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One of the topics that has not received enough attention in economics is the effect of economic growth on the distribution of income. So if you want to understand it, you should get a piece of paper. I’ll wait until you have it …
Now on the lower left side, draw a rectangle with a height longer than the width. The top half of the paper should still be blank. We will use an agricultural model with one product, corn. At first, the only factors are land and labor. Now draw small circles of equal size in the rectangle. These are farms of equal size. The yield is ten bushels of corn per farm per period of production. As long as there is free land available, land rent is zero, and the entire yield of ten goes to wages.
Now draw another rectangle to the right of the first one, three-fifths as high. Label this “six,” because the output in that land is six bushels of corn. All the farm workers are equally skilled and work the same number of hours, so the lower yield is due to its being less productive land. With rent at zero because there is free land, the wage is six. The wage in the ten-bushel land has now fallen to six, because workers are mobile and equally skilled. The extra four bushels in the ten-bushel farms are now land rent.
For rent and wages, it does not matter whether the owner is also the worker, or whether he hires labor at six bushels, or whether he rents out the land to a tenant at four bushels. The economic rent is the difference in the productivity of the two lands, regardless of who are the owners, tenants, and workers. If the landlord happens to charge only three bushels from a tenant, the economic rent is still four: three go to the landlord, while one bushel is the yield as rent kept by the tenant.
In classical economics, the least productive land in use is called the “margin of production.” There is a “law of wages,” which states that the wage level for the economy is the wage at the margin of production. There is a “law of rent” which states that the rent of a plot of land is its output minus the normal costs of labor and capital goods, such as, in our simple model, the difference between the output of the lands yielding ten and six.
Now add a third rectangle to the right of the six-bushel land, and label this “four,” because this is the new margin of production yielding four bushels. Wages there are four, making the wage also four at the lands yielding ten and six. Now rent in the ten-bushel land has risen from four to six, and rent at the six-bushel land has risen from zero to two. You can see that as the margin of production moves to less productive land, wages fall and rent rises.
Now let us introduce a plow, which represents both more capital goods and better technology. The plow costs two bushels and completely depreciates each period, requiring a new plow for the next period. The plow doubles production at each plot of land. So on the rightmost rectangle, draw another rectangle just above the first one, attached to it, with an equal size, representing the doubling of output.
Is it worth buying the plow? Yes! The farms at the margin, having yielded four, now yield eight. After paying for the capital good, the plow, the output is six, which all goes to wages. Wages there have risen by 50 percent. By the law of wages, wages in the other farms have risen to six.
With the plow, the farms that yielded six now yield twelve. Draw a rectangle above the middle one, with equal size. Now the distribution of the twelve-bushel output is two to capital goods, six to wages, and the remainder, four bushels, to rent. Rent there doubled from two to four bushels.
Now do the same for what was the ten-bushel land, which now yields twenty. The distribution is two to capital goods, six to wages, and the remainder, twelve bushels, to rent. Rent there also doubled, from six to twelve bushels. (A similar graph of the factors).
Now we can see the effect of the economic growth caused by more and better capital goods. Wages have risen by fifty percent, while rent doubled. We can calculate this in bushels. Suppose there were ten farms in each grade of land. Write this down: before the plow, for the three lands, output was 100 + 60 + 40 = 200. Wages were 40 times 3 = 120. Rent was 60 + 20 = 80. So wages were 60 percent and rent was 40 percent of income.
With the plow, output doubles to 200 + 120 + 80 = 400. Are you writing this down? Wages are now 60 times 3 = 180. Capital yields are 2 bushels per plow times 30 farms = 60 bushels. Land rent is 120 + 40 = 160. Wages are now 180/400 = 45 percent of income. Capital yields = 60/400 = 15 percent of income. Rent = 40 percent of income. Wages rose by 60 bushels, while rent has risen by 80 bushels.
The portion of income going to wages has fallen from 60 to 45 percent, but the portion of rent stayed the same, 40 percent. The doubling of output doubled the rent, but because the plow has a cost, wages could not double, but they did rise by 50 percent. Labor benefits from the greater productivity, but landowners benefit more. If new technology and capital goods were to similarly double production again, the distribution of income would keep the same proportions.
If the ownership of the land value is concentrated, then much of the gains from economic expansion is distributed to a few landowners. The greater rent going to a few owners explains much of the inequality of income today throughout the world. These landowners do nothing to generate the growth. Usually, better capital goods also requires better human capital, greater skills. So the economic growth and development is caused by entrepreneurship and investment in capital goods and human capital, and the yields properly go to a return on the capital goods, the capital yield, and to greater wages, including the gains to the entrepreneurs. But the greater rent is a surplus windfall to the owners of land that obtain the rent just by holding title.
If we believe in human equality, the land rent should be distributed to all the people equally. Then all the people would equally benefit from the greater productivity. The effect of greater productivity on the input-factor distribution of income has been neglected, so this model should be taught in all courses on the principles of economics.
This 2014 excerpt of Pacific Standard, Jan 9, is by Noah Davis.
Between July 1 and December 15 along the American Mid-Atlantic Coast, 996 dolphins were “stranded,” which is marine-biology speak for a much darker reality. Compare that figure to the 117 average during the same period between 2007 and 2012.
This isn’t the first one. Between June 1987 and May of 1988, more than 700 bottlenose dolphins died in the Mid-Atlantic. It’s estimated that the figure represented roughly half of the Mid-Atlantic population. Marine biologists discovered that cetacean morbillivirus, which is in the same genus as measles, killed the dolphins.
Morbillivirus is also to blame for the recent deaths.
Morbillivirus is endemic to the dolphin environment. It’s always floating around, waiting to be passed through the air via exhalation from a dolphin’s blowhole. So why are they dying off in 2013?
One theory, according to Erin Fougeres, a marine biologist with NOAA Fisheries, is that outbreaks are cyclical. “Those bottlenose dolphins that don’t die develop natural antibodies,” she told me over the phone. “As those animals slowly die out of the population, herd immunity drops which can lead to an outbreak. That’s what we think it’s happening.”
Dolphins act like the proverbial canaries in a coal mine. “We will continue to look and see if there are any underlying causes that might make them more susceptible to the virus this year versus other years,” she said. “Something like global warming.”
There was an unrelated UME in Louisiana’s Barataria Bay, an area affected by the BP Deepwater Horizon oil spill. All the deaths aren’t linked but.
Ed. Notes: With power comes responsibility, supposedly. Human industry has the power to harm nature, so where is the responsibility not to? We humans need to strengthen our ties to the natural world. Perhaps a share of the worth of Mother Earth would do that. The healthier the ecosystem, the fatter our “rent” dividend. The old bottom line would be pulling on the same end of the rope with stewardship. It’d align the interests of people and planet both.
Thousands of homes can’t be sold because of private ground rent
A 2014 excerpt of Dutch News, Jan 9.
In 2011, it emerged that banks had suddenly all but stopped giving mortgages to people who want to buy property situated on another private owner’s land and therefore subject to ground rent (erfpacht).
The banks consider it too risky to do so, because the land owner can increase the ground rent at will. This, they say, could mean people default on their mortgages.
‘The aim of the new procedure was to make it possible to sell houses on land owned by third parties,’ said Piet van Buuren from a lobby group representing people unable to sell their homes. ‘In some cases, the notaries are being demonstrably tougher than was agreed.’
Ed. Notes: Is what the bankers get the media to repeat true? Don’t leases cover things like how often rents can be raised? And can’t leasees buy insurance to cover jumps in rents? And if site rents were rebated back as resident’s dividends, would any of this even matter? Maybe bankers don’t like rents going to anyone but themselves via mortgages? Didn’t journalists used to ask penetrating questions?
Why Karl Marx Hated the Land Value Tax and Why He’s Wrong
This 2014 excerpt of Keystone Politics is by Jon Geeting.
Rightists and conservatives calling Jesse Myerson a Communist for supporting ideas like Henry George’s land value tax is pretty amusing since Karl Marx himself described Georgist politics as “capitalism’s last ditch.”
Henry George differs from Marx in this important respect: whereas Marx’s politics envisioned a bifurcated struggle between labor and capital, George’s politics placed labor and capital on the same side, with landowners on the other.
George’s idea is that you work for a living, and (contra Marx) that the honest-to-God investors who make stuff like buildings and machinery and national telecommunications networks and politics blogs make an honest living too.
But your landlord doesn’t really work. He makes money by sitting around owning stuff, repairing your dishwasher sometimes, while you toil doing real work to pay him a third of your income or more.
What if we stopped taking so much money in sales, wage, and investment taxes from the people who work and invest for real, and started funding more of our public services with wealth expropriated from people who just own stuff. Rent hikes would stop eating into wages so much, workers and businesses would have more disposable income to spend and invest in the real economy, and this would all create a much stronger economic foundation for cities.
Ed. Notes: Paying your community for your land instead of an individual is not only fair, since it’s the community who generate that value, but also efficient, because drives efficient use of land and, as noted above, makes possible deleting the ruinous taxes. And psychologically, Land Dues ought to strengthen our identity with both community and Earth. Long run, that should help.
This 2014 excerpt of the BBC, Jan 7, is by Julia Carneiro.
Rio dos Macacos, home to 67 families, is one of Brazil’s quilombos – communities started by former slaves who went to live in hiding, surviving as best as they could by working the land, before forced labour was prohibited in Brazil in 1888.
According to Fundacao Palmares, a government-funded cultural organisation, there are more than 2,400 quilombos across the country.
Many still keep alive the traditions of their ancestors, such as African dance forms and forms of worship.
But even after slavery was abolished, elders say their ancestors had few rights. For a long time, they continued to work the sugarcane fields not for pay, but in return for food and housing.
It was only after the local farms went into decline, that the quilombolas – as quilombo residents are known – were allowed to harvest some of the fields and keep the proceeds for themselves.
But no land was ever formally given to them – an omission which is at the root of at their current problems.
Brazil’s constitution – signed in 1988, 100 years after slavery was abolished – ruled that quilombolas were entitled to the land they had historically occupied.
A navy built a naval base in the area in the 1950, and as the base grew, the area where quilombolas lived shrank. Today, the Aaratu Naval Base is the second largest in the country. One of the oldest residents, Maria de Souza Oliveira, 86, remembers how 70 families were moved to make way for a village built for the families of navy personnel in the 1970s. Nowadays, some 450 families live in the navy village, just across the Macacos river from the quilombo.
Community leader Rosimeire dos Santos Silva says the community has had its crops pulled out. “They harass our children on their way to school. And if we try to work the soil, we’re beaten up.”
Ed. Notes: Ironic, isn’t it, that the institution that’s supposed to defend the people instead attacks them when it wants what the people have. And nobody is going to attack Brazil. What do they want with an expanding military anyway? They could abolish it, as Costa Rica did, as any nation could. Just use geonomics to settle and disputes both within and beyond national borders.
The recent 2014 Rolling Stone article on how to transform the economy into one working right for everyone stirred up a firestorm of reaction, including a half dozen articles, excerpted here.
1) Demos, Jan 4, by Matt Bruenig The Totally Doable Slate of Economic Reforms That Conservatives Are Losing Their Minds Over
I do not generally care for framing that talks about what Millennials should be fighting for because it does not really make any sense, but the five reforms Jesse Myerson lists are basically doable and have been written about here and elsewhere before.
Nonetheless, a massive conservative backlash ensued on Twitter in response to the piece. On some level, this kind of reaction is to be expected. Conservatives prefer our institutions as they exist and the way they distribute power, income, and wealth in society. But the conservative backlash did not center around how they just prefer another system. Instead, it was almost universally premised on the idea that these reforms are fundamentally impossible. This is a popular conservative rhetorical move because declaring impossible all of the things that are so much more appealing than what they have to offer is the only real way to advocate the terrible things they support.
Nonetheless, with the exception of Myerson’s call for a job guarantee, all of the other reforms he proposes—a universal basic income, a land value tax, a sovereign wealth fund, and public banks—are clearly possible because they already exist in the world.
2) Business Insider, Jan 5, by Joe Weisenthal People Are Freaking Out About This ‘Rolling Stone’ Plan To Fix The Economy
“Five Economic Reforms Millennials Should Be Fighting For” has conservatives on Twitter flipping out. Nick Gillespie at Reason.com has a breakdown of the conservative backlash, but if you actually read the article it’s really baffling trying to figure out why the piece is generating such controversy.
You can disagree with all of these — all have various drawbacks and benefits — but the idea that this is some insane communist raving looks like an example of people just deciding to be outraged over something they didn’t actually read.
3) Business Insider, Jan 6, by Josh Barro Some Of These ‘Communist’ Economic Ideas Are Actually Pretty Good
This weekend, Jesse Myerson advanced five economic reform ideas that he thinks millennials should champion, and various conservative readers’ heads exploded for reasons I don’t fully understand. Particularly, I don’t see what’s supposed to be “communist” about Myerson’s proposals.
Conservatives dismiss this agenda at their peril.
The most promising of Myerson’s ideas is an unconditional basic income, which is a policy of sending checks to Americans simply for existing.
Or consider a land value tax. This tax would actually foster economic growth by making it harder for landowners to keep their land unproductive; you could expect to see a lot fewer vacant lots in New York City.
So, I’m not ready to sign up for Myerson’s agenda. But I’m not sure why people are treating it like it’s silly, or Soviet.
5) Washington Post, Jan 7, by Dylan Matthews
which we already posted as “WaPo Blogger: Millennials, Do Fight for Rolling Stone Reforms”
6) Los Angeles Times, Jan 8, by Emmett Rensin, a political activist and essayist living in Chicago, has appeared in USA Today, Salon, the Los Angeles Review of Books and elsewhere; he is 23 years old.
A Lefty Millennial Activist Takes on Columnist Jonah Goldberg
“In America,” I once quipped, “the old are always ready to give those who are young the sad news that history, with its opportunities for fresh ideas, is over.”
“One of the wonderful things about America is that both the left and right are champions of freedom. The difference lies in what we mean by freedom. The left emphasizes freedom as a material good, and the right sees freedom as primarily a right rooted in individual sovereignty. For the left, freedom means ‘freedom from want.’ If you don’t have money, healthcare, homes, cars, etc., you’re not free.”
In a way, Goldberg’s right. Young leftists like Myerson and myself share a moral outlook that fundamentally differs from conservatives like Goldberg: Freedom, in the most prosperous nation on Earth, must entail the freedom to act without the constant specter of homelessness, hunger, and preventable illness.
If liberalism believes that freedom consists of freedom from want, then we want only to extend the means for such achievement beyond the wealthy, white, and landed few. Not everyone needs their own Monticello, but an apartment and some groceries might suffice.
Who knows? Maybe if millennials achieve the kind of economic justice Myerson is calling for, we might just have the time to find a new idea under the sun.
Ed. Notes: A couple of Myerson’s ideas can’t really fit on the left/right spectrum, since they’re either left and right or neither, they’re simply “organic” in that they should be a key part of a market economy in order to make it work at full capacity. Those two ideas are to “socialize” or to tax the value of land and resources, a bit like Alaska does, and to pay everyone an extra income, which would correct the “price” of or wage for labor. But the human brain prefers differences to be black or white, so third ways have a hard time getting any traction. Still, if you have the time, read the articles. All were enlightening.
This 2013 excerpt of the Daily Caller, Dec 27, is by Burton A. Abrams.
Gasoline blended with ethanol, an alcohol, corrodes metal and deteriorates plastic and rubber parts. Fuel lines have been known to leak, causing obvious dangers to operators. Where’s the Consumer Protection Agency when you need it? Not only won’t the government protect us consumers, it caused the problem. Government legislation mandates the blending of ethanol into most gasoline sold in the United States.
Mandating the use of ethanol imposes more costs than benefits, including hidden costs on consumers that hit the poorest members of society worst, and provides billions of dollars in lucrative business to grateful campaign-donating special-interest groups.
In 2012/2013, approximately one-third of the U.S. corn crop went into ethanol production. U.S. annual production of ethanol has surged since 1998, increasing from slightly over one billion gallons to over 13 billion gallons in 2012. This surge in production and consumption is the result of state and federal mandates requiring it to be blending with gasoline.
Lands previously planted with other grain crops have been shifted into corn production, lowering supplies of other grains and raising their prices. Livestock that feed on higher-priced grains have had their costs of production and prices go up as well. These higher prices for food items are a “tax” on consumers — financial burdens that fall disproportionately on lower-income families whose budgets are heavily weighted towards food items.
The environmental benefits of corn-based ethanol are in doubt. While ethanol is an oxygenate that allows for the cleaner burning of gasoline, drivers using gasoline blended with ethanol find their cars’ miles-per-gallon fall, so more gallons of blended gasoline are needed for traveling any given distance.
Ed. Notes: A better solution to air pollution might be to just make the polluter pay and to repeal automatic limited liability. To avoid pollution charges and high insurance premiums, car manufacturers would find alternatives. There could even be one already found, sitting on a shelf, awaiting our use; who knows? As long as government tilts the playing field, who knows?
If government wants to help farmers, it could actually tax land, driving down its price and the mortgages that go with it, and use the raised revenue (raised mainly in cities, where locations are steepest) to pay citizens a dividend. An extra income (more honest than subsidies) would go further in the country, where the cost of living is lower. And it’d go further still, if government weren’t taxing incomes.
Geonomize — that’s how you help nature and farmers.
This 2013 excerpt of Keystone Politics, Dec 21, is by Jon Geeting.
Some people pop up to say land value is difficult for city governments to assess fairly and accurately, but I don’t buy that.
For starters, local governments in PA already do assess land values. We do it here in Philadelphia, and they do it in your town.
If people think these official land values aren’t sufficiently accurate, then what we need to do is try harder to get accurate values. The reassessment system most places have now, where we send a bunch of dudes to walk around and eyeball the value of everybody’s houses from outside, is far less accurate than using market prices.
The best valuation system that exists for figuring out what people are willing to pay for stuff is the housing market.
Why can’t we just use asking rents as a proxy for land, for tax purposes? Rents are basically equal to land values. Asking rents for crappy oldster row homes that haven’t been improved in decades have been going up. That’s all land. The asking price increases are driven by the desirability of the neighborhood, the school catchment district, and other amenities. You didn’t build that!
Shouldn’t it be possible to come up with an index where we keep track of the asking rents for different types of houses in each catchment zone or ward, average the rate of price increases or decreases together, and then use that number as a stand-in for land value changes in determining people’s tax bills?
That’s a bit crude, but I feel like the GIS wizards can definitely figure out a more sophisticated algorithm in areas where there aren’t that many vacant parcels left to assess directly.
Ed. Notes: People wonder how government will be able to figure out the value of locations but don’t wonder how business already figures out the value of sites, buying and selling, leasing and letting parcels of land every day. If business people can figure out the rental value of land, then so can government people. It’s really another non-issue.
“Drugs Aren’t the Problem”: Neuroscientist Carl Hart on Brain Science and Myths About Addiction
This 2014 excerpt of Democracy Now!, Jan 6, is by Amy Goodman, interviewing Dr. Carl Hart, the first tenured African-American professor in the sciences at Columbia University and a research scientist in the Division of Substance Abuse at the New York State Psychiatric Institute. However, long before he entered the hallowed halls of the Ivy League, Hart gained firsthand knowledge about drug usage while growing up in one of Miami’s toughest neighborhoods. He recently wrote a memoir titled High Price: A Neuroscientist’s Journey of Self-Discovery That Challenges Everything You Know About Drugs and Society. His book recalls how he avoided becoming one of the crack addicts he now studies.
Their conversation on the nationwide shift toward liberalizing drug laws continues.
AMY GOODMAN: Both your research findings will surprise many and also your own path in life. Let’s start by talking about, well, where you come from.
DR. CARL HART: Well, I come from — as you said, I grew up in the hood. And so, when we think about these communities that we care about, the communities that have been so-called devastated by drugs of abuse, I believed that narrative for a long time. In fact, I’ve been studying drugs for about 23 years; for about 20 of those years, I believed that drugs were the problems in the community. But when I started to look more carefully, started looking at the evidence more carefully, it became clear to me that drugs weren’t the problem. The problem was poverty, drug policy, lack of jobs — a wide range of things. And drugs were just one sort of component that didn’t contribute as much as we had said they have.
AMY GOODMAN: So, talk about the findings of these studies. I mean, you’ve been publishing in the most elite scientific journals now for many years.
DR. CARL HART: Yes. So, one of the things that shocked me when I first started to understand what was going on, when I discovered that 80 to 90 percent of the people who actually use drugs like crack cocaine, heroin, methamphetamine, marijuana — 80 to 90 percent of those people were not addicted. I thought, “Wait a second. I thought that once you use these drugs, everyone becomes addicted, and that’s why we had these problems.” That was one thing that I found out. Another thing that I found out is that if you provide alternatives to people — jobs, other sort of alternatives — they don’t overindulge in drugs like this. I discovered this in the human laboratory as well as the animal laboratory. The same thing plays out in the animal literature.
AMY GOODMAN: What do you mean? You’re saying that crack is not as addictive as everyone says?
DR. CARL HART: Well, when we think of crack — well, we have a beautiful example now, the past year: the mayor of Toronto, Rob Ford, for example. The guy used crack cocaine, and he did his job. Despite what you think of him and his politics, but he came to work every day. He did his job. The same is true even of Marion Barry. He came to work every day, did his job. In fact, he did his job so well, so the people of D.C. thought, that they voted for him even after he was convicted for using crack. But that’s the majority of crack cocaine users. Just like any other drug, most of the people who use these drugs do so without a problem….”
Ed. Notes: If we de-criminalized drugs, we could quit the drug war and save tax dollars and reverse the militarization of the police force who’re supposed to protect and serve. Criminalizing drugs is another example of how politicians misspend public funds and damage lives in doing so.
But nature abhors a vacuum so we’d have to replace the drug war with something. The researcher above mentioned jobs (too bad he didn’t mention startups since many dealers are excellent entrepreneurs). There is a proven way to generate job opportunity. First, don’t tax jobs; taxes on wages only make it more expensive to employers to hire helpers. Second, do tax land or somehow recover the value of locations, whether by tax, fee, dues, or lease. To pay the levy, owners quit speculating and put their sites to good use, and doing that generates jobs.
It’s amazing what some fundamental economic justice can do — just geonomize!
This 2014 excerpt of the Washington Post, Jan 7, is by Dylan Matthews.
A bit of a firestorm has been kicked up by Jesse Myerson’s piece, “Five Economic Reforms Millennials Should Be Fighting For” in Rolling Stone. But when we at wonkblog read it, we recognized something odd: Frame the policies a bit differently and it sounds almost like a conservative wish list. Here’s the same post, with the same ideas, written from a conservative point of view:
Tear down the welfare bureaucracy
Food stamps must be spent on food, but what if the family receiving them needs help on rent more? Why should the government tell them how to spend their money, any more than it should tell the rest of us? Worst of all, the current, hugely bureaucratic system props up a class of unionized government workers who can’t be fired and who pension costs are bankrupting our states and cities.
