Saturday , 19 April 2014

A Critique of Georgism

220px-Henry_George

Georgism is a political/economic school of thought originated by Henry George. Its main tenet is that economic success and political freedom go hand in hand with government being the landlord and renting out the land to private citizens, with the rent then being equally distributed among the people. It purports to be a free-market school of thought: Georgists prize freedom of trade and contract. It can even be reconciled with anarcho-capitalism: The government can be substituted for a competing network of courts in which class action lawsuits against a land holder claim rent that should have been paid to the people but wasn’t. My six main critiques of Georgism are based on pollution, sovereignty, monopolization, speculation, value, and immigration/emigration.

A Georgist land holder is the top bidder for a piece of land. Land rent is paid in as close to a continuous manner as possible. In Hong Kong, land is held for a period of fifty years before its lease must be bid on again, with payment of rent at the beginning of the holding period. Georgism takes this idea to the extreme. Land is held for the shortest possible period before its lease may be bid on again. One can imagine a daily payment of rent, with a daily chance to unseat a land holder by outbidding him.

So, what incentive does this give to the land holder? The land holder is paying the market rent of the land. So, if the worth of the land can be driven down without the land holders’ profits decreasing, the land holder saves money. One can imagine a factory with several hundred acres of land. In a Georgism, it is in the interest of the factory to pollute the land, since this drives the worth of the land and its market rent down. If the factory owned the land, then the factory would have an incentive to maintain the value of the land, for any company’s goal is to own valuable assets.

Also, a lawsuit against a polluter is a nonsensical notion in a Georgism. In a system of land ownership, pollution onto someone’s land that causes a decrease in the worth of the land is offset by a lawsuit against the polluter for the amount of financial harm i.e. the decreased worth of the land. In Georgism, however, there is not financial harm when someone’s land worth decreases: There is financial gain, because it results in the land holder paying less rent. This incentive problem might be solved through regulation, but if there is to be widespread regulation of an individual’s activities on the land he holds, then Georgism ceases to be a theory in harmony with free market ideals.

Moving on to the problem of sovereignty. If Georgism is a theory in keeping with libertarianism, then government should be as local as possible. But let’s examine a sovereign political entity in a Georgist world. A group of people hold a piece of land in common, distributing the rent amongst themselves. But if they deny others outside of their group a share of the rent, they are no different than a homeowner’s association who refuses to pay its rent to the government. If land owner sovereignty is done away with, then political sovereignty must be done away with as well. Just like a land holder can be evicted for failing to pay his taxes, a town could be invaded by a larger empire on the Georgist grounds that it was refusing to pay tribute to the people at large for the natural resources it held.

Now on to the issue of monopolization. If there is a large financial entity, it can easily conquer whole territories in a Georgist system. It can simply outbid the land holders of a town, and then pay the land value tax to itself. Across the world, governments have forcibly relocated villages so that wealthy people and industrial interests can claim the land. Georgism would provide these governments with the perfect excuse: The poor villagers would simply be outbid, and then when they are forced to move hundreds of miles away into an overcrowded city, they will not receive the land rent, since land rent is collected at a municipal level.

Speculation is another important thorn in the Georgist theory. When a region is developing, not all the land should immediately be put to use: It should be conserved for later, more important uses. For instance, one can imagine a burgeoning Georgist city that, in keeping with the Georgist economic theory, did not have land speculators. Cemetaries would have to be constantly be dug up, since more of them were built then was prudent, for the land was cheaper than it would be with land speculators in the early stages of the city’s development. Green space would likely be far lower, since conservancy purchases (by private or state groups) are by definition purchases of speculators’ lands or speculation itself. Regulation and central planning could be used, but no free marketer would agree they are more effective in determining growth trends than the market, and, of course, free market thought is inherently opposed to such policies in the first place.

Another failure of Georgism is the failure to differentiate between value and price. Value is inherently subjective whenever trade is concerned: If I value your tie more than my shirt, and you value my shirt more than your tie, then we trade. But the Georgist “land value” is an objective number set by the highest bidder. A farmer might value the family farm far more than what some corporation will bid for it. A congregation might value its church far higher than McDonalds does. A person might value their home far more than their neighbor does, but it is not land value that determines land holding in Georgism, despite the Georgist use of the term: It is simply an auction.

In a free world, people are not dogs kept in their master’s cage: One is free to leave and to enter any country he wants. But examine the incentives under Georgism: The financial incentive to allow immigrants in is smashed. In a region with a large amount of natural resources, the dividend from these resources paid to the people would directly go down as more immigrants entered. Furthermore, there would be an enhanced incentive to move to these resource-rich regions, and a democratic government would have all the more incentive to restrict their entry. People do not tend to vote their own money away, and combined with the naturally xenophobic tendencies of people, human migration would be severely limited.

Georgism proclaims to be a free market theory, but it simply isn’t. Georgism promotes pollution, regulation, invasion, monopoly, resource squandering, central planning, an eradication of family and religious traditions tied to the land, and an end to the free movement of peoples on this earth. A system of land ownership is the only system wherein free market ideals can flourish.

