop abstract models for gaming optimally with imperfect information, and so on. By emphasizing the arcane while ignoring the basic they are in danger of matching the proverbial expert who fine-tunes all the details and elaborations as he forges on to the grand disaster.
Indeed, we have had one such disaster. Viet Nam was viewed by many as an economists' war, rationally planned and led by the best and the brightest systems' analysts, exemplified by the brilliant, energetic Secretary of Defense. One should not be surprised at the post-Viet Nam decline of interest in applying modern economic theory to questions of global conflict.
We would be more useful to statesmen if we looked first at rent-seeking in the grosser sense of "land-grabbing", where the whole bundle is at stake. When William of Normandy conquered England the prize was land rent, all of it. He and his retainers dispossessed the local rent-collectors. It was simple, gross, and basic, and much more consequential than the trivial rent-seeking we model today. The bulk of the natives may have been affected only marginally: they just paid Lord B instead of Lord A. But it made all the difference to Lords B and A, the ones who made basic decisions about global conflict and cooperation. ...
Self-evidently, rivalry to appropriate limited rent-yielding resources must lead to conflict. It has to, because land is not produced, nor stored up like capital by saving. Modern economics glosses over this by stressing that land, like other resources, is allocated by the market. That may be, but distribution is something else. Every land title in the world goes back to a taking by force.
It will be objected that one can buy in peacefully once a tenure is firmly established, with alienable titles. There is certainly no intent to deny this. The problem is that a successor-in-interest stands on no firmer footing than the original. There is no laundering: every landholder can consult his chain of title and see how it originated.. Indeed, it has been said that those who buy stolen property are the chief cause of crime. Fencing itself is a crime.
However one may side on that question, it helps account for the extreme alarm with which US statecraft startles at any foreign country, however weak and innocuous, which expropriates any such successor-in-interest. Demonstration effects are contagious and threatening. The defensiveness of the insecure is a major cause of global conflict.
More destabilizing yet is the ambitious rent-seeker offshore, who finds his biggest gains in the riskiest ways, ways that unfortunately impose high risks on the U.S. The biggest gains to rent-seekers come from buying in on the ground floor, cheap, when tenures are precarious or uncertain. ... Read the whole articleMason 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.E. Less successful compromises with the principle
2. Selling voters on the benefits of immigration
1. Public works.
2. Subsidized public works in tandem with exclusionary zoning
3. Hocking the revenues
A. Socialize rent at the national level.Karl Williams: Land Value Taxation: The Overlooked But Vital Eco-Tax
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.
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.
a. Other regulations that mandate low-grading of subeconomic residuals.
1. One man's cost is another man's income, and they cancel out, so there are no social costs.
2. Mandatory goldplating to appease organized groups.
Environmental protection, like other good things, may be carried to excess in specific cases like the Wilmington Basin. That is no basis for generalizing, however, and it is obviously underfinanced in other cases like tanker spillage.
I. Historical overview
II. The problem of sprawl
III. Affordable and efficient public transport
IV. Agricultural benefits
V. Financial concerns
VI. Conclusion: A greater perspective
Appendix: "Natural Capitalism" -- A Case Study in Blindness to Land Value Taxation
It should also be noted that the advantages of LVT extend far beyond the immediate and direct contribution to environmental solutions - they give rise to economic efficiency, social justice, individual liberty, world peace, effective third world aid and more. An understanding of the nature of economic rent and rent-seeking behaviour would assist the appreciation of some points made here, but an explanation of this extends beyond the immediate ambit of this paper. This succinct summary, however, may assist:
"For the failure to make people pay rent for access, or possession of, natural resources is at the heart of all major environmental problems, and is the cause of some of the most fractious geo-political problems .... There are no remedies for the ecocrises that do not include a heightened awareness of the value of economic rent and the process of the land market". ...
