Read Progress and Poverty as a teenager, did some further reading on the topic, and became a convinced Georgist. He went on to be graduated from high school at the age of fifteen, to earn a B.S. in Physics and a Ph.D. in Materials, and to end up working for the U.S. Patent Office, which is not responsible for his extracurricular opinions and activities. He is a Georgist tutor for the Henry George Institute, on whose board he now serves; he is also a long-time director of the Center for the Study of Economics, and a relatively new addition to the Robert Schalkenbach Foundation’s board.
There’s an article in The Wall Street Journal (Monday, September 30, 2013, p. A18) about Japan’s attempt to regulate its economy, titled, “Japan to Pair Tax Rise and Stimulus.” In a saner world, it wouldn’t be an article in the WSJ; it would be an article in The Onion.
Japan has a high and increasing national debt, thanks largely to its attempts to “stimulate” its way out of the lost decade following the bursting of its real estate bubble. The Japanese, whatever their faults, seem at least to see a little further ahead than some of our politicians, so they’re trying to raise taxes to stop going further into debt, which may be a defensible policy. But they’re doing it by raising the sales tax from 5% to 8%, which is an indefensible idea (note page 4 of Professor Gaffney’s essay for a paragraph about Japan).
Apparently someone is bright enough to grasp that raising the sales tax is the next worst thing to running the economy through with a naginata, so they’re trying to counteract the damage by stimulating — or I should say, “stimulating” — the economy. And according to Keynesian doctrine, the way to do this is by government spending. The government will hire people to repair the infrastructure or something, these people will spend their money to create jobs for more people, and the entire economy will flourish.
If it could work, it would have done so by now; the Keynesian view of stimulus neglects the problem that the money which the government spends to stimulate has to come out of someone’s pocket, one way or another, so there is an anti-stimulus to match the stimulus.
You might think that anyone outside an Onion story would be able to see this. You might think that people would react to this proposal for stimulus the way they would react to a proposal to make a blanket longer by cutting strips off the top and sewing them to the bottom to keep a sleeper’s toes warm.
Failing that, you might think that Japan’s economy were under the management of dull-witted children or certifiable lunatics. Or if you are more humble, you might think that Japan’s best economists — the learned men running the Finance Ministry and the Bank of Japan — must possess a superior understanding of economic questions that you and I lack.
But no. These are intelligent, educated men, who are presumably capable of good management in their private affairs. And yet, they do not possess a genuinely superior knowledge of economics, as witness the fact that for year after year, their attempts to restore prosperity have not worked.
They are acting like imbeciles because they have been miseducated into believing grossly mistaken ideas about how economies work, what causes unemployment and depressions, and how to cure them. The extensive educations which they may well possess in some respects are rendered largely worthless by their basic ignorance of land rent and the real causes of speculative bubbles and subsequent crashes. Being an expert in Keynesian economics is like being an authority on phlogiston chemistry or the Ptolemaic system of epicycles.
To avoid seeing more Onion like article in the serious financial press, we have a simple but immense and difficult task before us: We need to educate the world about Georgist economics.
a new policy from a new perspective. Once your worldview shifts — so that vacant city lots are no longer invisible — then epiphany. “Of course! Why didn’t I see it before?” Once you do see the emptiness and what damage it does, how can you ever go back to the old paradigm?
a way to have everybody pulling on the same end of the rope. Last summer’s expansive forest fires shed light on growing class resentment in the West. Old loggers and ranchers rankled at the new urgency to stamp out the blazes that threatened the recent Aspenesque settlers. The newcomers expected working class firemen to make protecting their expensive homes top priority. (Chr Sci Mntr, Spt 7) The tinder for this envy? Rich people moving in bid up the price of land, making it hard to afford by people on the margin. The fault really lies with our system of privatizing land value. If this rising value were collected by land dues and shared by rent dividends – the essence of geonomic policy – who’d complain? The more people move in, the higher the land value, and the fatter the dividend paid to residents. Then people on the margin might go out of their way to invite rich outsiders in.
an alternative to conventional land trusts. Just as it seems some functions should not be left to the market – private courts and cops invite corruption (while private mediation is fine) – just so some land should not be left in the market. That said, sacred sites do not make much of a model for treating the vast acreage of land that we need to use. So the usual trust model, which is anti-use and counter-market, can not apply where it’s needed most. Trust proponents worry about ownership and control – two very human ambitions – but they’re not central. Supposedly, we the people own millions acres – acres that private corporations treat as private fiefdoms – and conversely, the Nature Conservancy owns wilderness the public can some places use as parks. So, the issue is not who owns but who gets the rent – ideally, all of us.
a discipline that, compared to economics, is as obscure as Warren Buffett’s investment strategy, compared to conventional investment theory, about which Buffett said, “You couldn’t advance in a finance department in this country unless you taught that the world was flat.” (The New York Times, Oct 29). The writer wondered, “But why? If it works, why don’t more investors use it?”
Good question. Geonomics works, too. Every place that has used it has prospered while conserving resources. Yet it remains off the radar of many wanna-be reformers. Gradually, tho’, that’s changing. More are becoming aware of what geonomics studies – all the money we spend on the nature we use. Geonomics (1) as an alternative worldview to the anthropocentric, sees human economies as part of the embracing ecosystem with natural feedback loops seeking balance in both systems. (2) As an alternative to worker vs. investor, it sees our need for sites and resources making those who own land into landlords. (3)As an alternative to economics, it tracks the trillions of “rent” as it drives the “housing” bubble and all other indicators. And (4) as an alternative to left or right, it suggests we not tax ourselves then subsidize our favorites but recover and share society’s surplus, paying in land dues and getting back “rent” dividends, a la Alaska’s oil dividend. Letting rent go to the wrong pockets wreaks havoc, while redirecting it to everyone would solve our economic ills and the ills downstream from them.