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About Andrew C

Andrew C
Andrew Criscione is an economics enthusiast: He is constantly trying to figure out why people perform the economic actions they do and what the seen and unseen consequences of those actions are. In addition to writing for "Speak Liberty Now," he produces content for the Facebook pages "I bet Ludwig von Mises can get more fans than John Maynard Keynes," "Laissez-Faire Capitalism," "TRUTHgasm," "The Right to Secede," and "Liberty.me" on facebook and has contributed to the Capitalism Institute, CopBlock, the Bastiat Institute, Portal Libertarianismo, and the Mises Institute's blog "The Circle Bastiat." Andrew is President and Protest Organizer of Antiwar New England, as well as founder of the Manchester Austrian Economics Group. He works for money in his spare time at a communications and marketing day job.
  • David

    Well, you make a few good points, but seem a bit confused about what geoliberarianism actually stands for. Have a look at: https://sites.google.com/site/justindkeith/home/geolibertarian-faq for a good summary and some counterarguments

    • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

      How so? In what way am I mistaken? I’ve studied land value taxation very thoroughly.

      • http://www.facebook.com/people/Adrian-AC/624371629 Adrian AC

        geolibertarians stand for individuals only having full ownership of manufactured
        goods. Natural resources e.g. land, water, sea, air, EM
        SPECTRUM, space, the moon etc must be leased from the community. You
        are correct that the initial setting up of the community and its size
        and boundaries is arbitrary. Freeholds on resources are held by
        community trusts in perpetuity. They are never sold or taken over.
        Trusts sell leases and collect ground rents or take some form of
        payment linked to the unimproved value of the resource set
        by the market (thus economic value generated by the community is not lost to a landed oligarchy or speculators but captured and reinvested in the
        community). Note that land speculation has no risk and requires no development of the land. If you hold a quality piece of land for 20 years you will make
        money because of the investments made around it by others.
        Leaseholds can challenge the unimproved valuation the community
        places on the resource in court. Evidence from multiple sources shows
        that assessments of unimproved land values are easily made
        and rarely challenged. Length of the lease is arbitrary but 50 or 100 years is common and these can be bought and sold in the market and sub leased and sub-sub leased. Freeholders i.e. the community can place rules on pollution in the terms of the lease. Trusts e.g. land trusts reinvest their revenues in infrastructure to maintain and boost land values and thus maintain their revenues. Infrastructure pays for itself. Thus the land trust would be corrupt if it did not have a system to charge lease holders for, polluting, lowering
        land values, reducing community revenue and jeopardising the maintenance of
        existing and future infrastructure. How long would a polluting factory be able to operate with crumbling community infrastructure ? Even if the lease allowed pollution over the long run the factory would have poor roads, drains, street
        lights, bus service, fire service etc … The geolibertarian way is the world as a patchwork of non-profit condminiums. Who runs the community land trusts ? Their boards are elected from the local community and they are paid expenses only.

        • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

          “Natural resources e.g. land, water, sea, air, EM
          SPECTRUM, space, the moon etc must be leased from the community”
          Who is the community? Do you mean every human being, and that there should be one government ruling mankind? What is the difference between a board of trustees and a UN Congress, if they are being elected by the whole of humanity?
          ” land speculation has no risk” It has the same amount of risk as speculation in any other commodity: Land values can go up and down.
          “If you hold a quality piece of land for 20 years you will make
          money because of the investments made around it by others.”
          If you hold a piece of land in a neighborhood that deteriorates, you will lose money.
          “assessments of unimproved land values are easily made
          and rarely challenged”
          Then why do some land speculators make more than other land speculators?
          “Length of the lease is arbitrary but 50 or 100 years is common”
          There is plenty of time for speculation in 50 or 100 years: But this isn’t really what George argued for. He wanted continuous, at the very least annual, and more likely weekly reassessments of the land to prevent all speculation.
          “Freeholders i.e. the community can place rules on pollution in the terms of the lease.”
          Yes, there would need to be massive environmental regulation, as I discuss above. I would argue the EPA or its equivalent has very little to do with a free market, and perpetual property rights are a much better decentralized, fairer, and more-efficient way to make sure pollution remains in check.
          “The geolibertarian way is the world as a patchwork of non-profit condominiums”
          Condominium fees are typically about 1% of the value of the condominium. George argued for fees of 100% of the value of the condominium, big difference.

          • http://www.facebook.com/people/Adrian-AC/624371629 Adrian AC

            While people can disagree about solutions, surely all libertarians must accept that there is a ‘land problem’ that must be confronted ? i.e. that socially created value is lost to society via capital gains in land. There is no such thing as a free lunch but an educated society would demand that land owners receiving capital gains from others investments pay for infrastructure proportional to their gains. If they can’t pay then they should sell their land resource to someone who can. The finite land resource wasn’t manufactured by anyone, is required for all economic activity and thus it is immoral to occupy it without paying for it – especially if you do not have the means to put it to its most valuable use. Land owners will always receive bills because roads, street lights, fire service, drains etc … aren’t free. It is just a question of who calculates these bills, what calculation method is used, and what is the revenue spent on ?

            • http://www.facebook.com/people/Adrian-AC/624371629 Adrian AC

              The world only makes sense when land is considered a unique factor of production and not confused with capital as a whole:

              http://onlinelibrary.wiley.com/doi/10.1111/j.1536-7150.2007.00561.x/abstract

              http://www.foldvary.net/works/geoaus.html

              • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

                But your arguments could equally be applied to any arrangement of the state auctioning the land, whether the lease is daily, yearly, by the century, or indefinitely i.e. property ownership. I just think the latter is the only one that addresses the concerns I’ve put forth. I think Hong Kong does fairly well with 50-year leases. 100- or 200-year leases would be even better.

                • http://www.facebook.com/people/John-Waterways/100003400434958 John Waterways

                  Leasing land is not ideal. Paying the full market rental value, assessed annually, and paid monthly avoid corruption. and gives the govmt a steady income to pay for services. Land is best left in private hands and apply LVT.

                  • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

                    And how is paying a private nonprofit landlord i.e. municipal corporation the full market rental value, assessed annual, and paid monthly to avoid corruption, different than leasing land? How does this change if it is a private for-profit landlord?

  • David

    One main problem with your critique is that you assume that geolibertarians argue for a “collective ownership”. They don’t. Instead they believe, no one can own the land unconditionally, because otherwise property of the fruits’ of one’s labour is conditional. A quote from Geolibertarian FAQ could perhaps explain this:

    “The only alternative to George’s proposal is to treat land as the unconditional property of a relative few. The problem with this alternative is that, when taken to its logical conclusion, we find that the fruits of individual labor must inevitably be treated as conditional property for everyone else. Why? Because no one can produce wealth in the first place unless he or she first has access to land. Consequently, since all land is legally occupied, and since producing more land isn’t an option, those who don’t have titles to land cannot legally access the earth — and thus cannot legally sustain their own lives — unless they first “consent” to pay a portion of their earnings to those who do have titles to land. (This is why geolibertarians regard landed property as the mother of all entitlements.)

    Land itself does not originate from labor; thus, property in land does not originate from labor, but from the law that confers ownership to an individual or group. Landed property is therefore law-made property, and is, in that sense, clearly distinct from man-made property. Thus, to compel one group to pay rent to another group for mere access to the earth is to elevate law-made property above man-made property. And since the latter is an extension of self-ownership, to elevate the former above the latter is to strike a blow at the very foundation of property rights.

    (…)

    To this some might object that the LVT does just that — compels one group to pay rent to another group for mere access to the earth. While this objection may sound logical at first, it is fatally flawed. Why? Because it ignores a universal law of today’s economy: the fact that land rent gets paid either way — regardless of whether or not it gets diverted into the public treasury.

    Thus, it is not a question of if land rent gets paid, but to whom and on what basis.

    If it is paid exclusively to titleholders on the basis of the earth being the unconditional property of titleholders, then, for reasons given above, the property that non-titleholders have in themselves and in the fruits of their labor is thereby violated. If, on the other hand, it is paid to the community on the basis of the individual members of that community each having an equal right to land, then said property right (the right to one’s self and the fruit of one’s labor) is thereby upheld for everyone — both titleholder and non-titleholder alike.”

    • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

      I would ask you this: What is the difference between the state auctioning off the land and the state auctioning off 1-year leases to the land? State auctioning of land is no different than the payment of all expected land rental in the future going forward: Rather than a 1-year lease, or a 50-year lease, it is an indefinite lease. Now, let’s get down to George’s theory: George said that the land value tax should be paid continuously, which can be thought of as a daily lease of the land. So, the moral arguments you raised above could be applied to both economic systems: State land auctioning and state land rental. But I have put forward several critiques in the article above showing how state land auctioning is far superior to state land rental: Do you have any rebuttals of those arguments?

      • David

        The state has no way of knowing the value of future land rentals, as they change constantly and depend on the creative social energy. That is why an annual rent makes more sense than the sale of land at the price derived from extrapolating current land value. According to geolibertarians, the land is your individual property: you are free to sell it, to do with it anything you like. It is only that every human has an equal right to benefit from natural resources (rent) and hence what you pay is merely the annual rent value BACK to the community. The value of the land (its rent) depends on the community and its preferences. While it is possible that someone would buy all the land in town and get rid off everyone there, what would be the point? The value of land surrounded by no one willing to use it, would be close to zero.

        • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

          David, you ask: “While it is possible that someone would buy all the land in town and get rid off everyone there, what would be the point?” Well, what is the point of wealthy Chinese businessmen kicking peasants off their land to build a golf course? Because this happens all the time, and it would be exacerbated and justified under Georgism. You say: “According to geolibertarians, the land is your individual property” But it is not property at all if it can be seized from you at any time when someone comes along and offers the state a higher LVT for it. I don’t own my hat if the hat store can take it back from me as soon as someone offers a higher price than I paid. You say: “The state has no way of knowing the value of future land rentals.” Precisely, and that is why the state cannot be trusted to implement zoning, conservancy projects, and apportion which land should be developed at which time in a city’s growth. This is the function of land speculators, and this is why speculation is so important. As any Georgist or non-Georgist who’s studied the matter knows, an annual lease on land (and George argued for a shorter term than that) leaves little room for land speculation by private actors. Just like speculation in the commodities markets prevents shortages of materials (even materials with a vertical supply curve), speculation in the land markets prevents overdevelopment.

          • David

            I see what your missing. You believe that the rent (LVT) is the only cost of having a monopoly to use it. That’s not the case. You buy the land for a market price and then every year you pay the rent (fee). Why would the Chinese peasant be “forced” to sell their land if their tax was very low (agricultural lands are worth little as they do not have much infrastructure around them)? And if they were offered a very good price, why should they refuse?

            • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

              The market rent of a piece of land is whatever the highest bidder will pay to rent it. Chinese peasants don’t have much money: Rich people who want to build golf courses on the peasants’ land have a lot of money. Rich people would outbid the villagers: The village would be forced off their land because they couldn’t pay the market rent. The villagers would have to leave for some overpopulated city: They wouldn’t be getting a citizens’ dividend from the rent, because the rent is collected at a municipal level, and they no longer live in the municipality. Right now, the Chinese government does this exact same thing, except it doesn’t bother using the excuse of Georgism. Though if I was their PR man, that’d be the first thing I’d advise the Chinese gov’t to do.

              • Ziv

                Teal, I think what he meant was that the space wouldn’t be “rented” annually, but that the “rent” be merely a fee levied upon owners. The peasants would still own the land. For an explanation of what rent is see: http://www.henrygeorge.org/rent1.htm

                • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

                  I know what rent is, I’ve studied George thoroughly. The rent is a fee levied upon land holders: It is equal to the market value of the land. The market value of the land is whatever people are willing to pay for it. A villager with very little money cannot afford the market value of land that is worth hundreds of thousands since it can be converted into a nice golf course.

                  • Ziv

                    It does not equal the market value of the land, Andrew. “In classical economics, “rent” is the return or yield of land as a factor of production. The classical economists such as Adam Smith and David Ricardo recognized that landowners, as an ideal type or economic role, receive land rent without contributing anything.”

                    • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

                      Yes, you are correct: “‘rent’ is the return or yield of land as a factor of production”
                      And the yield in my above example is whatever fees the golf course could generate, which are much higher than what the peasant’s can afford. They would be evicted. Can we at least agree on that: It’s basic rent theory.

                    • Ziv

                      If the land is so valuable then the peasant will be able to sell it to the highest bidder (if he cannot afford paying the rent). I don’t understand why you call this “eviction”. If I sell you my car, I get evicted from it?

                    • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

                      Again, you are missing that as the LVT approaches 100%, the price of land sale approaches zero. If there is an LVT of 80%, then the price of land sale is lower than if there is an LVT of 40%, because the price of land sale factors in the payments that must be made in the future. An LVT of 100%, what George argued for, is the exact same economic activity as a rental/lease of land from the government: If a person’s lease is up, and you outbid him on it, you get the lease: You don’t have to pay the ex tenant anything. An LVT of 100% collected on a weekly basis is the same as lease being expired and renewed every week, wherein anyone who can derive more utility from the land can unseat the current lease holder any week when the lease expires.

                  • Ziv
  • Ziv

    Teal, in response to your facebook comment that:

    “Factory owners can even move into a nice neighborhood, pollute as much as they can possibly pollute, and end up paying virtually no land value tax as everyone is forced to leave”

    why would factory owner-to-be want to move to a nice district (the value created by the fact it is nice) and then destroy it? What would be the rationale here? If the value of the land does not depend solely on its non-pollution, then even when polluted it would retain the value (of, let’s say, being close to a major highway). If polluted land can still be used to benefit from its value, then the value won’t drop too much. Besides, if one’s pollution goes beyond his property, he/she will be sued by the neighbours for damage (not the loss of “value”, but the actual physical damage).

    You also write:

    “You [Ziv] say: “This does not mean that anyone should be exluded from its benefits. Most geolibertarians argue for open borders and asumme that every human has an equal right to benefit from nature’s resources.” This would mean a one-world-government type situation. It is strongly opposed to those who value local government over empire.”

    Nope, it wouldn’t. It could mean a world full of small sovereign entities, each managing land rent differently. In such a world (with open borders), one would be free to choose whichever sovereign entity is best at collecting and managing rent. Obviously, we can imagine a situation in which there are tyranical/socialist or other types of governments not collecting/sharing the rent. This however, does not mean that one that would, would exclude humanity from using it. What you are saying is that a pocket of liberty is worse than the uniform world of unjustified monopoly. I suggest the opposite. A sovereign entity with land value tax and open borders would be in perfect agreement with geolibertarian ideas.