The process of monitoring and assessing LVT itself leads to a more subtle, more environmentally-appreciative understanding of how best to prioritise conflicting demands on land. Should a tract of land best be used for green space for local residents, a light rail corridor or employment providing development? LVT assessment inherently weighs the pros and cons of a whole range of intangible costs and benefits for the wider community now and into the future, and eliminates corrupting "NIMBY" motives and rent-seeking behaviour that influence existing planning and development decisions. In response to the accusation that LVT assessment is little more than a best guess at quantifying values that are inherently unquantifiable, LVT advocates respond "Guilty as charged!" However, they then add, "Our good guesses are based on solid, objective methodology and are better than wild guesses, and even most wild guesses are better than the decisions made today." Currently, many natural resources are almost assigned a worthless value because, not entering the mainstream marketplace, they usually have no $ tags hanging off them - hence the existence of externalities whereby the environment is plundered as near worthless. So even wild guesses at the value of land and other natural resources are better than the present situation, in which the "no guess" decision effectively assigns natural and community resources a zero value....
LVT and its 19th-century champion, Henry George, achieved huge acclaim before being buried by the "purpose-built" body of neoclassical economics financed largely by rent-seeking American plutocrats. In one form or another, Henry George's writings on the need to tax land values was preceded or endorsed by various biblical prophets, and by Carlyle, Churchill, Einstein, Franklin, Aldous Huxley, Jefferson, Lincoln, Locke, J.S. Mill, Paine, Penn, Rousseau, Bertrand Russell, Adam Smith, Spencer, Spinoza, Sun Yat Sen, James Tobin, Tolstoy, Twain, Voltaire, Winstanley, Frank Lloyd Wright and many more. Just how this wisdom has been lost sight of is a long - too long for this paper - and tragic story.
18 Gaffney, op.cit., pp.29-145
19 A list of 300+ of these and other endorsements quoted throughout history can be obtained from me on request at email@example.com
Here, for this conference, is the quirk - environmental considerations played almost no part in the compelling endorsements lavished on LVT! The main bill, then and now, is its powerful explanation of the great causes of social injustice, with the second billing going to an exposure of a whole range of economic inefficiencies and deadweight losses of our present economic system, which should more accurately be termed land-monopoly capitalism. Support acts include
The appeal of LVT to some others is more its philosophical basis and how its implementation must turn the economy the right way up, such that the cause of the "madness" (because completely unnecessary) of involuntary unemployment is eliminated, which of necessity then leads to the range of benefits just mentioned.
This is not a meandering departure from the subject of this conference. No significant, effectual solutions can be made to our environment if the all-embracing economic system is only nibbled at, piecemeal, from the angle of taxation alone.
LVT is not a mere taxation solution, but an integrated economic solution, impacting on land management and cutting at the heart of privilege and injustice. Yes, environmental tax reformers must indeed address the looting of undervalued natural resources driven by bourgeois habits of overconsumption. Let us not, however, overlook the destruction resulting from short-term perspectives driven by poverty and desperation. LVT deals with both worlds. ... read the entire article
The Most Rev. Dr Thomas Nulty, Roman Catholic Bishop of Meath (Ireland): Back to the Land (1881)
I have already shown that the land of every country is the public property of the people of that country, and consequently, that its exclusive appropriation by a class is a substantial injustice and wrong done to every man in that country", whom it robs of his fair share of the common inheritance. The injustice of this appropriation is enormously enhanced by the fact that it further enables the landlords, without any risk or trouble, and in fact makes it a matter of course for them, to appropriate a vast share of the earnings of the nation besides. They plundered the people first of God's gifts in the land, and that act of spoliation puts them under a sort of necessity of plundering them again of an enormous amount of their direct earnings and wages. The line of argument that leads directly to this conclusion seems abundantly clear. Read the whole letterBill Batt: The Compatibility of Georgist Economics and Ecological Economics
The next important step in understanding Georgist economics is recognition that each factor of production has its economic price: the price of labor is wages, the price of capital is interest, and the price of land is rent. When any of these prices are unpaid, distortions result in the economic equilibrium and problems become manifest in other realms of nature and society. In neoclassical economics compensation for the use of labor and capital continue to be important in the formulas and calculations employed to explain the economy. But for neoclassical economics, David Ricardo’s “law of rent” is essentially ignored and has be come for all practical purposes an artifact in the history of economics. Rent continues to exist of course; it is simply uncollected, left in the hands of those who maintain monopoly control of certain services of nature, adding to their market value in ways that distort the balance of markets. Failure to recognize the importance of land rent (sometimes called economic rent) is for Georgists critical to an understanding of the problems of contemporary economies and economic analysis.14
14The phenomenon of rent and rent-seeking is a proper consideration not just in economics but also particularly for the study of politics. A recent paper originally published in Political Studies /Vol. 45 (September, 1997), pp. 639-658, makes this clear: Paul Hutchcroft, “The Politics of Privilege: Assessing the Impact of Rents, Corruption, and Clientelism on Third World Development,” also at http://www.coc.ceu.hu/hutchcroft.html.
