Sunday, 30 October 2011

Some Questions for Georgists / Geo-Libertarians

I posted this at the progress.org forum...


I am willing to accept arguendo the ethical arguments that support land value recapture as described in the recent article by Edward B Miller.

He says "The land value must be recaptured to the fullest extent possible, not simply as a means for funding essential services. If the government is limited enough and well-managed enough to not require all of the land rent, it should still recapture all of it and distribute the surplus as a flat Citizen's Dividend, since that value truly does belong equally to all. This dividend would not only be essential for justice, but would provide a strong incentive for all parties to keep public services lean and efficient."

I have a number of questions about this passage.

1. What does he mean by "the fullest extent possible"? i.e. how does the government work out how much needs to be recaptured from each landowner, without crossing the line beyond which recapturing becomes aggression?

2. Roughly speaking, how much revenue do you expect the government to raise through full recapture, compared to, say, it's current tax revenue? More? Less? What if this is not enough to cover all "essential services"?

3. Who decides what an "essential service" is? What happens if there is a disagreement among the citizens about whether recaptured money should be used to pay for some service, or whether it should be left to market competition?

4. For any services that are to be provided by the government or paid for out of recaptured money, how will economic calculation be carried out? i.e. in the absence of free market competition and free market prices, how can the government know that it is using resources efficiently?

5. How will the government operate, ideally? Monarchy? Democracy? How will public-choice issues such as the influence of special interest groups whenever there is a government, be avoided? How large a land area ought each government to cover, and is secession allowed?

That'll do for now. Thanks.

10 comments:

  1. 1) By "fullest extent possible" I mean to show that recapturing land rent is essential for justice in just the same way as minimizing murder is. I agree there are diminishing marginal returns in trying to recapture every last crumb, and Mason Gaffney explained that exact point in more mathematical detail in a seminar.

    Can't find a published paper on that, but you could email him about it and he would likely respond.

    It isn't that we should expend all our resources trying to eliminate all injustices from the world, but we should to the fullest extent possible.

    2) The revenue that can be expected is very high. The total land value of the nation is quite high, as one would imagine

    Here's a quote from a paper from the Federal Reserve on residental land values alone:

    “The Board of Governors of the Federal Reserve System Finance and Economics Discussion Series published “The Price and Quantity of Residential Land in the United States” 2004-37 by Davis, Morris A., and Jonathan Heathcote, later republished 2007 in the Journal of Monetary Economics 54, no. 8 (November): 2595-620. The earlier version concluded that residential land amassed a value (a stock) equal to the GDP (a flow) as of 2003 Q3 and that housing investment leads the price of residential land by three quarters. The 2007 version estimated the value of residences to be $24.1 trillion, or 1.43 times greater than the stock market. Using the building-replacement scheme, they still conclude land equals 46% of total property value. They also estimated farmland at a bit under one fifth of home sites.”

    http://progress.org/geonomy/Files/EEAPhl10_1.doc

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  2. 3) This problem exists under any and all political systems, and is not particularly the realm of Georgism. Geo-libertarians have all manner of beliefs about this. Dan Sullivan started out as basically an anarcho-capitalist, but he now supports the idea of Single Tax Corporations which are bound by their own charters and use the jury system for most decisions as opposed to democracy. On the other end you have people who want something closer to Social Democracy and advocate for public banks.

    Single Tax Corporations nowadays, like Arden, Delaware, have to rebate income taxes in order to achieve the goals of Georgism, since they are within the federal government's jurisdiction. Dan Sullivan's idea was to go even further and actually penalize people to the extent that they live under zoning restrictions, to give them incentive to eliminate those restrictions. That seems a bit radical, but maybe it would work. I'm pro-experimentation.

    Although Arden prosperous, they are probably much less prosperous than they could have been without that necessity of rebating income taxes. Nevertheless, they are often rated as one of the best places to live in the country.

    By contrast, places like Denmark have had a history of Georgist-style reforms at various times. Unfortunately, some reforms in the late 1960s dampened the extent of their value capture. Nevertheless, one might consider them more social-democratic, but they are often rated as one of the happiest countries. You can read more about that history here:

    http://www.progress.org/archive/geono05.htm

    I would be comfortable with either model as long as it is proving itself workable, and I do essentially think that competition among various systems would help show the strengths and weaknesses. So many otherwise-noble ideas have miniscule effects because of the land problem, and it would be nice to see how various communities flourish under value capture, not just Hong Kong and Arden, DE.