    You need to realise, that you do pay the rent already anyway. Anything and everything you buy includes this rent, this monopoly fee that goes to the idle owners of nature’s good. The cost of anything is not merely one’s labour, but also the natural resources and space (land) used in the process. There is a good quote in another comment:

    “To this some might object that the LVT does just that — compels one group to pay rent to another group for mere access to the earth. While this objection may sound logical at first, it is fatally flawed. Why? Because it ignores a universal law of today’s economy: the fact that land rent gets paid either way — regardless of whether or not it gets diverted into the public treasury.

    Thus, it is not a question of if land rent gets paid, but to whom and on what basis.

    If it is paid exclusively to titleholders on the basis of the earth being the unconditional property of titleholders, then, for reasons given above, the property that non-titleholders have in themselves and in the fruits of their labor is thereby violated. If, on the other hand, it is paid to the community on the basis of the individual members of that community each having an equal right to land, then said property right (the right to one’s self and the fruit of one’s labor) is thereby upheld for everyone — both titleholder and non-titleholder alike.”"

    • Ziv

      I will give you an example. Imagine you produce hamburgers. Surely, if you used rotten meat, polluted oil, infested salad and horrible ketchup, you would be saving heaps of money… but, would you? Who on earth would be buying your hamburgers? Similarly with land. The value of land is the rent (are you familiar with the law of rent?), hence if by pollution you do nothing to upset the economic benefits of the land, your tax is still the same. However, if by pollution you destroy the value of the land (your factory starts producing contaminated products, it cannot find workers willing to work there, etc), you do pay lower tax, but you also lose most of the economic opportunities of the land.

      • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

        The owner of the factory is in the business of selling whatever trinkets his factory produces. He does not care about the fact that large vats of a dangerous chemical are being buried on the land he holds: He cares about paying less in LVT and saving on disposal costs. You say: “if by pollution you do nothing to upset the economic benefits of the land, your tax is still the same,” and you are right. And if you sharply decrease the economic benefits of the land, you pay less. And turning a piece of land into a poisonous chemical depository that cannot be used for housing or farmland and, if it is ever to be rehabilitated, would take a million dollar Superfund effort, is sharply, sharply decreasing the economic benefits of the land. Whereas before it could be used for anything, now it can only be used to produce trinkets for a few years before the land has been filled up with chemicals and the factory owner decides to shutter the factory and move on to another location.

        • Ziv

          Think again. “And if you sharply decrease the economic benefits of the land, you pay less” – yes, but if you do so, you yourself also lose these economic benefits and hence earn less from the land. It’s that simple. If you turn your land unusable it is unusable not only for third parties but for you yourself. Besides, as mentioned below, you do confuse the concept of economic rent with ownership. The factory owner still OWNS the land. If he destroys it beyond usage, he will not be able to sell it. True, he will pay less tax, but he will also be able to make less money of his land and he won’t be able to sell it. The land-value tax is merely a reflection of the benefits derived from land ownership. If these are small, then the tax is small.

          • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

            “If you turn your land unusable it is unusable not only for third parties but for you yourself”
            A much lower quality of land is required to have a factory on than is required to have a farm or suburban development on.
            “The factory owner still OWNS the land. If he destroys it beyond usage, he will not be able to sell it.”
            As the land value tax approaches 100% of the economic rent, the selling price of the land approaches zero, this is the main economic foundation behind Georgism. If you can derive a greater economic benefit from a piece of land than the current holder can i.e. if you can pay a higher rent for the land than the current owner, you can offer the government more money for it and get the lease: You do not have to pay the current owner anything if he can’t afford to pay the economic rent.

            • Ziv

              the economic rent is calculated on the annual basis, the property value is much greater as it can be hold indefinitely. I think that’s what might have confused you. I don’t think George argued for a tax equal to the 100% value of a property, but rather a tax equal to annual rent.

              • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

                George argued that the entire economic rent should be captured in the LVT i.e. an LVT of 100%: The economic rent is whatever economic utility can be derived from the land. The amount of economy utility that can be derived from the land is how much money can be made from the land: If someone can make more money on a piece of land i.e. pay more rent than the current land holder, then the current land holder is evicted, since he cannot afford to pay the full economic rent of that piece of land. For instance, an Amish person with a farm on top of an oil field who refuses to drill cannot pay the economic rent, which might be millions. The economic rent is the amount the oil company is willing to pay to drill there.