Mason Gaffney: Red-Light Taxes and Green-Light Taxes
A worm in the apple was waste of water. The same policy that promoted close economy and rapid conversion of land also tolerated waste of water, and even subsidized it by basing the quantity of rival water claims on histories of use - what economists now call "rent-seeking." It was once a minor problem, but times change, and "circumstances alter cases." Today we are stuck with much of our water, a limiting natural resource, frozen in lower uses and withheld from higher ones - exactly what Georgist policy is supposed to prevent. The solution, clearly, is for the State to charge each Irrigation District (and other diverters) per unit of water they take, and reallocate the great surpluses they would immediately stop taking. ... read the whole article
Mason Gaffney: George's Economics of Abundance: Replacing dismal choices with practical resolutions and synergies
Fostering economy in government in the very process of raising revenue
Anti-governmentalists often identify any tax policy with public extravagance. Georgist tax policies, on the contrary, help save public funds in at least two general ways.
a. Putting the unemployed to work saves many public costs, like welfare, obviously, crime-fighting, and, ultimately, putting down civil disturbances and insurrections.
At the same time, these policies deflate the "rent-seeking" motivations of land speculators to sue for state and federal aid. Under George's scheme, the unearned increments secured by "rent-seeking" lobbying for public works would be taxed away.
In the longer run it seems reasonable to expect that more genuine productive job opportunities at home would reduce the pressures for military spending, at least those portions which are strictly boondoggling of a make-jobs nature.... read the whole article
Ed Clarke: Geoisim and the Practice of Public Economics
I have long been sympathetic to the Geoist position, and to the extent that you will let me characterize my views as Geoclassical rather than Neoclassical, Geoism represents a position that many in the public economics profession can gradually be attracted to, as I was over the course of thirty years.
The geoist position, at least as developed by people like Federand Tideman, is simply to advance principles of public economics known as benefit taxation, to structure incentives that will constrain rent-seeking behavior, and share rents from use of natural resources and the exercise of government privileges more equitably among citizens (present and future, ours and the world's citizens). ...
The ideas are contained in several recent articles by Martin Bailey, one of Chicago's most famous public finance professors, who recently died. Nic Tideman has taken on the task of publishing his posthumous work on A Constitution for A Future Country. In his articles (Public Choice, 1996, 1997), Bailey structures a set of incentive compatible decision mechanisms and agenda setting/referendum arrangements that essentially mimic the operation of the private market in the public sphere.
These markets largely eliminate the incentive to rent-seeking and politically exploitative behavior and to the extent that community-created values are appropriately reflected in land rents (ie., the building of a dam or flood control project) as opposed to some good that has non-material or symbolic value (Bailey, 1996, uses the example of public support of a monarchy), then there is a strong motivation to adopt what amounts to LVT and/or the appropriate (supplementary) marginal cost (user) charges. ... Read the whole article
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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper