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Ed. Notes: As usual, the problem is people assuming that the rental profit from locations belongs to the landowner when in a moral universe it belongs to those creating it, which is the surrounding society. Further, nobody made the earth, everybody needs some part of her, and enjoying an equal right to life we all have an equal right to land. If we were to use government to recover then disburse equitably the socially-generated value of land — and to not tax and subsidize willy-nilly — then the rise in site value would be a boon to us all, no matter what its cause: tourists, Air(mattress)BnB, or locals hitting the jackpot.
One of the key concepts in classical economics, which was lost when it changed into the neoclassical school of thought, was the extensive margin of production. I have written previously on the margin of production at <http://www.progress.org/fold97.htm>, but because in recent discussions the existence of the margin has been questioned, it is time to revisit the topic.
Imagine a agricultural territory with one crop, corn, and areas of various productivity because of the natural fertility, the climate, and the rainfall. We can number the output in bushels in a range from zero to ten. If the land is not populated or claimed, the first settlers will go to the most productive land, where the output per period of production is ten bushels. When the ten-bushel land is filled, the next settlers go to the nine land, and then the eight-bushel land.
The least productive land in use is called the “margin of cultivation,” or more generally, the extensive margin of production. If land cannot be claimed unless used, the margin is also the best land available for free, hence without rent. The margin is called “extensive” because people keep extending or moving it out to lands of ever lesser quality as the better lands get claimed.
The significance of the margin of production was its role in the determination of rent and wages. The classical law of rent is that the rent of a plot of land equals its output minus what the same quality of labor and capital goods will yield at the margin of production. The law of wages is that the wage level for the economy is set by the wage at the margin of production. The margin of production itself is determined by the supply of labor and the amount of super-marginal land that is unproductively being held by speculators waiting for land values to rise further.
When workers are completely mobile, and not emotionally attached to any location, they will move to the land that provides the highest wage. Competition among equally skilled workers will result in a common wage, because if one area pays more, workers move there, and drive the wage down. The law of wages applies to unskilled labor, and workers with more human capital obtain a premium above that to compensate them for their greater productivity.
There is another margin of production, the intensive margin. In the best lands, another worker can contribute more to output than he earns in wages, and so labor will be hired so long as the extra output (marginal product) of the next worker is greater than the wage. Hiring stops when the marginal product of labor at the intensive margin equals the marginal product at the extensive margin where the wage level is set.
In the early 1800s, the classical economist David Ricardo developed this model of the relationship between land and labor, the original and ultimate factors or inputs of production. In the latter 1800s, Henry George, the last of the classical economists, added land speculation to the model. If land at the margin can be claimed even if not used, it will get fully claimed, and new settlers will have to go to less productive land, which, by the law of wages, drives down the wage for all workers.
In the prevailing mainstream neoclassical school of economic thought, land disappears, and theory only uses labor and capital goods. The margin of production also vanishes from theory – you will not find it in any economics textbook other than my Science of Economics. The wage level in neoclassical economics comes from a simple economy-wide supply and demand model. What today’s economists do not realize is that the area in the graph between the demand for labor curve and the wage line is land rent. You can see this illustrated in the lower left graph at <http://www.foldvary.net/ec2/four-graph/morris.doc>, where the rent is the area between the demand curve labeled D and the horizontal real wage line labeled R. The rent in that neoclassical model is the same as the rent in the classical model, illustrated at <http://www.foldvary.net/images/RentWages.jpg>.
But some followers of Henry George now question whether the margin of production exists in today’s economy. All solid surface land today has been claimed either by private title or by governments. There is bare land that is not being used, but is it possible to have any production there at all?
If the margin of production is no longer relevant, then the classical economic theory of wage determination no longer applies. Then how is the wage level determined? The output is produced by a combination of land, labor, and capital goods, and the distribution of the wealth depends on how much is going to rent. A ten-bushel plot of land will yield a wage of ten if it is rent-free, while it will yield a wage only of four if the margin is at four, with the same amount and skill of labor. Therefore it is not just the exertion and skill of a worker alone that determines his wage, and it is not the intensive margin of extra workers in the same place that determines the wage, because the typical firm is a wage taker, paying the wage that the market has determined.
The margin of production has to be lurking somewhere in the shadows. The margin is not visible and not obvious and not self-evident. It is the task of economic theory to enable people to understand the implicit reality beneath superficial appearances. The margin of production has no superficial appearance today, as it had in more primitive economies.
The ocean provides one rent-free margin. Another rent-free margin is the edge of cultivation, grazing, or residential land, beyond which is land that is not being used. Today, such land will be claimed, and may have a positive price, such as from speculation that this plot will be developed later, but if such land is submarginal, not being used, with no expectation that it will soon be used, then that implies that there is some marginal border, even if the rent and price are not zero. The essence of the margin is not that the land is unclaimed, or that the land is free, or that the worker is self-employed, but that it is the least productive land in use, beyond which lies submarginal land.