                • Ziv

                  Yes, but rent is not 100% of the property value! Rent is a differential between the productive capacity of the land and the margin of production. http://www.ethicaleconomics.org.uk/2010/08/the-law-of-rent-the-concept/ And ok, if the Amish had land worth billions and planted cucumbers there, then they would probably need to sell it to someone (as the still own it – a concept you seem to be failing to grasp) to the highest bidder. And rest assured, there are heaps of people willing to purchase an oil field. They would then perhaps “be evicted”, but in the same way a guy who owns a massive apartment and cannot afford necessary repairs, heating, body corporate etc costs is “evicted” by being forced to sell it and buy two small apartments for the price. The Amish in question could purchase heaps of more farms, just there where there isn’t any oil.

                  • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

                    You need to study up on your rental economics: As the LVT approaches 100% of the economic rent, the transaction price for the property approaches zero. Someone who cannot afford to pay the rent on a piece of land does not then make money by selling it, because the selling price of land in Georgism is zero. If the LVT was 80%, there would be a small selling price. If the LVT was 40%, the selling price would be higher. With a 100% LVT, the selling price is zero. Think of it this way: If the rent increases on an apartment and the tenant cannot afford the increase, what is the selling price he gets for the apartment? It is zero: He is renting the apartment.

                    • Ziv

                      Well, let me reply with the word of Fred Folvary:”First of all, if 100% is collected, it is only the economic land rent, notthe total rental paid by a tenant. The rental includes compensation for
                      labor services and a payment for capital goods.

                      There would still be a market for land, since the capital goods (buildings
                      and other improvements) would have a market price. One would buy the real
                      estate in order to use it, just as one rents land to use it.

                      But there is no need to set the rate at 100%; 90% would do fine, as this
                      would leave a margin for error and leave a small land price for raw land.
                      This would also enable a finite rate based on the price of land:

                      f = t/(i+t) where f is the fraction of rent taxed, i the real interest
                      rate, and t the tax rate based on the price of land.
                      If i=.05 and t=.45, then f=.45/.50=.9
                      A tax rate of 45% of land value with interest at 5% takes 90% of the land
                      rent. If we set f at 1, then t has to be infinite.

                    • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

                      Think of it this way: The LVT in a Georgist economy is economically the same as someone paying ground rent to a land owner (which is how a lot of urban land is held today). If the ground rent increases, and the land holder can’t pay the ground rent, then the land holder is kicked off his land without any compensation. The Amish, for instance, initially acquired their land at market value. Today, however, they could not even come close to affording the economic rent of the land: A farm can be worth millions, since its highest economic use would be to turn it into a housing subdevelopment, but the Amish are cash poor and could not pay this. They would be forced off their land if even a 90% LVT was charged.

                    • http://profiles.google.com/justindkeith Justin Keith

                      You are correct here. Properly implemented, the tax would eliminate most if not all of the sale price for the land (not the improvements).

                    • http://www.facebook.com/people/John-Waterways/100003400434958 John Waterways

                      Well it never in Denmark when land values rose because the LVT encouraged enterprise – no income tax. It never in the German Chinese colony of Tsingtao when full LVT was implemented. Hong Kong, Taiwan and Singapore are world dynamic economise. Guess what? They tax land.

                      Do some reading.

                • http://profiles.google.com/justindkeith Justin Keith

                  I, for one, don’t argue for that. I argue the “he who wants it most will express that through a CONTINUAL market price.” One can get millions of dollars of utility and, so long as no one is willing to challenge that, then the owner owns no one anything. LVT shouldn’t be for use (except permanently depleting use), but only for exclusion. Depleting use is a form of long-term exclusion though so it still works.

            • http://profiles.google.com/justindkeith Justin Keith

              The factory owner still OWNS the factory. If he destroys the land so that the factory is unusable, he will also not be able to sell it.

              • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

                He will not be able to sell it even if he maintains it in pristine condition with a 100% LVT, since the land price is zero in a 100% LVT environment, see above.

    • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

      A factory owner builds a factory on land in pristine condition. He spend a fortune trucking his waste away. The factory owner then decides that, instead of paying a fortune to truck his waste away, he is simply going to bury it in the ground. Whereas before, the demand for that land consisted of homeowners and other businesses, now the only person who would be willing to buy that land would be another factory owner. The LVT will drop dramatically as the demand drops dramatically. The factory owner will save money. For another example, take a logging forest: With property ownership, the logging company has an incentive to maintain the value of the land by replanting trees and harvesting slowly, because its net assets are reflected in its stock price. With LVT, the logging company has an incentive to deforest the land as rapidly as possible and then move on to another forest or dissolve and give the shareholders its remaining assets in payouts. The LVT turns land value from an asset into a liability. You could also apply the same argument to 4-year crop rotations: Farmers would plant the most valuable crop until the soil was stripped of necessary nutrients and then move on to another farm, instead of alternating crops in a sustainable manner. The LVT encourages businesses to pillage the land, depriving it of its value, and then move on. This might be fixed through intensive government regulation / central planning, but if this is incorporated Georgism ceases to be a free market theory.