The solution, as conservative and libertarian thinkers from Milton Friedman to Charles Murray to Guy Sorman to Veronique de Rugy have noted, is to burn down the bureaucracy and replace it with simple checks to everyone. This idea would treat all citizens equally rather than tagging a certain subset to receive help, and would eliminate any incentive that the poor have to live off of government programs, since they’d be at no risk of losing their benefits if they started work.
A basic income would shrink our bloated government, give people more choices, and break the culture of dependency in our poorest areas. What’s not to like?
Eliminate job-killing income, payroll, and corporate taxes
The government should at the very least do no harm to the economy. But our current tax system — which taxes heavily things we want more of (like income, investment, and savings) — creates huge burdens for businesses and individuals, disincentivizes investment in promising technology, and reduces the living standard of ordinary Americans.
So how about we get rid of literally every income and payroll tax in the federal government? No more withholding from your paycheck. No more capital gains tax when you make money from stocks. No more getting your pay dinged for Social Security and Medicare. No more companies worrying about what expenses are or are not tax deductible (and no more charities worrying about that, either). Just make all corporate and individual earnings completely tax-free.
As the great free-market advocate Henry George wrote in his book Progress and Poverty, there is a single tax that can and should replace all these, and do much less harm to the economy in the process. It’s called a land value tax, and it’s imposed on the value of land and other natural resources before improvements are made. So the owner of the Empire State Building would pay the same amount in land tax if the building stayed up or if it suddenly vanished tomorrow.
What’s great about this is that, while taxes on income discourage people making more money and hurt the economy, the most that land value taxation could do is discourage people from making more land. But, you can’t make more land. So there are no economic distortions. People buy and sell as they would in the absence of any taxes, and yet the government can still earn more than enough from a land tax to pay for the whole federal government. So let’s stop punishing job creation and implement the biggest supply-side tax reform in human history.
Ed. Notes: The writers listed three others but the two above are the keys, especially since one would fund the other. Both ideas could be extended to do even more good. Government could recover the socially-generated value of not just surface land but also natural resources, ecosystem services (something that pollution taxes do), and of government-granted privileges, such as corporate charters. We’re talking untold trillions here. All of it could fatten the Citizen’s Dividend so that people could do without even more government programs and even more bureaucracies could be eliminated. These two key ideas — getting then sharing the worth of Earth in lieu of taxes and subsidies — should appeal to left, right, and people who’re neither but simply rational (call them “geonomists”).
This 2014 excerpt of Off the Grid, Jan 6, is by Daniel Jennings.
Modern Farmer magazine discovered that there is a movement among farmers abandoning genetically modified organisms (GMO) because of simple economics.
A growing number of farmers are abandoning genetically modified seeds, but it’s not because they are ideologically opposed to the industry.
Simply put, they say non-GMO crops are more productive and profitable.
The re-converts to non-GMO seeds are not hippies but conservative Midwestern farmers who are making a business decision.
Farmers can get paid more for conventional corn than GMO corn. Plus, convention corn can produce more per acre.
Herbicide use increased by 26 percent between 2001 and 2010 because of the spread of herbicide-resistant weeds. Farmers used herbicides on GMO corn, even though theoretically he shouldn’t have to use it on his genetically modified crop.
The group Farm & Water Watch reported that 61.2 million acres of cropland in the US are plagued by weeds that are resistant to the popular glyphosate herbicides.
GMO seeds can cost up to $150 a bag more than regular seeds.
The market for non-GMO foods has grown from $1.3 billion in 2011 to $3.1 billion in 2013, partially because some Asian and European countries don’t want GMO seeds.
Ed. Notes: Let’s hope government does not intervene to prop up GMOs, which probably could not even exist, if government had not already intervened by limiting the liability of corporations like Monsanto who alter nature, imposing risk on others. And it’s not too late now to repeal or drastically refine limited liability in order to speed the demise of many other bad ideas, such as nuclear power. But to wield the requisite political power, we’d have dramatically increase ours, which calls for a fairer distribution of society’s surplus and a Citizen’s Dividend paid to us all.
This 2014 excerpt of the Washington Post, Jan 6, is by Charles Lane, a Post editorial writer.
A large number of Washington DC’s top earners specialize in trading on their connections to DC’s biggest “industry,” the federal government. As of 2012, lobbying for tax breaks, contracts, exclusive licenses, subsidies, and the like was a $3.3 billion-a-year industry. The average salary of the CEOs — chief lobbyists — of the 30 biggest industry trade associations, including incentives and deferred compensation, was $2.34 million in 2010.
More than a few of these people used to be governors, senators, or members of the House, where they acquired the access that they now sell to the highest bidder. They are accompanied by a small army of former executive and legislative branch staffers who have gone through the revolving door from government to what Washingtonians euphemistically call “the private sector.”