All cities have a margin of production in the top stories of buildings, because another story on top of the existing ones would use the same site surface. Building one more story will not increase the ground rent, so the extra use of that space is rent free, free of extra rent.
The extensive margin of production lurks unrecognized in the neoclassical model. The supply of labor is the least that workers will accept, and that would be close to zero if not for some margin where they can get a subsistence wage. The demand for labor is based on the marginal product of labor at various quantities of labor, and the share of output going to labor depends on the share going to rent due to the productivity of land at the least productive land in use. Of course the wage also depends on the productivity of complementary capital goods.
The margin of production is an implicit reality. We cannot observe the law of wages directly, because the wage of unskilled labor has become distorted by taxes, minimum wage laws, restrictions on employment and self-employment, and mandates such as required medical insurance. We cannot also observe the law of rent directly because of interventions. We need to understand economic theory to mentally envision the hidden economic reality.
The margin of production can no more disappear from the economy than can gravity disappear just because an iron bar is being held up by a magnet. The fact that government interventions alter prices, profits, and output does not imply that supply and demand have stopped working. If theory says there is a margin of production, it must be there, and our task is to uncover its implicit reality.
This 2014 excerpt of CorpWatch, Feb 12th, is by Pratap Chatterjee and it also appeared at OpEd News.
Three top executives at Anglo Irish bank are on trial for a secret scheme to buy their own bank’s shares. The bankers allegedly hatched the plan to cover up bets made by Sean Quinn, once Ireland’s richest man.
What the executives were doing had “potentially disastrous consequences for the entire Irish financial system.”
Ireland attracted a phenomenal amount of investment in its Celtic Tiger boom days after it set up an “offshore” tax haven named the International Financial Services Centre with a special limited-time tax rate of 10 percent. Among the beneficiaries was Anglo Irish bank, a property finance bank founded in 1964, which gained a reputation for lending quickly for risky local projects at a higher rate of interest that in turn swelled its profits. One of the ways that Anglo was able to grow exponentially was because it often accepted one mortgaged property as collateral for the next, a scheme not unlike a house of cards.
Over the course of a decade, beginning in 1994, house prices in Ireland rose five fold and by 2007 even Irish farm land was worth €66,000 ($88,000) per hectare, the highest in Europe. Ireland was soon building more than seven times as many houses per capita as the U.K. and the Irish had borrowed twice as much as their gross national product. At the time one in five workers in Ireland was employed in the construction industry, and lending to the sector totaled 28 percent of all lending (compared to 8 percent in the rest of Europe).
One notable beneficiary of this was Irish entrepreneur Sean Quinn, who started his career in 1973 quarrying gravel on his family farm, who eventually built a fortune in manufacturing by undercutting his competitors. In 2008, Quinn was the wealthiest man in all of Ireland, worth €4.722 billion ($6.13 billion)
At the time, Quinn had quietly built up a 29.3 per cent ownership stake in Anglo Irish by buying an exotic financial instrument called contracts for difference (CFD) that essentially involved gambling that the bank’s share price would rise. Quinn made his bets in secret, using a bank registered in Madeira to invest a total of €3.2 billion ($4.4 billion) in Anglo Irish beginning in 2006.
When share prices in the bank started to fall in March 2008, bank executives discovered that Quinn was effectively the biggest shareholder in the bank. Panic stricken, they decided to lend money to ten wealthy people – who have been dubbed the Maple Ten based on the name for the scheme drawn up by Morgan Stanley – to buy a large chunk of Quinn’s shares from him in the hope that would stabilize their value.
The problem was that since the Maple Ten had borrowed money from the bank itself so when the share price continued to collapse, the bank lost its own money.
They had legal opinion from MOP (law firm Matheson Ormsby Prentice) and that the financial regulator was aware of it, and the Central Bank, everyone, was aware of it, and they wanted it done.
When Anglo Irish teetered on the brink of complete collapse later that year, the Irish government pumped €30 billion ($33.8 billion) of taxpayers’ money into it. The following year, Anglo Irish was nationalized and in February 2013, the bank was liquidated, essentially writing off the taxpayer’s money. Meanwhile the government of Ireland has been forced to borrow €67.5 billion from the European Union and International Monetary Fund to cover the losses caused by the collapse of the national economy.