    4) A Citizen's Dividend essentially cedes no authority to the government as to where the wealth ought to be spent, it merely ensures that those who own it are the ones who receive it.

    A more social-democratic approach might use some for particular public services. If it turns out that the freedom unlea

    I don't claim to speak for all Georgists, but we come out of the classical liberal tradition and if you read Henry George or any of the other figures I quoted in the article, I think you'll find that all of them were hostile to command and control schemes. I consider myself a follower of that great tradition.

    Nevertheless, I think there are certainly ways to even exceed the efficiency of the market since the market doesn't internalize all costs. Thus, I personally would support things such as prizes for contributions to the technological commons, in regards to renewable energy and so on. Yet, value capture itself would improve the efficiencies there, and solve many other issues, so prize systems are not the focus of my advocacy.

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  3. This comment has been removed by the author.

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  4. 5) I don't speak for everyone, so my ideas aren't super relevant here. I personally believe in the idea of constitutionally-limited republics or any sort of polity which uses a strict charter or bylaw which preserves freedom. I tend to like any ideas that limit corruption. I think democratic republics work ok if done properly, but it is time for very major reform.

    Good reforms to the current system would include the Schulze Method of voting. Before that was developed, the idea of Ranked Pairs was the most notable, and it was actually developed by the Georgist scholar Nic Tideman.

    Another idea I like is the proposal from ThirtyThousand.org which claims that smaller electorates have proven to be more effective at eliminating corruption.

    http://thirtythousand.org/

    Essentially, I'd want the idea of value capture codified into some sort of constitution.

    Taxes on land are arguably the only taxes, besides head taxes, which are allowed by the Constitution prior to the 16th Amendment... although we didn't make enough use out of that. We mostly used tariffs and outright land sales. If there had only been leasing, and no sales, we would have essentially achieved the ideal of value capture and never needed tariffs or income taxes or anything else.

    There are a range of views in the movement, and all the discussion groups show evidence of that. Some in the movement believe in consensus democracy, David Graeber style. Some believe in a very Montesquieuian republican government. Some have even pined for a Georgist African dictator to rise up and dramatically implement much-needed reforms (see the novel Allodia).

    Still others believe in geo-anarchism, like Fred Foldvary

    http://www.anti-state.com/geo/foldvary1.html

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  5. Thank you so much for your thoughtful consideration of the issues.

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  6. So basically what ancient China did, then? Trying to divide up all of the land equally. Complete idiocy.

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  7. Graham wrote:

    > 1. What does he mean by "the fullest extent possible"? i.e. how does the government work out how much needs to be recaptured from each landowner, without crossing the line beyond which recapturing becomes aggression?

    IMO it just means recovery of the full rent that the high bidder willingly pays, consistent with the predictability producers require when investing in significant fixed improvements (I would envision low-cost options to prepay rent for several years, and to lock in rent indexed to GDP for many years). I personally doubt that more than about 99% of rent can be recovered without incurring marginal costs greater than the marginal revenue. And IMO it would be better to settle for 98% than try for 101%.

    > 2. Roughly speaking, how much revenue do you expect the government to raise through full recapture, compared to, say, it's current tax revenue? More? Less? What if this is not enough to cover all "essential services"?

    There is great disagreement about this, even among geoists. The main "problem" is that a rent recovery economy will be radically more efficient, and it is not clear if the increased advantage to productive use of land (demand) will outweigh the increased availability of good land (supply) as vacant and under-used land is brought into productive use. It may also be different depending on the current state of the economy, property taxation, etc. in each jurisdiction. Certainly there will be enough revenue for essential services. Land rent is an enormous fraction of the economy; in most advanced OECD-type countries it is comparable to the government fraction.

    > 3. Who decides what an "essential service" is? What happens if there is a disagreement among the citizens about whether recaptured money should be used to pay for some service, or whether it should be left to market competition?

    That's more a question for political science rather than economics. IMO it will be found that government is a more efficient provider than the private sector of quite a lot of services and infrastructure that have public good or natural monopoly characteristics, once their full value can be recovered to pay for them instead of being pocketed by landowners in return for nothing, as a welfare subsidy.