Economists have a name for this sort of behavior: rent-seeking. In economic parlance, “rent” means the profit from gaining control over existing sources of wealth as opposed to creating new ones.
Many of our public institutions — from Congress to big-city school systems — have been captured by rent-seeking interest groups. Wall Street hedge funds have their carried-interest exemption in the tax code. Farmers are making record incomes yet still benefit from government incentives to grow corn for ethanol. Real estate agents defend the mortgage-interest deduction, even though the benefits go disproportionately to upper-income homeowners.
The good news is that, entrenched as special interests and their various special subsidies may be, it is probably more realistic to undo rent-seeking than it is to undo the global forces of trade and technology. Instead of worrying about how much money rich people make, we should focus more on how they make it.
Ed. Notes: Insider rent-seekers are actually rent winners, who continue a long tradition of the well-connected using government as a servant. The original rent-seekers — those insiders who sought and won the rent of land and locations — similarly won major favors from government, such as evicting squatters, building roads to or near their property, etc.
Such corruption is a good reason to repeal the discretionary spending by politicians and hand that power over to citizens. Let elected officials spend for war and emergencies but disburse the bulk of public revenue back to the citizenry as a dividend.
And to raise that revenue in a way to avoid favoritism, distinguish between private wealth and common wealth; don’t tax earned income but instead used taxes, fees, dues, etc, to redirect society’s spending for land, resources, ecosystem services, and other natural features into the public treasury. Minus tax breaks or subsidies, nobody will have a reason to seek rent and officials won’t have a way to deliver it. Former rent-winners will have to become one of those artists or inventors or entrepreneurs.
This 2014 of The Atlantic Cities, Jan 6, is by Feargus O’Sullivan.
Busy and often beautiful, the Irish capital’s center is nonetheless pockmarked with vacant and derelict lots.
Dublin property still costs around half what it did in 2007.
Ireland’s main fightback will come in the form of a new vacant lot levy charged to owners of both empty and derelict sites. Currently, owners of vacant sites pay no land taxes at all. Owners of so-called derelict sites, or nuisance properties, pay 3 percent. This has led to situations where Irish property owners have demolished buildings to avoid paying property taxes.
Some sites on Dublin Council’s list are owned by the national government’s Office of Public Works, which will itself be pressured into either exploiting its portfolio or selling it on.
Irish speculators were land banking for over a decade. Back when property values were rising inexorably (due to a housing bubble which overstated demand) it was possible to clean up by just buying a site, leaving it in a state least likely to incur taxes, and then selling it on much later. While this made profits for some, few activities could be more symbolic of the false steps taken during Ireland’s Celtic Tiger years than the plowing of boom era cash into land that developers never even intended to use for economic activities.
Ed. Notes: The city is moving in the right direction but it would not be necessary to single out vacant lots if the City taxed land in general or required Land Dues. Then owners would keep all sites at best use always. And if a prime site got to spendy for an owner, the City could turn it into a park or plaza, compensating the owner for any building on it. Keep all locations at best use with a mix of non-use would keep site values at their peak. To make sure the tax or dues are always affordable, the City could return some of the recovered rents as a divided to residents. Permanent prosperity and permanent peak use — both guaranteed.
Ed. Notes: Those owners near light rail did not jump up the value of their land — the light rail did — so why let owners keep it? And look what they must do to keep it. Either they sell and move on or by move out and lease their home. Both break up the old community. And the rise in land value would not be a boon but a burden if the city levied a land tax or required Land Dues.
People want that pile of money they did not earn — and they should have it. Or rather, they should have a share of all the land value in their region, but not capitalize on the value of their own individual parcel of land. The value of their land is not created by them but by the presence of their society, so to their community it belongs.
What people should be able to keep, untaxed, is their earnings from their work and investments and their purchases of others’ goods and services. That’s what’s legitimately their property, not the socially-generated rentable value of their land. The media’s cheering on of speculation in land only reinforces selfishness and the eventual ruin that comes with it. It’s up to geonomists to set a course to justice and prosperity.
When drought stalks the land, graziers become rent-seekers and bone collectors.
This 2014 excerpt of Crickey, Jan 5, is by Bob Gosford.
Graziers in far western Queensland Australia haven’t had enough good seasons to prepare for the number of droughts and the length of droughts they are continually facing. The majority of graziers have a huge financial burden and even in the better years, most struggle to make ends meet. They face rising costs of production, wages, fuel, rates & land rent, and have no control over the price of the product that they produce.