Ed. Notes: Good to see some top dogs face jail time potentially. But what’s overlooked is such scams happen every business cycle. The problem, this cycle — which is really the real estate cycle — is too long for most people to notice, being 18 years. What’s also overlooked is that the value is not in any building but in the land or location. And finally, most people don’t notice that the value of locations is generated by the presence of society, so it’s fair for society’s government to recover this surplus value. If government we to tax land value or charge land dues or recover site value by whatever mechanism, then it’d no longer be available for speculators, and such scams could not occur; why would any speculator bother? So, instead of one billion grabbing for all that rising land value, society should, and put an end to both such scandals and a roller-coaster real estate cycle.
The Economics of Star Trek — The Proto-Post Scarcity Economy
This excerpt of Medium, either late 2013, late December, or early 2014, January or February, is one of their Editor’s Picks by Rick Webb.
People can get paid doing zero work. We have the capacity to feed everyone, even if we don’t have the will. It’s not a matter of scarcity; it’s a matter of the organization of labor and capital.
In today’s terms, a ‘healthy’ economy now is one at or near full employment. A healthy economy now is one where everyone has a job. But in abundance, jobs are actually unrelated to a healthy economy. Everyone’s fed and housed and tons of people simply don’t need to work. Right now, we have them working making stuff we don’t need. Is that any better than them not working?
It seems pretty clear cut that jobs are optional. The Federation is based on a philosophy of self improvement and cultural enrichment. We’ve never seen people who sit around and literally do nothing, but then why would we?
The big challenge here is how does society get someone to do the menial jobs that cannot be done in an automated manner. Why would anyone? There are really only two options: there is some small, incremental increase in your hypothetical maximum consumption, thus appealing to the subconscious in some primal way, or massive societal pressure has ennobled those jobs in a way that we don’t these days.
Private ownership still exists — the biggest examples are Sisko’s restaurant and Chateau Picard. The Maquis routinely refer to “our land,” which they presumably owned. Some spaceships were privately owned. Finally, Captain Kirk says in the Nexus, “This is my house. I sold it years ago.”
Star Trek is, essentially, European socialist capitalism vastly expanded to the point where no one has to work unless they want to. The amount of welfare benefits available to all citizens is in excess of the needs of the citizens. Therefore, money is irrelevant to the lives of the citizenry, whether it exists or not. Resources are still accounted for and allocated in some manner, presumably by the amount of energy required to produce them (say Joules). And they are indeed credited to and debited from each citizen’s “account.” However, the average citizen doesn’t even notice it, though the government does, and again, it is not measured in currency units — definitely not Federation Credits.
If robots do all the dirty work, and the US is hugely rich, does every single person really need a job? Are we going to let all of that money pile up in the 0.1% ruling elite, or can it be distributed to everyone? Does wealth being distributed to the people in an equal manner mean communism absolutely? What happens when the surplus is more than enough?
Ed. Notes: Outsiders buying up homeland happens all the time in Africa and elsewhere. America is not exempt from that and, actually, never has been. Because we humans are land animals and have the instinct of ownership, and feel upset by trespassers, our hackles rise when the rich land-grabber is a foreigner but don’t even care when the absentee owner is a fellow countryman. Nationality (the horizontal dimension) matters but class (the vertical dimension) doesn’t count.
But in reality, investor owners won’t make different decisions; being from here or there won’t change any minds about preferring big agri-business, factory farms, selecting crops that travel well and can sit on shelves for long periods, using GMOs, mechanizing and automating with hot fertilizers, over-irrigating and thereby depleting the ground water, etc.
If people could care as much about sharing rents, making land value into our common wealth, rather than about the home address of absentee owners, then these downstream issues would no longer plague us. So how do we tie instinct to geonomics?
This 2014 excerpt of iranian.com, Feb 12, is by Reza Varjavand of Saint Xavier University in Chicago.
Rent seeking is often carried out through exorbitant lawsuits against business firms and the costs are passed on to consumers. Mighty corporations like pharmaceutical companies are also shielded by the patent system. In a recent lawsuit, the jury awarded Apple $1 billion in damages to be paid by Samsung for allegedly copying some aspects of Apple’s iPhone and iPad.
Lawyers will gain handsomely regardless of the outcomes. They may also encourage companies to file even more lawsuits in anticipation of monetary gain as well as monopoly of power. Propagation of such cases can divert companies’ attention away from focusing on their products and redirect it toward gaining easy money at the expense of their rivals.
There are more than 3100 lobbyists working for the healthcare industry alone (nearly 6 for every congressperson), and 2100 lobbyists working for the energy and natural-resources industries. Physicians are represented by more than 750 lobbyists in Washington spending nearly $80 million every year to safeguard their interests.
The U.S. ranks at the top when it comes to the number of licensed lawyers. There are currently 1,143,358 of them, one per every 265 people. The inverse correlation between economic growth and the number of lawyers has been documented.