    > 4. For any services that are to be provided by the government or paid for out of recaptured money, how will economic calculation be carried out? i.e. in the absence of free market competition and free market prices, how can the government know that it is using resources efficiently?

    It is the CURRENT system that lacks free market competition and free market prices, as they only become POSSIBLE with land rent recovery. Without it, there is a huge welfare subsidy to the landowner, which inherently violates free market principles. No calculation problem arises with land rent recovery, as every input is priced by the market. Government is just another buyer.

    > 5. How will the government operate, ideally? Monarchy? Democracy? How will public-choice issues such as the influence of special interest groups whenever there is a government, be avoided? How large a land area ought each government to cover, and is secession allowed?

    Those are problems under any revenue system. Recovering publicly created land rent for public purposes and benefit just aligns government's desire for revenue with the public interest, making government self-funding. It is the ONLY POSSIBLE way to do so.

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  8. Iain said:

    > So basically what ancient China did, then? Trying to divide up all of the land equally.

    No. Just requiring those who forcibly deprive others of their liberty to use the good land to make just compensation to those whose rights they are violating.

    > Complete idiocy.

    As they say in Japan, "It's mirror time!"

    You might want to ponder the fact that the ancient Chinese found that dividing up the land equally from time to time worked a lot better than supporting a parasitic caste of wealthy, idle, greedy, privileged landowners. A similar system worked well in Okinawa, effectively banishing poverty from that happy island for many centuries.

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  9. 1. The fullest extent possible just means the most revenue gained per unit cost. Cost can be both in money and liberty/privacy consequences. Good enough is good enough. The government can do appraisals like it does not. Such appraisals can be challenged. I personally prefer a bidding system, so each person pays whatever tax they think is fair. In both cases, there is the issue of non-moveable investments, which I feel should be compensated for, but the question is how much? Fair market value, cost of production, depreciating cost of production? That, to me, is the biggest problem Georgism has to overcome.

    2. If economic land is to include the EM spectrum, riparian, mineral, oil, and fishing rights, as well as parcel land then estimates range from 14% to 33% of GDP in the U.S. So ~2 to 4.7 trillion dollars for all levels of government. Additionally, there are estimates that the current tax code and compliance costs make the U.S. economy only 77% as efficient as it could be. On top of that, the up front costs to start a business or buy a house funnels a bunch of money into the banking sector rather than into public goods. Land value recapture makes land free or nearly free to "buy," but more expensive to hold. It's more pay-as-you-go.

    If the U.S. ended its imperialism and drastically cut back on its welfare, $3 trillion (middle of the road figure, and the most likely according to the few studies I've seen) should be enough to fund everything with money left over for every adult citizen.

    If it's not enough, then fund as much as you can with that tax first before resorting to more destructive taxes.

    3. It'd be decided however people want it to be decided, just like now. I'd prefer that decisions and spending are done as locally as possible with money trickling UP to the larger governments, so people have more control, there'd be less waste on average, and there'd be more options to vote with one's feet.

    4. Any government operation will be subject to the calculation problem and geoism doesn't solve that. I lean toward minimal government services with a large citizen's dividend. However, if most spending is local, then different governments can try different things: there can be those with many services and small or non-existent dividends, and others which are almost entirely dividend.

    5. Again, geoism doesn't answer these things, it only looks at the freedom lost when people are excluded from natural opportunity and better ways to fund public goods (where user fees are impractical). I believe secession should be a primary right, thus I'm a panarchist.

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  10. اننا في شركة الرائد للخدمات المنزلية نقدم خدمات ممتازة في الدمام بافضل الاسعار بجودة عالية لمزيد من الخدمات تفضل بزيارة

    شركة مكافحة حشرات بالدمام شركة مكافحة حشرات بالدمام
    شركة تنظيف سجاد بالدمام شركة تنظيف سجاد بالدمام
    شركة تسليك مجاري بالدمام شركة تسليك مجاري بالدمام
    افضل شركة تنظيف بالدمام افضل شركة تنظيف بالدمام
    شركة مكافحة الفئران بالدمام شركة مكافحة الفئران بالدمام
    ارخص شركة نقل عفش بالدمام ارخص شركة نقل عفش بالدمام

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