Every grazier says that without some assistance there is no future for them in the grazing industry or anyone else who wants to follow in their footsteps. There is much hand-wringing sympathy for the lot of the poor graziers. Few questioned the apparent god-given entitlement of graziers to keep flogging this country. The response to anyone wanting to protest against these commonly held views is scathing and abusive.
If the arid-zone country of western Queensland cannot sustain grazing activity from year to year, through drought and good seasons both, then it seems environmentally foolhardy and financially irresponsible to keep flogging a dead horse. Or in this case hundreds if not thousands of dead cattle. Graziers may have to stop grazing cattle and find some use for their land within its carrying capacity and sustainable yield.
Ed. Notes: During the Australian drought, unfair emotion prevails while equitable reason is left on the sidelines. Government subsidy has just prolonged a bad situation that should’ve ended long ago, as it would’ve in a free and fair market, a market that in this case would’ve been beneficial to the environment.
What government could do is replace aid to a special interest — the graziers — with a dividend to everyone. And make sure the payment of land rent goes to the community, not to landlords, so that it can feed into the dividend to everyone. If graziers get a share of the location values from the entire region, cities included, then those dividends would dwarf any ground rent or land dues they’d have to pay, since urban land per acre is thousands of times more valuable than rural land.
But if sharing Earth’s worth does not help graziers, it might be tough emotionally for them but land uses do and must change. People have to adapt or lose out. It might be time to move on.
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.
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.
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.
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.
shaped by reality. In the 1980′s, the Swedish government doubled its stock transfer tax. Tax receipts, however, rose only 15%, since traders simply fled to London exchanges. Fearing a further exodus, the Swedish government quickly rescinded the tax altogether. (The New York Times, April 20) That willingness to tax anything leads us astray. Pushing us astray is that unwillingness to pay what we owe: rent for land, our common heritage. Assuming land value is up for grabs, we speculate. We cap the property tax on both land and buildings and the rate at which assessments can go up; while real market values rise quicker, assessments can never catch up. Our stewards, the Bureau of Land Management, routinely sell and lease sites below market value, often to insiders, says the Government Accounting Office. Once we grasp that rent is ours to share, we’ll collect it all, rather than let it enrich a few, and quit taxing earnings, which do belong to the individual earner. That shift is geonomic policy.
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?
an economic policy based on the earth’s natural patterns. Eco-systems self-regulate by using feedback loops to keep balance. Can economies do likewise? Why don’t they now produce efficiently and distribute fairly? The answers lie in the money we spend on the earth we use. To attain people/planet harmony, that financial flow from sites and resources must visit each of us. Our agent, government, must collect this natural rent via fees and disburse the collected revenue via dividends. And, it must forgo taxes on homes and earnings, and quit subsidies of either the needy or the greedy. As our steward, government must also collect Ecology Security Deposits, require Restoration Insurance, and auction off the occasional Emissions Permit. And that’s about it – were nature our model.
not exactly Georgism, the Single Tax on land value proposed by Henry George. He did, tho’, inspire most of the real-world implementations of the land tax that some jurisdictions enjoy today, and modern thinkers to craft geonomics. While his name and our remedy both begin with “geo” since both words refer to “Earth”, the two have their differences. (a) George pegs land monopoly as the fundamental flaw while geonomics faults Rent retention. (b) To fix the flaw, George was content to use a tax, while geonomics jettisons them in favor of price-like fees. (c) George focused on the taking while geonomics headlines the sharing. George envisioned an enlightened state judiciously spending the collected Rent while geonomics would turn the lion’s share over to the citizens via a dividend. (d) And George, as was everyone in his era, was pro-growth while geonomics sees economies as alive, growing, maturing, and stabilizing. Despite these differences, George should be recognized as great an economist as Euclid was a geometrician.
a POV that Spain’s president might try. A few blocks from my room in Madrid at a book fair to promote literacy, Sr Zapatero, while giving autographs and high fives to kids, said books are very expensive and he’d see about getting the value added tax on them cut down to zero. (El Pais, June 4; see, politicians can grasp geo-logic.) But why do we raise the cost of any useful product? Why not tax useless products? Even more basic: is being better than a costly tax good enough? Our favorite replacement for any tax is no tax: instead, run government like a business and charge full market value for the permits it issues, such as everything from corporate charters to emission allowances to resource leases. These pieces of paper are immensely valuable, yet now our steward, the state, gives them away for nearly free, absolutely free in some cases. Government is sitting on its own assets and needs merely to cash in by doing what any rational entity in the economy does – negotiate the best deal. Then with this profit, rather than fund more waste, pay the stakeholders, we citizenry, a dividend. Thereby geonomics gets rid of two huge problems. It replaces taxes with full-value fees and replaces subsidies for special interests with a Citizens Dividend for people in general. Neither left nor right, this reform is what both nature lovers and liberty lovers need to promote, right now.