Despite oversupply, the costs of legal service keep rising at usually twice the rate of inflation. The mounting spending on legal services is partially due to additional demand created through vigorous advertising by lawyers seeking to find lucrative targets for possible lawsuits. Such solicitation efforts have been proliferating in the mass media – via commercials aired during the shows watched by most susceptible people – and particularly in the form of billboard advertising that is proliferating especially in the aftermath of Great Recession of 2008.
Lawyers, just like medical doctors, have to go through rigorous training and a time-consuming licensing process. They incur an immense amount of debt upon graduation. Once they finally begin practicing, they feel the need to generate as much money as possible to pay off that debt and make up the opportunity cost of the time they have invested in education and demanding internships.
The proliferation of specialists has caused massive increase in the number of surgeries performed in the US, “400% in a little over a decade”. Like many other business people, lawyers often tend to create a market for real or imaginary problems because they have already a solution for them. Lawyers, like doctors, earn income when things go wrong.
Ed. Notes: Most politicians are lawyers. Lawyers have persuaded politicians to pass laws that make it a punishable offense for a non licensed legal expert to perform even a routine task. Lawyers have erected insider court proceedings that if anyone representing themselves fail to follow can be found in contempt of court. None of this is to facilitate justice for society but to fatten the pockets of lawyers.
Doctors use the same tactics of requiring licenses, punishing non conformists, and winning other laws to maintain their oligopoly.
What can the rest of society do? Get its government out of the licensing racket. Get rid of automatic limited liability so people in business would have to become responsible personally for their decisions to cheat. And, basically, share society’s surplus so it can’t be concentrated onto few major owners and corporations that hire the unscrupulous minions to do their dirty work. If people feel materially secure, perhaps those now tempted will be able to resist a career in lawyering.
This 2014 excerpt of Quartz, Feb 12, is by Matt Phillips.
In the wake of the financial crisis, US companies have socked away a record $1.93 trillion in cash or liquid securities. So if they’re not investing it, what are they doing?
And paying dividends. At the end of January, some 420 out of the 500 companies that comprise the benchmark S&P 500 stock index paid dividends. That’s the most since 1998. And S&P companies say they plan to pay out roughly $330 billion in dividends this year—a new record high.
They’re buying back their stock.
The cash at these companies belongs to shareholders, not the management of the firms. Returning it either via dividends or buybacks is the right thing to do, if executives don’t see a productive place to invest that money.
Money floating around keeps interest rates low — regardless of the fact that the Federal Reserve continues to cut back on its bond-buying programs (QE).
Ed. Notes: Yes, that excess does belong to stockholders. So how long does management get to keep it? How is the delay legal, not theft? Why doesn’t the government enforce shareholder rights? The “recovery” may have been a boon for those corporations but for some penny investors a dividend check could come in handy right about now.
This 2014 excerpt of UPI, Feb 11, is by Brooks Hays.
According to a new survey by the National Science Foundation, nearly half of all Americans say astrology is either “very scientific” or “sort of scientific.”
By contrast, 92 percent of the Chinese public think horoscopes are a bunch of baloney.
Skepticism of astrology hit an all-time high in 2004, when 66 percent of Americans said astrology was total nonsense. But each year, fewer and fewer respondents have dismissed the connections between star alignment and personality as bunk.
Not surprisingly, those with less science education and less “factual knowledge” have become increasingly willing to accept astrology as legitimate science.
Young people are also especially inclined to offer astrology scientific legitimacy, with a majority of Americans ages 18 to 24 considering the practice at least “sort of” scientific, and the 25-34 age group is not far behind them.
Ed. Notes: How do old, non-scientific ideas gain popularity while new, provable ideas are so hard to sell to people? One saving grace may be the fact that good new ideas don’t need everyone behind them, or even a majority, but just a critical mass. And whatever else those early adherents believe, that’ll be quite alright.
RichDiesal writes: The new report (PDF) from the National Science Foundation that states that roughly 40% of Americans believe astrology to be scientific turns out to be false; most of those apparently astrology-loving Americans have actually confused astrology with astronomy. In a 100-person Mechanical Turk study with a $5 research budget, I tested this by actually asking people to define astrology. Among those that correctly defined astrology, only 10% believe it to be scientific; among those that confused astrology for astronomy, 92% believe ‘astrology‘ to be scientific.
This 2014 excerpt of the UK’s Financial Times, Feb 11, is by Martin Wolf.
Nigh half of US jobs are at high risk from automation. Most workers in transport and logistics occupations, together with the bulk of office and administrative support workers, and labour in production occupations, are likely to be substituted by computer capital. Moreover, computerization will mainly substitute for low-skill and low-wage jobs in the near future. By contrast, high-skill and high-wage occupations are the least susceptible to computer capital.