People must learn to stop whining so much and feel enough self-esteem to demand a fair share of rent, society’s surplus, the commonwealth.
a manual. The world did not come without a way for people to prosper, and the planet to heal and stay well; that way is geonomics. Economies are part of the ecosystem. Both generate surpluses and follow self-regulating feedback loops. A cycle like the Law of Supply and Demand is one of the economy’s on/off loops. Our spending for land and resources – things that nobody made and everybody needs – constitutes our society’s surplus. Those profits without production (remember, nobody produced Earth) can become our commonwealth. To share it, we could pay land dues in to the public treasury (wouldn’t oil companies love that?) and get rent dividends back, a la Alaska’s oil dividend. Doing so let’s us axe taxes and jettison subsidies. Taxes and subsidies distort price (the DNA of exchange), violate quid pro quo by benefiting the well-connected more than anyone else, reinforce hierarchy of state over citizen, and are costly to administer (you don’t really need so much bureaucracy, do you?). Conversely, land dues motivate people to not waste sites, resources, and the ecosystem while rent dividends motivate people to not waste themselves. Receiving this income supplement – a Citizens Dividend – people can invest in their favorite technology or outgrow being “economan” and shrink their overbearing workweek in order to enjoy more time with family, friends, community, and nature. Then in all that free time, maybe we could figure out just what we are here for.
a study of a phenomenon David Ricardo noted going on two centuries ago. When wine grapes rise to $10,000 a ton from the very best land (last year, cabernet sauvignon commanded an average of $4,021 a ton in the Napa Valley), then vineyard prices soar from $18,000 an acre in the 1980′s to $100,000 an acre five years ago and now for a top pedigree up to $300,000 an acre (The New York Times, April 9, via Wyn Achenbaum). Pricey land does not make wine pricey; spendy wine makes land spendy. While vintners make their wine tasty, nature and society in general – not any lone owner – make land desireable. Steve Kerch of CBS’s MarketWatch (April 5) notes that much of what a home sells for on the open market is a reflection of intangible factors such as what school district the house sits in. The price the builder has to pay for the land also tends to be driven by the same intangibles. Because the value of land comes from society, and because one’s use excludes the rest of society, each user owes all others compensation, and is owed compensation by everyone else. Sharing land’s value, instead of taxing one’s efforts, is the policy of geonomics.
a new field of study offered in place of economics, as astronomy replaced astrology and chemistry replaced alchemy. Conventional economics, in which GNP can do well while people suffer, is a bit too superstitious for my renaissance upbringing. If I’m to propitiate unseen forces, it won’t be inflation or “the market”; let it be theEgyptian cat goddess. At least then we’d have fewer rats. Meanwhile, believing in reason leads to a new policy, also christened geonomics. That’s the proposal to share (a kind of management, the “nomics” part) the worth of Mother Earth (the “geo” part). If our economies are to work right, people need to see prices that tell the truth. Now taxes and subsidies distort prices, tricking people into squandering the planet. Using land dues and rent dividends instead lets prices be precise, guiding people to get more from less and thereby shrink their workweek. More free time ought to make us happy enough to evolve beyond economics, except when nostalgic for superstition.
close to the policy of the Garden Cities in England. Founded by Ebenezer Howard over a century ago, residents own the land in common and run the town as a business. Letchworth, the oldest of the model towns, serves residents grandly from bucketfuls of collected land rent (as does the Canadian Province of Alberta from oil royalty). A geonomic town would pay the rent to residents, letting them freely choose personalized services, and also ax taxes. Both geonomics and Howard were inspired by American proto-geonomist Henry George. The movement launched by Howard today in the UK advances the shift of taxes from buildings to locations. A recent report from the Town and Country Planning Association proposes this Property Tax Shift and their journal published research in the potential of land value taxation by Tony Vickers (Vol. 69, Part 5, 2000). (Thanks to James Robertson)
in part the Great Green Tax Shift maxed out. Economically, taxing pollution and depletion does reduce pollutants and extracts – and thus the tax base; plus such taxes are regressive, requiring a safety net. On the other hand, collecting site rent is progressive and generates a revenue surplus payable as a dividend to residents, which can serve as the safety net. Environmentally, taxes on waste and extraction do not drive efficient use of land, as does getting site rent.
what you do when you see economies as part of the ecosystem, following feedback loops and storing up energy. Surplus energy – fat or profit – enables us to produce and reproduce. To recycle society’s surplus, the commonwealth, geonomics would replace taxes with land dues (charged to users of sites and resources, including the EM spectrum, and extra to polluters), and replace subsidies with rent dividends to citizens (a la Alaska’s oil dividend). Without taxes and subsidies to distort them, prices become precise, reflect accurately our costs and values; then, motivated by no more than the bottom line, both producers and consumers make sustainable choices. While no place uses geonomics in its entirety, some places use parts of it, most notably a shift of the property tax off buildings, onto locations. Shifting the property tax drives efficient use of land, in-fills cities, improves the housing stock, makes homes affordable, engenders jobs and investment opportunities, lowers crime, raises civic participation, etc – overall it makes cities more livable. Geonomics – a way to share the bounty of nature and society – is something we can work for locally, globally, and in between.