      You say that Georgism “could mean a world full of small sovereign entities, each managing land rent differently.” Well, let’s examine this: Suppose there is a resource rich region and a resource poor region, and two governments rule over them. If the government in the resource-rich region refuses to pay a large amount of money to the government of the resource-poor region, then that is no different than the holder of plush farmland refusing to pay his LVT to the holder of barren farmland. If the Georgist ideal that all of humanity deserves its share of LVT from the whole earth, than any country that held out and didn’t pay up would be a target for invasion. Think of it this way: What is the difference between a town and a very large homeowner’s association? If the very large homeowner’s association can be evicted for not paying its tax to the larger government, then why couldn’t a town be invaded for refusing to pay tribute to some larger Georgist government? Both the homeowner’s association and the town have open migration so long as one can afford to move in.

      Rent will always be paid, that is taken for granted. But to who is rent being paid in Hong Kong, where people have 50-year leases of the land auctioned off to the highest bidder? You need to understand that ownership of the land can be viewed as a very long-term lease, and Georgism can be viewed as a daily or annual lease. The interest rate / time preference means that perpetual property ownership and a 50, 100, and especially 200-year lease are practically indistinguishable. The morality doesn’t change whether it’s a daily lease or a 200 year lease, only the economics. Hong Kong has shown that a 50-year lease acts practically the same as a perpetual lease, since time preference is typically under 50 years i.e. the natural rate of interest makes the principal negligible after 50 years.

      • Ziv

        Yet, the rent value does not depend on the demand for purchasing it, but on the rent that can be collected annually from using it. Even if you bury waste and still use the land productively, you will need to pay the same rent, unless the fact that you buried stuff causes your factory to produce terrible products and makes all business activities there difficult. then, and only then, would your rent (tax) decrease.

        As for your example with invasion, well, what stops governments from invading other governments today for resources, etc? The point is that anyone can move to a sovereignty collecting/spending rent. If you live in a resource poor area that doesn’t get any rent from a neighbouring place, you can simply move there and start benefiting. That’s the whole point. The world is full of valuable pieces of real estate and hence don’t worry that everyone would move to the same country.
        Besides, in an ideal world, the rent wouldn’t need to be collected by any government, but by trusts (as described by Adrian below) that would not be bound by political borders.

        • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

          “the rent value does not depend on the demand for purchasing it, but on the rent that can be collected annually from using it” If a corn field can yield more rent than a bunch of homes on a particular piece of land, then the corn field would be on that piece of land in a Georgist system. If a bunch of homes could yield more rent than a cornfield on that piece of land, then the homes would be on that piece of land. Whatever land holder is willing to pay the most determines both the rent value and the amount that is collected annually from using it. So, in the middle of nowhere, a factory’s land would be cheap. In a suburb, it would be expensive, since home builders would also want that land, and the factory would have to outbid them for the land. If the people suddenly stopped wanting the land because it was horribly polluted, the rent of the land would decrease to that of what it is in the middle of nowhere, where nobody wants the land.

          You ask: “what stops governments from invading other governments today for resources” Generally, it is the idea of sovereignty (though sometimes that fails, as in Iraq). But how is there to be sovereignty when any group of people who hold land without paying the land’s rent to the surrounding society are to be evicted? There is no difference, philosophically, between a homeowner’s association of 200 homes and a municipality of 200 homes. If the homeowner’s association should be invaded and evicted for not paying their rent to the surrounding community, then why should the municipality not be invaded for not paying their rent to the surrounding community? Political lines are drawn arbitrarily, it is true, and Georgism provides a justification to ignore them completely, for the poorer areas to invade the richer areas until all is consolidated into a government where everyone on earth gets a citizens dividend derives from all LVTs on earth.

  • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

    These tribal people certainly can’t afford the economic rent of their land. But they’re not about to give in to the Georgist notion that failure to make economic rent payments should drive people off their land.
    http://www.salon.com/2013/02/10/to_get_the_gold_they_will_have_to_kill_every_one_of_us/

  • http://www.facebook.com/mark.wadsworth.90 Mark Wadsworth

    “Georgism is a political/economic school of thought originated by Henry George”

    I like the way you start off the article with a bare faced lie. The first person to actually put this into practice (collecting land rents and dishing it out as welfare) was Queen Elizabeth I of England. And Tom Paine is famous for recommending it a century before George.

    “In a Georgism, it is in the interest of the factory to pollute the land, since this drives the worth of the land and its market rent down.”

    Another bare faced lie.

    The presence of pollution does not affect the location value of the land, and neither do the owner’s own improvements. In any event, it’s not as if the absence of LVT has meant a pollution-free world is it? Environmental laws are a separate topic.

    “If there is a large financial entity, it can easily conquer whole territories in a Georgist system. It can simply outbid the land holders of a town, and then pay the land value tax to itself.”

    By outbidding, it is overpaying and making a loss. And all the money it overpays goes to the people it has outbid as Citizen’s Dividend. The predatory behaviour you refer to is far more common without LVT, i.e. in the real world, today.

    “Another failure of Georgism is the failure to differentiate between value and price… it is not land value that determines land holding in Georgism, despite the Georgist use of the term: It is simply an auction.”