It is possible that the ultimate result will be a tiny minority of huge winners and a vast number of losers. But such an outcome would be a choice not a destiny. Property rights are a social creation.
Technology itself does not dictate outcomes. Economic and political institutions do. If the ones we have do not give the results we want, we must change them.
We will need to distribute income and wealth differently. Such redistribution could take the form of a basic income for every adult. The revenue could come from taxes on bads (pollution, for example) or on rents (including land and, above all, intellectual property).
Intelligent machines will make it possible for human beings to live far better lives. What else is the true goal of the vast increases in prosperity we have created?
Ed. Notes: Along with paying dividends to the citizenry, we could also stop paying wasteful subsidies to special interests. Along with collecting taxes as cited above, we could also quit levying the counterproductive taxes on earnings, sales, and buildings. Both steps will swell location value, generating even more revenue with which to fatten the dividends to everyone. The editor above makes so much sense, one must wonder when will the US’s Wall Street Journal will ever catch up to the UK’s Financial Times.
This 2014 excerpt of AlterNet, Feb 10, is by Lynn Stuart Parramore.
A recent report on Obamacare found that the law will nudge workers to work less. Why? Because if you don’t have to take a full-time job just to get coverage, then maybe you won’t. Conservatives are interpreting the report to mean that Obamacare is a “job killer.”
What’s so bad about that?
Facing job insecurity and layoffs, older workers have often been forced to take McJobs just to be able to go to the doctor, when they could be doing much more interesting and productive things with their time, like teaching their grandchildren to read or engaging in civic activities.
Entrepreneurs have put off trying out new business ideas because they fear losing insurance. Parents of newborns and people taking care of elderly parents can’t take time to care for their family because insurance is tied to full-time employment.
“Raise the retirement age!” “Get a second job if you can’t make ends meet!” “Keep working if you’re sick!” Keep going, lazy! Work, work, work!
U.S. workers now toil longer hours than their counterparts in any industrial nation except South Korea. We have gotten so sleep-deprived our cognitive performance on the job is suffering and we’re actually becoming less productive, which negatively impacts GDP. Germans rank second to last in number of hours worked, and their country is considered an economic triumph.
John Adams said that he would know we had achieved a secure state if his grandchildren were free to study poetry. Jefferson agreed. The Declaration of Independence promised us the “pursuit of happiness.” The liberty of free time, the thinking went, made us better citizens — more tolerant and engaged.
Ed. Notes: Now for the solution: Pay ourselves a Citizen’s Dividend from society’s surplus. There’s a huge stream of spending that does not reward anybody’s labor or capital: society’s spending for land and resources and government-granted privileges such as corporate charters. Have government redirect all those trillions now landing in the accounts of the 1% into the pockets of everyone by utilizing taxes or fees or dues or leases of public assets, all at full market annual value (why this flow is called “rents” in economese), then disburse the proceeds as shares to the citizenry, a la Alaska’s oil dividend. Make all those natural values our common wealth. Plus, de-tax our labor and capital and the value of locations will become even higher, swelling the land dividend even more (and completing the policy of geonomics). Once we share the worth of Mother Earth, we Earthlings can work as much or as little as we like, and everyone will be the better off for it.
This 2014 excerpt of Liberal Democrat Voice, Feb 10, is by Nick Thornsby.
Last week, the highly-respected Institute for Fiscal Studies in Great Britain produced its annual “Green Budget”.
On the living wage, the IFS have two reservations:
…the policy also has two key problems. First, it does not seem particularly well targeted at addressing the ultimate causes of low pay – low productivity and/or exploitation by employers with substantial labour market power. Second, it may distort the behaviour of employers in ways that reduce employment and economic output, and reduce rather than increase exchequer revenue.
LVT: an idea whose time has come?
Another chapter is devoted to the issue of business rates and ideas for their possible replacement. At the very least, the IFS would like the government to look seriously at whether a land value tax should be considered:
We cannot say conclusively that the administrative hurdles to replacing business rates with an LVT could be overcome at reasonable cost. But this is such a powerful idea, and one that has been so comprehensively ignored by governments, that the case for a thorough official effort to design a workable system seems to us to be overwhelming. In particular, significant adjustment costs would be merited if the inefficient and iniquitous system of business rates could be swept away entirely and replaced by an LVT.
Ed. Notes: Why can political groups in the UK discuss the idea of using land value as the tax base but not in the US? Such articles appear frequently in GB, and in major media, and as a portion of the size media, far more frequently than in the US. Is it harder for bigger societies to discuss unfamiliar ideas? Do so many more voices and POVs create too much confusion? If so, probably a smaller nation will lead us.
Ed. Notes: Is their bigness solely due to their business? Or do corporations benefit from another factor? While some companies must grow to awesome size in an immense market, can all that growth be attributed to market dimensions and to selling more and better than the other guy? No, it can’t, because firms who succeed in markets also succeed in the halls of power.
Rich businesses buy favors from government that tilt the playing field for them, against their competitors.
What do tech companies get? Mainly incredibly cheap patent protection, way below what a private firm would charge to protect intellectual property.
What do oil companies get? They get most of the value of the oil in the ground, which is the biggest part of the value of oil (otherwise oil taxes couldn’t be so high outside the US; near 80% of crude barrel price in Norway). In the US, royalty payments to the people are quite low.
What do banks get? They get the value of land via mortgages, and note most properties sell again well before the mortgage is paid.
What do telecoms get? They get the EM spectrum for hugely below its value, in some cases for free, as are TV licenses.
What do polluters like car manufacturers and factory farms get? No fees, no fines, and barely and enforcement of the merely feeble laws.
What do utilities get? Cheap or free franchises, which are monopolies in the area the utility does business.
And all businesses get limited liability for when they consciously harm consumer, worker, or nature, as do pharmaceuticals while trying to grab greater unearned profit.
Further, most benefit from taxes since they’re skewed to the middle class, and from the absence of a rent share or Citizen’s, making people more desperate for jobs and willing to accept lower wages. There are more favors, but you get the picture.
Without government granting so many valuable privileges, and if government actually preferred to defend the rights of everyone to a safe environment, then the Googles and Apples and Exxons could be big and profitable but could not be titantic and imperious. They’d be consumer friendly or, on a level playing field, lose market share to competitors.
This 2014 excerpt of Thom’s blog, Feb 10, is by Thom Hartman; it also appeared at Truthout and at Grist by a different blogger. Thom also promotes public recovery of the socially-generated values of land and resources and a partitioning of the surplus with everyone in an RT video.
Once again, the corporate media virtually ignored a massive protest over the weekend. On Saturday, more than 80,000 people from 32 states marched against extreme right-wing policies in North Carolina. Protestors came from all over our nation to push back against what they call the “immoral and unconstitutional policies” of Governor Pat McCrory and his Republican legislature. The “Moral March on Raleigh” grew out of the weekly “Moral Monday” protests that are now spreading to other states, and it was organized by the Historic Thousands on Jones Street group.
Ed. Notes: It is hugely encouraging that so many people showed up but disappointing that, as usual, they were against, not for. It is physically impossible to react to every single issue your opponent throws at you. To succeed, you must set the agenda and let your opponents expend their energy and resources on trying to defeat you rather than push toward their own goals. If 80,000 people came out for a Citizen’s Dividend, I bet they’d win. Why? Because they’d move the debate from the old frame of people having no value outside of jobs and “might makes right” to a totally different and more humane frame of abundance and decency toward one another. People want to do the right thing. They just have to know it’s right. And geoism is right. Share society’s surplus. Don’t tax our efforts, don’t subsidize our insiders. Just share Earth’s worth.
Facebook founder Mark Zuckerberg and his wife Priscilla Chan have been named joint top US philanthropists for 2013.
The couple gained the accolade after a donation of 18 million Facebook shares to the Silicon Valley Community Foundation, a charity that manages and distributes charitable funds. The shares are priced at $970m (£590m). They helped make the foundation one of the largest in the US.
The (tax deductible) donation was the largest in the US in 2013. Over the past two years, Mr Zuckerberg and Ms Chan have donated about 36 million Facebook shares to the foundation.
Funds have broadly been distributed to education and health, with $5m being distributed to a health clinic in East Palo Alto, for example.
The gift outstripped philanthropists such as Bill and Melinda Gates. Mr and Mrs Gates gave their foundation slightly more than $181.3m last year.
Ed. Notes: Since some of the nouveau riche give away a lot of what they got, does that make the concentration of wealth OK? First of all, how did they get the money? In cases of hi-tech, it’s usually due to patent protection supplied by the government. Tech companies get thousands of patents per year, for a mere filing fee, so that others can’t conduct competitive research in said fields. That slows progress and makes the patent holders richer than they should be.
Further, donating is not the same as giving away the money, no strings attached. The donors get tax write-offs (so the money’s not really let go of), get to set the agenda of the recipient non-profit, get to hire their inner circle to the jobs of running the non-profit, get to influence public debate powerfully yet discretely, etc. The donors get as good as they give.
Plus, not everyone in the 1% is so “generous”. But rather than hope for charity or try to tax the rich, it’d be better to run government like a business. From the get-go, charge full market value for patents, corporate charters, for spectrum licenses, for leases of public land, and — the granddaddy of them all — for land titles. At the same time, to be fair, get rid of taxes on true enterprise. Then every fortune would be earned and all earnings would be retained. It’s geonomics and it’s fair and effective.