    What better way of establishing the true value than an auction? Whoever values a location most highly is the person who can make best use of it. So all locations will be used by those people who can make best use of it, whether that is for farming, business, leisure, a nice back garden, whatever.

    So your last paragraph is actually a list of things which Georgism discourages and which the absence (high taxation of incomes, heavy subsidies to land ownership) thereof ENCOURAGES.

    • http://profiles.google.com/justindkeith Justin Keith

      Even assuming that one could rebid a lower amount because “TOXIC WASTE” (which magically came from … ? … since it wasn’t there before, one still has to live with the toxic waste. The utility one gets from the land goes down.

      Now, if it’s a factory and they only care about money, why can’t others outbid the land away from them if they don’t agree to an ultimatum to stop polluting, or why can’t they use standard anarchist tools of boycotting, shunning, suing for pollution entering their property, etc.?

    • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

      “By outbidding, it is overpaying and making a loss. And all the money it
      overpays goes to the people it has outbid as Citizen’s Dividend”

      But if the citizen’s dividend is distributed locally, then the ex-residents do not receive it. The current residents pay the dividend to themselves.

      “Environmental laws are a separate topic.”

      This is precisely my point: In a system where land value is an asset, environmental laws ARE property laws: No outside regulatory body is necessary. In a Georgist system, regulatory bodies are necessary to offset the incentive problem of land value decreases being a financial asset.

  • http://www.facebook.com/mark.wadsworth.90 Mark Wadsworth

    “When a region is developing, not all the land should immediately be put to use: It should be conserved for later, more important uses.”

    That’s another bare faced lie. The best way for towns and cities to grow is from the middle outwards. It is stupid to suggest that the best way is for them to grow outwards in patches of used land and unused land, just so that whoever owns those patches can make a massive windfall capital gain later on if his gamble pays off.

    I debunked this one here:

    http://kaalvtn.blogspot.co.uk/2013/01/m-lvt-is-anti-free-market.html#3

    “Green space would likely be far lower, since conservancy purchases (by private or state groups) are by definition purchases of speculators’ lands or speculation itself.”

    Another lie. It is the current rules, where the land speculator can make money by buying up a public park and building on it to sell or rent out privately which incentivises over-development. or by buying land near an expanding city and then sitting tight until the city has expanded around it, keeping the land out of use until it is time to pounce.

    With LVT, there is every incentive for the local council to maintain a sensible balance between public parks and housing. I’m sure you are well aware that Central Park in Manhattan was already partly developed, but the town council of the day realised that they can collect more in property tax from the surrounding buildings by declaring that area to be an open public park? They bought up the buildings which had already been built and demolished them again.
    http://kaalvtn.blogspot.co.uk/2013/01/j-there-would-be-too-much-new.html#1

    • http://profiles.google.com/justindkeith Justin Keith

      “When a region is developing, not all the land should immediately be put to use: It should be conserved for later, more important uses.”

      Correct. People will only put land to use when it costs them more to not do so. I have an additional 5 acre plot that I’m “using” as a buffer between myself and my neighbors. It is being conserved. If population pressures make it such that my excluding them is costing them a lot of opportunity, then I need to give them a reason to respect my claims and, if using that land as a buffer is the highest use, then it can pay the highest tax.

      Less land overall will be used because there won’t be speculative rings and “underused” urban plots causing larger amounts of land to be used overall.

      • http://www.facebook.com/people/John-Waterways/100003400434958 John Waterways

        “”When a region is developing, not all the land should immediately be put to use: It should be conserved for later, more important uses.”

        Correct.”

        Wrong. This is interfering with the free-market. Let people develop land as they see fit. Interfering creates distortions in the economy, not to mention the growth of an area.

    • http://www.facebook.com/profile.php?id=842943 Andrew Criscione

      “With LVT, there is every incentive for the local council to maintain a sensible balance between public parks and housing.” Again, you are assuming central planning, and the main premise of this article is that Georgism presupposes central planning. In a pure market system, the local council would not be making these decisions, private actors would.

  • http://www.facebook.com/profile.php?id=1334113368 Jonathan Hall

    I have never seen a critique of Georgism that was not a dreadful straw man. So I am quite glad I delved into Georgism directly. Here is a good way in.

    http://www.henrygeorge.org/pcontents.htm

    Start there, and then for chuckles come back here.

  • http://www.facebook.com/people/John-Waterways/100003400434958 John Waterways

    Geoism, not Georgism, reclaims commonly created wealth to pay for public services. IT leaves private wealth in private hands.

    Geoism:
    1. socializes common wealth.
    2. Keeps private wealth private

    Correctly we do the opposite:

    1. Privatize socially created wealth – land values and other “economic rent” appropriated by private individuals and organizations.
    2. Socialize private wealth – using income and sales taxes.

    It is simple. It works. It stop boom and busts.

  • wmyl

    I see you deleted the famous rebuttal Dan Sullivan posted here. Really classy. You are intellectual giants.