This 2014 excerpt of IPS, Feb 10, is by Samuel Oakford.
Though critics of renewables often cite their higher cost per kilowatt-hour (kWh) compared to traditional sources, when externalities like carbon emissions, effects on health, and resource scarcity are considered, that dynamic is reversed, the IMF found. Global subsidies of fossil fuels rose to $1.9 trillion worldwide; renewable subsidies top out at 88 billion dollars globally.
During his January State of the Union address, U.S. President Barack Obama told Congress “climate change is a fact” and called for the phasing out of an estimated four billion dollars in tax breaks and incentives – many dating back a century, when oil exploration was dangerous and far more expensive – that U.S. companies enjoy every year.
Generally, consumption subsidies that lower prices at the point of sale have prevailed in the developing world, while producer subsidies have been more common in industrialised countries.
But unlike traditional forms of state welfare that attempt to target the needy, consumption subsidies funnel wealth to those who consume the most. In low and middle-income countries, the richest 20 percent of households receive six times the benefits from subsidies as the poorest fifth. Among gasoline consumers alone, the disparity widens to 20 to one.
Fossil fuels not only have the advantage of subsidies, but they are the incumbent. Because renewables have very low fuel costs the real issue is up-front financing. Renewables are competitive at the moment, but it takes political will to change.
Ed. Notes: The author wants to shift subsidies from the entrenched ways to the clean ways he likes. But what if all subsidies to all energy sources were eliminated? And if taxes on our efforts were repealed, too? And if government recovered the annual rental values of natural resources (as do many Muslim countries) and paid citizens a dividend (as does Alaska)? And if government defended people’s right to a healthy environment and made polluters pay? Doing all that would level the playing field. On a level playing field, renewables could laugh at subsidies.
suitable for framing by Green Parties. When Greens began in Germany two decades ago, they defined themselves as neither left nor right but in front. Geonomics fits that description. The Green Parties have their Four Pillars; geonomists have four ways to apply them:
Ecological Wisdom. Want people to use the eco-system wisely? Charge them Rent and, to end corporate license, add surcharges. To minimize these costs, people will use less Earth.
Nonviolence. Want people to settle disputes nonviolently? Set a good example; don’t levy taxes, which rely on the threat of incarceration, to take people’s money. Try quid pro quo fees and dues.
Social Responsibility. Want people to be responsible for their actions? Don’t make basic choices for them by subsidizing services, addicting them to a caretaker state. Let people spend shares of social surplus.
Grassroots Democracy. Better have grassroots prosperity. Remember, political power follows economic. Pay people a Citizens Dividend; to keep it, they’ll show up at the polls, public hearings, and conventions.
one of many words I coined over 20 years ago: geoism, geonomics, geonomy, geocracy, etc – neologisms that later others came up with, too. CNBC once had a Geonomics Show, and Middlebury College has a Geonomics Institute. If “economy” is literally “management of the household”, then geonomy is “management of the planet”. The kind of management I had in mind is not what CNBC was thinking – top-down. My geonomics is not hands-on, interfering, but hands-off, organic. It’d strive to align policy with natural processes, similar to what holistic healing does in medicine, what organic farming does in agriculture. Geonomics attends to two key components: One, the crucial stuff to track is fat – or profit, especially profits without production, such as rent, or all the money we spend on the nature we use. Society’s surplus is the sine qua non for growth, needed to counter death – not merely more, but sustainable development, more from less. Two, the basic process to respect is the feedback loop. These let nature maintain balance automatically and could do the same for markets, if we let them. Letting them would turn our economies, now our masters, into a geonomy, our servant, providing us with prosperity, eco-librium (to coin a term) and leisure, time off – a hostile environment for economan but a cradle for a loving and creative humanity.
the study of the money we spend on the nature we use. When we pay that money to private owners, we reward both speculation and over-extraction. Robert Kiyosaki’s bestseller, Rich Dad’s Prophecy, says, “One of the reasons McDonald’s is such a rich company is not because it sells a lot of burgers but because it owns the land at some of the best intersections in the world. The main reason Kim and I invest in such properties is to own the land at the corner of the intersection. (p 200) My real estate advisor states that the rich either made their money in real estate or hold their money in real estate.” (p 141, via Greg Young) When government recovers the rents for natural advantages for everyone, it can save citizens millions. Ben Sevack, Montreal steel manufacturer, tells us (August 12) that Alberta, by leasing oil & gas fields, recovers enough revenue to be the only province in Canada to get by without a sales tax and to levy a flat provincial income tax. While running for re-election, provincial Premier Ralph Klein proposes to abolish their income tax and promises to eliminate medical insurance premiums and use resource revenue to pay for all medical expense for seniors. After all this planned tax-cutting and greater expense, they still expect a large budget surplus. Even places without oil and gas have high site values in their downtowns, and high values in their utility franchises. Recover the values of locations and privileges, displace the harmful taxes on sales, salaries, and structures, then use the revenue to fund basic government and pay residents a dividend, and you have geonomics in action.
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 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.
a study of Earth’s economic worth, of the money we spend on the nature we use, trillions of dollars each year. We spend most to be with our own kind; land value follows population density. Besides nearness to downtowns, we also pay for proximity to good schools, lovely views, soil fertility, etc. These advantages, sellers did not create. So we pay the wrong people for land. Instead, we should pay our neighbors. They generate land’s value and deserve compensation for keeping off ours, as they’d pay us for keeping off theirs. It’s mutual compensation: we’d replace taxes with land dues – a bit like Hong Kong does – and replace subsidies with “rent” dividends to area residents – a bit like Alaska does with oil revenue. Both taxes and subsidies – however fair or not – are costly and distort the prices of the goods taxed and the services subsidized. By replacing them and letting prices become precise, we reveal the real costs of output, the real values of consumers. Then, just by following the bottom line, people can choose to conserve and prosper automatically. A community could start by shifting its property tax off buildings, onto land – a bit like a score of towns in Pennsylvania do; every place that has done it has benefited.
more transformation than reform; it’s a step ahead. Harvard economics students this year did petition to change the curriculum, in the wake of the English who caught the dissension from across The Channel. French reformers, who fault conventional economics for conjuring mathematical models of little empirical relevance and being closed to critical and reflective thought, reject this “autism” – or detachment from reality – and dub their offering “post-autistic economics”. Not a bad name, but again, academics define themselves by what they’re not, not by what they are, unlike geonomists. We track rent – the money we spend on the nature we use – and watch it pull all the other economic indicators in its wake. We see economies as part of the ecosystem, similarly following natural patterns and able to self-regulate more so than allowed, once we quit distorting prices. To align people and planet, we’d replace taxes and subsidies with recovering and sharing rents.
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 log-gers 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.
of interest to Dave Lakhani, President Bold Approach (Mar 8) and Matt Ozga (Jan 29): “I write for the Washington Square News, the student run newspaper out of New York University. Geonomics seems like it has great significance, especially in this area. When was geonomics developed, and by whom?”
About 1982 I began. Two years later, Chilean Dr Manfred Max-Neef offered the term geonomics for Earth-friendly economics. In the mid-80s, a millionaire founded a Geonomics Institute on Middlebury College campus in Vermont re global trade. In the 1990s, CNBC cablecast a show, Geonomics, on world trade as it benefits world traders. My version of geonomics draws heavily from the American Henry George who wrote Progress & Poverty (1879) and won the mayoralty of New York but was denied his victory by Tammany Hall (1886). He in turn got lots from Brits David Ricardo, Adam Smith, and the French physiocrats of the 1700s. My version differs by focusing not on taxation but on the flow of rents for sites, resources, sinks, and government-granted privileges. Forgoing these trillions, we instead tax and subsidize, making waste cheap and sustainability expensive. To quit distorting price, replace taxes with “land dues” and replace subsidies with a Citizens Dividend.
Matt: “This idea of sharing rents sounds, if not explicitly socialist, at least at odds with some capitalist values (only the strong survive & prosper, etc). Is it fair to say that geonomics has some basis in socialist theory?”
A closer descriptor would be Christian. Beyond ethics into praxis, Alaska shares oil rent with residents, and they’re more libertarian than socialist. While individuals provide labor and capital, no one provides land while society generates its value. Rent is not private property but public property. Sharing Rent is predistribution, sharing it before an elite or state has a chance to get and misspend it, like a public REIT (Real Estate Investment Trust) paying dividends to its stakeholders – a perfectly capitalist model. What we should leave untaxed are our sales, salaries, and structures, things we do produce.
a way to connect the dots. Making the cyber rounds is “The Cavernous Divide” by Scott Klinger, from AlterNet (posted March 21): “As the number of billionaires in the world expands, so does the number of those in poverty.” Duh. The yawning income gap is not news. Nearly every issue of our quarterly digest carries a similar quote. Yet the connection was worked out long ago by one of America’s greatest thinkers, Henry George, who labeled his masterpiece, Progress and Poverty. Techno- and socio-advances always enrich few and impoverish many. Yet progress also pushes up location values – the geonomic insight (is Silicon Valley cheaper now or more expensive?). Instead of taxing income, sales, or buildings, society could collect those values of sites, resources, EM spectrum, and ecosystem services via fees and dues, which would lower the income ceiling, and instead of lavishing corporate welfare, pay out the recovered revenue via dividends, which would jack up the income floor. Dots connected.